MASERU — The Lesotho Revenue Authority (LRA) last Thursday organised a seminar to train professionals from the construction sector — such as architects, engineers and quantity surveyors — on tax compliance.
The seminar was designed to address the proper application and administration of income tax with an emphasis on withholding tax.
According to the revenue authority, tax compliance within the construction industry is very low.
“Our main focus is on the contractors who normally have to partner with other contractors. They usually have problems when it comes to the correct way to pay tax,” said LRA taxpayer education manager Letsatsi Sepiriti.
He said different tax rates were imposed on players in the construction industry, depending on the nationality of the contractor in question.
According to the LRA a resident contractor must withhold tax on the payment to the resident sub-contractor at the rate of five percent of the gross amount of the payment.
“Lesotho has a double taxation agreement with a number of countries such as South Africa and the United Kingdom,” he said.
He said non-resident contractors from countries where Lesotho has a double taxation agreement are charged at a rate of 10 percent of the gross income received. A rate of 25 percent is however applicable for contractors from countries where there is no such agreement.
However, most of the local professionals attending the seminar said they had a problem with withholding tax, saying the current format sometimes caused cash flow problems as they could only claim their tax credits at the end of the financial year.
“The current law, as it stands, causes cash flow problems in our businesses, hence we are not able to pay tax in most cases as we can only claim at the end of the financial year,” said one participant at the seminar.
However, Sepiriti called for more taxpayer education on a more regular basis so as to disseminate more information to taxpayers.
“The LRA has in the past encountered some challenges on our year-end annual income tax returns,” said Sepiriti.
“Frequent interaction between the Lesotho Revenue Authority and taxpayers is necessary to ensure that taxpayers are well informed to increase the rate of compliance,” said Sepiriti.
He said there was also need to harmonise working relations between taxpayers and the LRA on issues pertaining to problems that taxpayers encounter when they have to pay tax.
“We need more target based taxpayer education, that will make us aware of the different needs of taxpayers from different economic activities,” he added.