Reduce tax to stimulate growth: govt told

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Bereng Mpaki

LOCAL business says Lesotho should reduce its tax to stimulate economic growth.

This was highlighted during discussions on the fiscal policy and the role of taxation at a tax expo that was organised by the Lesotho Revenue Authority (LRA) on Tuesday and Wednesday at the ‘Manthabiseng Convention Centre.

The first ever tax expo, also known as the Lekhetho Khotla, provided a platform for tax stakeholders and clients to discuss and make inputs into the tax policy formulation and tax administration. This was done with a view to unlock the potential of both tax policy and administration as drivers of economic growth and development.

LRA has fallen short in collecting the required revenue over the past two consecutive financial years; a situation which has been compounded by declining Southern Africa Customs Union (SACU) revenues in recent years.

This has resulted in the country struggling to finance its operations and being forced to draw on its official reserves; a situation which has threatened to throw off its macroeconomic stability.

Participants at the expo said given the circumstances, it is clear that the only way out for Lesotho at this point is to mobilise means of generating more revenue.

Nthako Sekome, a member of the Lesotho Chamber of Commerce and Industry (LCCI) said tax reduction would help the country to better manage its finances since it cannot increase its spending any further.

Mr Sekome said reducing the amount of taxes business currently pay would stimulate economic growth.

Lesotho’s corporate income tax is currently 25 percent.

A former LRA employee, Mr Sekome said decreasing tax would increase business spending capacity, which would in turn stimulate demand for goods and services in the country.

He said this would increase production capacity thereby growing the private sector. When the private sector grows more jobs are created and more taxpayers to collect revenue from.

“The business sector proposes that the government should adopt expansionary fiscal policy measures,” Mr Sekome said.

“If the government reduces taxes, it makes it possible to have more money available for businesses to spend. And when there is more money to spend, it stimulates demand for goods and services and as demands for goods increases, we get an influence on production to produce more to meet the demand. As we produce more the private sector grows and as that happens there is employment generation and economic growth,” he added.

Mr Sekome lamented that while the private sector is an engine for economic development, it was worrying that it is being held hostage by the government which has delayed paying its suppliers of goods and services.

Earlier this year, the Private Sector Foundation of Lesotho estimated that government owed its suppliers for goods and services rendered during the 2017/18 financial year up to M700 million.

For his part, LRA chairman Robert Likhang said apart from financing government expenditure, taxes are also effective instruments of economic policy.

“Scheduled at the beginning of the annual fiscal planning cycle, the expo seeks to enable a conversation that will inform the authority’s advice to the Ministry of Finance as the ministry decides on its tax policy priorities in the next year. Moreover, the conversation will also provide the with feedback on how it discharges the tax administration function that it has been entrusted with, which includes suggesting appropriate legislative amendments.

“This year, the main focus of the expo is on the role of taxation in tackling Lesotho’s current economic development challenges. Above and beyond financing the government’s fiscal budget through both domestic and frontier resource mobilisation, taxes are also effective instruments of economic policy,” Mr Likhang said.

 

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