Bereng Mpaki
THE parliamentary economic and development cluster committee has recommended that the proposed tobacco and alcohol levies be implemented gradually.
This will be done by increasing the rates at six and three percent for tobacco and alcohol annually respectively over the next five years.
The committee said this while tabling its report on the Tobacco and Alcoholic Products Levy Bill 2020, on Monday. Apart from the gradual increases, the committee also wants the government to force the registration of all liquor traders as only 20 percent are licensed and the rest are evading tax.
Tabled before the house by the then Finance Minister, Moeketsi Majoro, in March 2020, the Bill’s objective is to introduce a levy on tobacco and alcoholic products and to eventually reduce the use of the said products.
The rationale was that the prevailing excessive use or abuse of tobacco and alcohol is contributing to several socio-economic and public health hazards.
Having scrutinised the Bill and listened to stakeholders’ views on the Bill, the committee therefore proposed that it be revised.
“The committee recommends that the tobacco and alcohol levies be increased gradually over five years to reach 15 percent and 30 percent respectively, subject to economic performance.
“The ministry must enforce the registration of all alcohol traders, 80 percent of whom are evading tax; and Lesotho suppliers must be empowered and favoured by the industry over their foreign counterparts.”
The committee also recommended the adoption of the Bill with its amendments.
“After thorough scrutiny of the Bill, the committee recommends that the house adopts the bill as amended.”
Now parliament will debate on the report before it to consider whether to adopt it as is or make further amendments.
Despite the committee’s recommendations, both tobacco and alcoholic products stakeholders are adamant that enforcing the laws would be ill-conceived and therefore spell chaos for their respective industries.
The committee considered views from Maluti Mountain Brewery (MMB), British American Tobacco (BAT), Lesotho Liquor and Restaurants Owners Association (LLROA), Private Sector Foundation Lesotho (PSFL), Lesotho Chamber of Commerce and Industry (LCCI); and South African Alcohol Policy Alliance Lesotho (SAAPA).
The stakeholders said implementing the Bill would lead to the government losing M800 million in revenue in the next three years. The figure is almost double the projected income from collecting the alcohol levy from MMB over two years.
“The 2020 budget statement indicated that government’s projected revenue from the total levy on alcohol and tobacco will be M200 million annually. The loss of revenue from MMB alone will be double the anticipated incremental revenue from the levy and will therefore result in a net negative impact for the country from revenue perspective.”
The stakeholders also said that 80 percent of liquor traders in the market were operating illegally. The stakeholders feared that registered traders would therefore be forced to close shop as they would be unable to compete with illegal traders.
“The licensed liquor and tobacco dealers will be forced to close their businesses due to high prices and this will benefit illegal dealers.
“Introducing a 15 percent tobacco levy will just make illegitimate players in the market because raising a levy will not necessarily stop people from smoking nor reduce consumption. Consumers will not buy legal products but buy from the illicit operators.”
They said imposing the levy will have a double taxation effect on the two products as they were already paying tax.
