Hefty sin tax on the cards

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By Mamello Mosaefane

Sponsors of a draft law introducing hefty alcohol and tobacco tax law currently under discussion before the Economic and development Cluster portfolio Committee in the national assembly of Lesotho has rubbished demands for lower tax from alcohol and tobacco industry leaders.

Previously various stakeholders in the alcohol and tobacco industries opposed this bill, arguing it to be impractical and capable of increasing criminal activities that including smuggling of both alcohol and tobacco.

But, the Lesotho Revenue Authority gunning for an increased revenue collection from both alcohol and tobacco industries has indicated that no matter the times the stakeholders are consulted, they by nature do not want to pay tax and as a result, “there will never be a consensus between the stakeholders on this bill”.

Emphasis by the revenue authority was further made that informing stakeholders about the bill was not necessarily for consensus-building purposes, but rather to ensure that it does not come as a shock to stakeholders when enforced.

This bill was, according to revenue authority recommended by the International Monetary Fund (IMF) as a measure to boost Lesotho’s fragile economy.

The KDNews understands that the bill has been under-discussed since the year 2014, with tobacco expected to rise to 40 percent and alcohol to rise to 30 percent.

Owing to the government’s stake in the alcohol industry, the bill was halted in order to “protect” the alcohol industry as it is a shareholder in the Maluti Mountain Brewery.

The levy on alcohol was therefore lowered to 15 percent to test its effectiveness, and will later be lifted to 30 percent when the bill is passed into law.

Commenting on the stakeholders’ concerns citing Botswana’s alcohol and tobacco industry’s economic failure under such hefty sin tax laws, the revenue authority emphasized that, Botswana had its reasons for failing and those will not apply in Lesotho.

The revenue authority argued that in Lesotho, the sin taxes would be implemented in the form of Value Added Tax, which will be taxable to consumers when buying as opposed to how Botswana approached the introduction of these taxes.

In response to stakeholders’ concern over possible smuggling, the revenue authority said its anti-smuggling section ensured that lifting the levy on these beverages will par Lesotho’s low prices with its neighbor, South Africa.

The revenue authority argued that if both countries have similar prices, smuggling is not to be feared.

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