LRA to re­duce M500 mil­lion deficit – Khasipe

Lesotho Times - - Front Page - Tsitsi Matope

THE Le­sotho Rev­enue Au­thor­ity (LRA) is ex­pect­ing to miss its rev­enue tar­gets for the se­cond year run­ning by about M500 mil­lion. But LRA Com­mis­sioner-gen­eral, Thabo Khasipe, says the au­thor­ity is pur­su­ing ro­bust strate­gies to re­duce the deficit.

The de­cline could se­ri­ously un­der­mine the gov­ern­ment’s ca­pac­ity to fund its op­er­a­tions, bankroll de­vel­op­ment ini­tia­tives, bal­ance the na­tional bud­get as well as ac­cess to mul­ti­lat­eral fi­nanc­ing which is tied to its abil­ity to ser­vice loans.

Mr Khasipe this week told the Le­sotho Times that while the LRA was pur­su­ing vig­or­ous strate­gies to en­hance rev­enue col­lec­tion, he was how­ever, “not op­ti­mistic that we are go­ing to meet the cur­rent tar­get” be­cause of an in­ter­play of var­i­ous fac­tors, in­clud­ing the de­cline in rev­enues col­lected from the South­ern African Cus­toms Union (SACU).

He said the rev­enue tar­get for the April 2017 to March 2018 fi­nan­cial year had been set at M 6.5 bil­lion but could be missed by as much as M500 mil­lion. This will be the se­cond year in a row that the rev­enue col­lect­ing body had failed to meet its tar­get. In the pre­vi­ous fi­nan­cial year (April 2016to March 2017) the au­thor­ity missed its M6.4 bil­lion tar­get by M430.8 mil­lion.

It was against this back­drop that Mr Khasipe said that new strate­gies were needed to en­able the LRA to ful­fil its man­date of rev­enue col­lec­tion.

“I am not op­ti­mistic that we are go­ing to meet the cur­rent tar­get but we are work­ing hard to re­duce the pro­jected short­fall,” Mr Khasipe said, adding, “It is against this back­ground that we are go­ing all-out to set our­selves on a new path that will en­able im­proved rev­enue col­lec­tion”.

Mr Khasipe, who was first ap­pointed to the top job in De­cem­ber 2016, be­moaned the neg­a­tive ef­fect of po­lit­i­cal in­sta­bil­ity on the coun­try’s in­vest­ment cli­mate, say­ing it had ul­ti­mately im­pacted on rev­enue col­lec­tion.

Le­sotho has been plagued by chronic in­sta­bil­ity which has been char­ac­terised by among other things, the as­sas­si­na­tions of two army com­man­ders, Lieu­tenant Gen­eral Maa­parankoe Ma­hao (June 2015) and Lt-gen Khoan­tle Motšo­motšo (Septem­ber 2017).

The coun­try has also wit­nessed the col­lapse of gov­ern­ments with three elec­tions be­ing held in the space of five years (2012, 2015 and 2017).

Mr Khasipe said while the po­lit­i­cal in­sta­bil­ity had af­fected the busi­ness cli­mate, the sit­u­a­tion was ag­gra­vated by ex­ter­nal fac­tors that in­cluded the slow­down of the South African econ­omy and the con­se­quent de­cline in Le­sotho’s share of rev­enue from the South­ern African Cus­toms Union (SACU).

SACU is one of the world’s old­est cus­toms union and it con­sists of Botswana, Le­sotho, Namibia, South Africa, and Swazi­land.

Speak­ing on SACU, Mr Khasipe said, “Our econ­omy has not been so ro­bust in re­cent years due to fac­tors in­clud­ing a slow South African econ­omy and a drop in rev­enue from SACU”.

“Last year, we saw an in­ter­est­ing fea­ture where our do­mes­tic tax-col­lec­tion ex­ceeded SACU rev­enue.”

This, he added, re­flected how SACU rev­enue was be­com­ing “of less sig­nif­i­cance to Le­sotho,” thereby plac­ing a heavy re­spon­si­bil­ity on do­mes­tic tax col­lec­tion.

