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Wholesale/retail sectors non-tax compliant

1 Finance Thlohang Sekhamane at the LRA announcementMaseru-The revenue collection for the financial year 2016/17 that ended March 31st shows that the wholesale and retail sectors, which contribute 55-60 percent of the Value Added Tax (VAT), are not complying with paying tax, resulting in the overall tax target not being met by the Lesotho Revenue Authority (LRA).

This was revealed by the Finance Minister Tlohang Sekhamane when announcing the performance of tax revenues on Friday. Sekhamane indicated that LRA had failed to meet the set target for the year of M6.4 billion and only managed to collect M5.9 billion. This is the second time that the LRA has missed its target by a large margin after the 2013/14 financial year.VAT, which comprises of inland and import taxes, had a set target of M2.3 billion, with the actual remittances standing at M2.2 billion, making it a target miss of M100 million.

 Sekhamane explained that this under-performance is due to some taxpayers in the wholesale and retail sectors who devise schemes to evade tax, those who do not file annual tax returns and those who do file but deliberately under-declare their returns.

“There also taxpayers who make arrangements for settlement of debts, only to end up dishonouring those arrangements,” he noted.

The report reveals also that the poor VAT performance can be constituted to a decline in contribution of the construction, water and sewage and the electricity sectors. Statistically, the Income Tax, VAT and the Alcohol and Tobacco Levy, missed their set targets by 7.3 percent %, 4.3 percent and 100 percent, respectively.

For the Alcohol and Tobacco Levy, the minister explained that there was no collection at all due to the delay in the enactment of the bill which was required to enable the collection of revenue from the excise duty after concerns were raised on the impact the bill would have on the prices of these commodities.

Income Tax, which comprises of personal income tax, corporate income tax, withholding tax, fringe benefits tax and gaming levy, missed the annual target by M300 million against M4 billion target while the actual remittances stand at M3.7 billion. Sekhamane stated that income tax was impacted by the bad performance of Company Income Tax (CIT) which was mainly affected by the poor performance of the mining sector. This sector is set to make a contribution of estimated at 30 percent of the overall CIT collections.

The mining sector has been struggling due to unfavorable global diamond prices as well as the appreciation of the South African Rand which negatively impacted the value of diamond exports. Bad weather is said to have also played a part as it resulted in increased production costs.

Sekhamane nonetheless commended LRA on a job well done over the years, citing that they are the economic and financial soldiers of the country tasked with revenue collection. He continued to urge those still lagging behind to settle their tax obligations for the betterment of the economy.

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