By Seleoe Nonyane
The Lesotho Liquor and Restaurant Association (LLROA) has decried the enforcement of the Tobacco and Alcohol Product Levy Act 2023 on March 1 2023, which has seen a rise in the prices of these products.
The Tobacco and Alcohol Product Levy Act 2023 is a tax imposed on selling of the tobacco and alcoholic products at all stages of the business cycle.
The government intends to use the legislation as an instrument to influence acceptable or normal consumption of tobacco and alcohol products.
It is also expected to increase the revenue gain in order to provide for the developmental programmes.
The levy rate for tobacco products is 30 percent while the rate on the alcoholic products will be 15 percent.
In a statement released last week, LLROA president Motseki Nkeane states that “it is particular disappointing that the implementation date of the 1st March 2023, was not communicated to stakeholders timeously, and without adequate stakeholder education.”
He laments that the move has left traders wondering who is affected by the legislation and who it might be excluding.
“The alcohol levy implementation comes at a time when small traders are still recovering from the alcohol bans of the Covid-19 era, compounded by rising costs of living; the sustainability of businesses is under threat. With the addition of the levy, there’s a real danger that legal businesses will shut down. Numerous traders operate outside the legal system and they will benefit from the implementation of the Act.
“LLROA has always advocated for better enforcement of laws, to limit the growth of illegal traders, before the Tobacco and Alcohol Levy Act is passed and implemented. It is unfortunate the government did not heed our advice, thus giving further impetus for illegal trading to grow.
“As LLROA, we are reminded of the wool and mohair saga of the previous government, and it was our understanding that the government of the day would have approached these types of issues differently. We once again urge the government to review this Act, and propose actions that will benefit the legal traders in this industry,” Nkeane stressed.
The LLROA is a voluntary body that represents liquor traders and restaurants in Lesotho.
In an analysis of the Act, the tax advisory service for Revenue Services Lesotho (RSL) Mosiuoa Masoabi explained how the levy will operate and who has the mandate to collect it.
He said in Lesotho there is an alcoholic products manufacturing company that sells to wholesalers who sell to retailers who in turn sell to the consumers.
“So, how it works is that the manufacturer will charge the wholesalers according to the cost of the alcohol then the wholesalers will also be expected to charge the levy on traders.
“All the stages charge the levy and it will be paid by the consumers of alcohol,” he said.
Masoabi said the levy is also charged on alcoholic and tobacco products coming into the country and the expectation is that the RSL staff will collect the levy at the borders of Lesotho.
He indicated that the levy is charged on the fair market value of the products.
“When we charge the levy, we do so on prices that are not VAT (value added tax) inclusive and the expectation is that if one is VAT included we will remove the VAT, charge the levy and then take back the VAT after charging the levy.
“Moreover, not all traders of alcohol and tobacco products can charge the levy but only traders who have registered for VAT and make an annual turnover of not less than M850 000 and are also registered for levy purposes.
“RSL staff or customs officials at all entry ports in Lesotho are also expected to collect the levy from businesses and individuals.”
When the law was first introduced in parliament in 2021, the stakeholders who were involved such as Maluti Mountain Brewery (MMB), British American Tobacco and Lesotho Liquor and Restaurants Owners Association complained that they were not consulted during its drafting.
However, they said the proposed levy should not be introduced in order to secure government total product taxes from MMB, preserve jobs and to keep MMB sustainable for many years.
“The proposed levy would not achieve its intended results; instead the government will lose M800 million in revenue in the next three years which is almost double the income projected to be collected from the total levy over the next two years from MMB alone.”
The stakeholders also wanted the government to implement the Alcohol and Tobacco Act of 1998 before they can increase the levy.
“We recommend that the ministry of health should make policies to control substance abuse. We also recommend that the ministry of finance should control the spread of counterfeit products and smuggling which impact on tax collection and also indicate how taxes collected in the industry are used,” they suggested.
They also called on the industry to be granted a grace period of 12 months to start the implementation of projects in agro-inputs and projects diversification with clear milestones regarding sourcing fields and preparing contracts for supply by Basotho farms for manufacturing,
In another development, the Anti-drug Abuse Association of Lesotho (ADAL) this week applauded the government for finally enforcing the law, describing the move as a step in the right direction.
ADAL director Mphonyane Mofokeng said the organisation will motivate that government can go even further by earmarking a percentage of this levy’s to be used for health promotion programmes.
In conclusion, Mofokeng dismissed as untrue LLEROA’s claims of prior non-consultation. She said LLEROA is not even a stakeholder in the matter.