“We only have one op­tion, which is to in­crease lo­cal rev­enue, oth­er­wise the gov­ern­ment is go­ing to en­counter se­ri­ous chal- lenges, in­clud­ing sig­nif­i­cant un­der­fund­ing of some sec­tors and chal­lenges in ac­cess­ing mul­ti­lat­eral fi­nanc­ing due to a drop in our ca­pac­ity to ser­vice loans,” he said.

He said as the coun­try moved to achiev­ing ef­fi­ciency in do­mes­tic tax col­lec­tion, the LRA’S big­gest task would be that of en­gen­der­ing a new cul­ture of tax com­pli­ance among stake­hold­ers to en­sure that Le­sotho in­creased its rev­enue, par­tic­u­larly cor­po­rate tax.

At 15 per­cent of the tax rev­enues, the cor­po­rate tax col­lected in the coun­try is be­low the 20 per­cent av­er­age reg­is­tered in other SACU mem­ber coun­tries.

Mr Khasipe said com­pli­ance was also a chal­lenge in the re­tail and whole­sale sec­tors where VAT col­lec­tions were strug­gling.

Mean­while, a strate­gic shift that will see the LRA turn­ing to a “ser­vices and client ap­proach” is ex­pected to im­prove re­la­tions and co­op­er­a­tion be­tween the au­thor­ity and tax­pay­ers, thereby boost­ing rev­enue-col­lec­tion.

“It is my view that de­spite the eco­nomic chal­lenges, as an au­thor­ity, we did not fo­cus on nur­tur­ing re­la­tions with our clients and ed­u­cat­ing them on the im­por­tance of pay­ing tax. Peo­ple need to know who should pay tax, how much and why,” Mr Khasipe said.

He said there was need to change the LRA’S ap­proach to tax col­lec­tion which had in the past been modelled on the en­force­ment ap­proach.

“I call it a cops-and-rob­bers ap­proach. We have viewed tax­pay­ers sus­pi­ciously – as peo­ple with a propen­sity to break tax laws while the LRA acted like cops. That ap­proach did not only sour re­la­tions with our clients, it also did not help us meet our tar­gets. It has ac­tu­ally re­duced the lev­els of trust and com­pli­ance, whether in the form of new clients join­ing the tax net or those al­ready in the tax net. Due to lack of trust and other fac­tors, some of our old clients are not keen on re­veal­ing their new streams of in­come,” Mr Khasipe noted.

He fur­ther said the au­thor­ity was now fo­cus­ing on im­prov­ing ser­vices through reg­u­lar en­gage­ments with the clients to un­der­stand their needs and make it easy and less costly for them to com­ply with tax reg­u­la­tions.

This week, the LRA launched the Vol­un­tary Dis­clo­sure Pro­gramme (VDP) that opened a win­dow of op­por­tu­nity for all er­rant busi­nesses and in­di­vid­u­als to visit the au­thor­ity’s of­fices and am­i­ca­bly ad­dress their tax obli­ga­tions. Those who com­ply vol­un­tar­ily will be spared the 200 per­cent penalty charges.

“The VDP is one of our ini­tia­tives that re­flects our strate­gic shift. It gives our clients an op­por­tu­nity to work through all their tax is­sues with us. Whether they had over­stated their ex­penses and un­der­stated their in­comes strate­gi­cally or by mis­take, they can come to us to be­gin on a new path.”

He added that the ini­tia­tives aimed at fos­ter­ing mu­tual re­la­tions with all clients also cre­ated a moral au­thor­ity on the LRA to ap­ply puni­tive mea­sures such as penal­ties and pros­e­cu­tion of those who chose to re­main out­side the tax net.

The LRA will also in­tro­duce other ini­tia­tives aimed at im­prov­ing clients’ com­pli­ance such as the E-tax­a­tion sys­tem, which is funded to the tune of M85 mil­lion by the African De­vel­op­ment Bank (AFDB), to en­sure quicker, con­ve­nient and faster pro­cesses. It will also im­ple­ment the Small Busi­ness Tax­a­tion regime, which will come with a num­ber of flex­i­ble pay­ment mod­els, among other ben­e­fits.

LRA Com­mis­sioner Gen­eral Thabo Khasipe.

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