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Windfall for tax payers

In News
January 22, 2009

MASERU – The Lesotho Revenue Authority (LRA) will refund over M100 million to workers who have been paying excess tax for the past 10 months.

About 48 000 workers will get refunds for the excess pay-as-you-earn tax that they have been paying at a time when the tax rate should have been reduced.

The reduction in the tax rate and increase in non-taxable income threshold was announced in a budget statement last year but could not be implemented because parliament had not passed the amendment to effect the changes.

The delay resulted in thousands of workers paying excess tax to the government.

Because of the delay thousands more continued to pay tax when they should not have done so.

The decision to refund the workers comes after the passing of the Income Tax Amendment Act of 2008.

The biggest beneficiaries of the refunds which the LRA said will be paid in the next two months are the low-income earners who include junior clerks, textile and industry workers.

Low-earning teachers are also set to benefit.

Those people who earned between M1 167 (M14 000 a year) and M1 705 a month (M20 455 per annum) from April last year will be refunded the 25 percent tax that they paid.

That means a person who earned a monthly salary of M1 165 or M13 980 per annum will get a refund of M3 495.

This translates to a refund of three months’ worth of salary.

That money will probably come in handy for school fees, small investment or putting more food on the table.

But there is even better news: people within this salary range will have more disposable income because they will no longer pay tax on their salaries.

Those that earned M1 705 and M35 060 and were taxed at 25 percent instead of 22 percent will also get refunds.

For those whose monthly income is above M5 030 the LRA will use the off-setting method.

The commissioner general of the LRA, Charles Jenkins, said the income overpaid by the taxpayer in the last months will be deducted from their tax liability in the next two months.

“This effectively means that the employee’s income is increased by the amount deducted from the tax. In effect, employees in this category will be paying less tax for the next two months,” Jenkins said.

He said for those workers who earned below M5 030 the LRA will send individual cheques to employers who will then distribute them to their workers.

He said to ensure smooth operations during the refunding process the authority has increased the capacity of the offices dealing with tax refunds.

There will also be a tax calculator on the LRA website.

The new tax regime has also increased the threshold for the middle to high income earners.

From now an income of M37 378 will be taxed at 22 percent with any amount beyond that will be taxed at 35 percent.

Minister of Finance Timothy Thahane, said the income tax reduction will help low income earning families.

“These changes mean that Basotho who earned meagre wages will now be exempt from income tax and as a result, the money they could be paying in tax will go into improving their lives and paying for their children’s education,” said Thahane.

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