‘Arbitrary rules cause headaches for businesses’
LOCAL business people have rapped the Lesotho Revenue Authority (LRA) for making arbitrary changes to the import regulations, saying these were causing them serious problems that crippled their operations.
Last month, the LRA began implementing new regulations which demanded that traders and private shoppers produce at the port of entry, proof of payment for goods valued at more than M10 000.
The new rules also spell out that goods bought of credit shall no longer be cleared under VAT Refund Administrator (VAR) system and an invoice will only be accepted if VAT payment has already been made to the South African supplier.
The measures follow an announcement last month by LRA Board Chairperson, Robert Likhang that the LRA had come up with strategies to increase revenue collection. In the last financial year the taxman missed the M6.4 billion revenue collection target by M430.8 million.
The changes which are expected to be fully operational on 1 February, 2018 are already causing headaches for traders who say they are not only cumbersome but were also implemented without the necessary communication by the revenue authority.
Pick ‘n Pay Lesotho Finance Manager, Rethabile Pule, this week told the Lesotho Times that the new demands had the net effect of slowing down their operations and negatively affecting their cash flow.
“As much as most of the goods we sell in the store come from the Pick ‘n Pay headquarters’ warehouse in South Africa, we also have direct suppliers in South Africa whom we have arrangements to pay at a later date after receiving the goods,” Mr Pule said.
“These suppliers give us invoices which include tax which but in terms of this new LRA system we will have to pay tax at the border to LRA and again pay tax to the supplier when we settle our debt because the invoice still carries the tax surcharge.
“We also have goods that we order on Sundays by mail but because of the new rules, we will have to order on weekdays so that we can process payments for the goods to arrive on time. This will affect our cash flow as we will have to make regular payments instead of paying once a month as we have always done.”
LSP Construction clearing agent, Phoka Tsunyane, urged the LRA to refrain from imposing regulations without communicating with traders.
“The LRA used to call us for meetings whenever they wanted to implement any new strategy but recently they just enforce any procedure without notifying us. We get surprises when we get to the border.
“It is not every day that we have money to pay for the goods we order which is why our suppliers have agreed on credit terms.
“For instance, my construction company orders goods that cost up to M1 million on regular basis on credit and we normally pay after completing the project. There are also companies that order perishable goods on credit and these will suffer huge losses as their goods will rot while awaiting clearance at the border.”
Another trader who operates a hardware shop in Maseru said that he did not understand how such procedures could be implemented without educating business owners about them.
“I do not understand how these new rules will work. How will they (LRA) deal with the issue of our credit suppliers who charge us tax because if we are charged tax again at the border, it means we will be paying double? They should have clearly explained to us how we would deal with the matter,” said the dealer who requested anonymity.
Another trader added: “the system at the border is already a mess so this means more congestion as it will make the queues even longer.”
Last week, car importers and clearing agencies told this publication that the LRA had introduced a new clearing system at ports of entry which they said had not only increased tariffs but was also taking longer to process.
Some of the car dealers said they were now paying 60 percent more in import duties as a result of the new LRA regulations.
Three clearing agencies who import pre-owned cars from Japan told the Lesotho Times in separate interviews that the new clearing system, which they say was introduced without prior consultations by the LRA in December 2017, had also bred mistrust as clients blamed them for the resultant delays in receiving their imported vehicles.
According to Mokhali Mofubetsoana, a Phoka Clearing and Forwarding Agency representative, the clearing of cars which used to be done before the vehicles reached the border was now being done only when they had arrived at the border and they were being charged higher taxes.
“We normally do pre-clearance but early in December they (LRA) introduced what they call top-up where they evaluate the imported cars again when they arrive at the border and then add an extra charge,” Mr Mofubetsoana said.
“The changes were not communicated to us beforehand so we do not know the basis for the higher taxes. The extra charges have negatively affected our business in that we can no longer give people the exact quotes which let them know exactly how much it will cost them to import cars from Japan,” he said.
However, the LRA Customs Commissioner, Kali Lepholisa, defended the new regulations, saying they were introduced after the LRA encountered problems with the South African Revenue Services (SARS) in claiming taxes that were paid in South Africa.
“We have a Memorandum of Understanding with SARS to refund us on VAT which was paid to South African supplies for goods exported to Lesotho and we demand those refunds based on the invoices which would be used to clear goods at the border,” she said.
“However, SARS has explained that they have been having problems of goods bought on credit in that they would have refunded us and yet they never get the tax from those suppliers. So to avoid that high risk, VAT will from 1 February 2018, be demanded at the Lesotho borders for goods bought on credit.
“The local traders have the option to ask their suppliers to give them a zero tax rate on the invoices so that they do not get to pay tax twice or they can arrange with LRA to have a deferment account which will allow them to pay tax at a later date after settling their debts with suppliers so that way they have the proof of payment.”
She said the LRA will meet SARS on 8 February this year to further discuss the issues raised by traders.