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IMF hints tax hike for Lesotho

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Ntsebeng Motsoeli

MASERU — Basotho will have to pay more in taxes, fines and service charges if the government is to make up for the declining revenue from the Southern African Customs Union (Sacu), an International Monetary Fund (IMF) working paper has said.

The paper, titled In the Wake of the Global Economic Crisis: Adjusting to lower revenue of the Sacu in Botswana, Lesotho, Namibia and Swaziland, the IMF suggests workers should expect a tax hike this year.

A civil service salary freeze is also another option the paper suggests to contain expenditure in the wake of dwindling Sacu revenues.

Lesotho gets 60 percent of its revenue from Sacu.

Over the years more than half of Lesotho’s annual budget has been from Sacu revenue.

But that revenue has been declining steadily since the 2009/10 financial year.

This year the Sacu funds are expected to drop significantly from the M2.2 billion that was received last year.

The decline is expected to continue but the IMF paper says revenues might pick up slightly in 2015.

The IMF paper shows that the declining revenue could see the government of Lesotho hiking fees to close the gap.

The paper recommends that Sacu member states should increase taxation and cut expenditure to stabilise their budgets.

This means that people could be charged more than what they are paying now to access government services.

“The impact of the import decline on Sacu revenue is expected to be larger for the smaller members of the union,” reads the IMF publication.

“The decline in customs revenue implies a smaller common revenue pool to be shared across Sacu members,” it continues.

“This will affect the smaller Sacu members the most, given the importance Sacu transfers have in percent of total revenue and of GDP in the (Botswana, Lesotho, Namibia and Swaziland) countries, particularly Lesotho and Swaziland.”

To deal with this reality the government of Lesotho has already started adjusting prices for services that it offers such as firearm licences and press cards that are used by journalists.

Journalists used to pay M100 to get a press card but the government this month hiked the price by 100 percent to M200 per card.

Fees for taking finger prints, motor vehicle clearance as well as getting a police escort have also been increased.

Parliament is currently looking at amending the Traffic Offences Act to increase traffic fines which have remained unchanged since 1981.

Other ministries are likely to increase charges for their services as well.

The IMF paper also recommends that Sacu governments should focus on curtailing non-priority expenditure to leave within their means.

Finance Minister Timothy Thahane announced last month that the government was cutting scholarships for Basotho students who wished to study in South Africa.

The paper also called on governments within Sacu to contain the growth of their wage bills. If this is adopted civil servants might receive a very small salary adjustment this year.

Last year civil servants received a paltry 3.5 percent salary hike that triggered howls of protest from trade unions.

The paper also called for the postponement of the defined contribution pension scheme which could see the government delaying pensions for civil servants or increasing the retirement age.

In order to keep revenue collection at the required levels, the paper suggests that governments within Sacu should improve their tax administration and compliance.

It says collection of tax arrears should be strengthened while improving tax intelligence, investigation and audit functions.

This means that the Lesotho Revenue Authority is expected to strengthen its ways of hunting businesses that evade tax and those that downplay their revenue in a bid to avoid paying more tax.

Thahane could not be reached for comment.

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