MASERU – Lesotho should start thinking about taxing the digital market to increase revenue collection and reduce tax non-compliance, Lesotho Revenue Authority (LRA) board chairman Robert Likhang has said.
Likhang noted in an interview with Public Eye this week that the digital market is one of the major emerging challenges, not only for Lesotho but also for the entire global tax administration community.
He emphasised that the developing economies such as Lesotho are mostly challenged as they stand to lose a lot of their taxation rights as transactions become more and more digital.
The challenge, according to the chairman, requires Lesotho to collaborate with other developing countries in addressing the issue which is evidently hampering revenue collection, particularly in developing African economies.
“However, by its nature, the challenge requires collaboration between the developed countries who stand to benefit from the trend and developing countries. For example, a book sale by Amazon based in the United States to a person based in Lesotho means the VAT and the profit taxation rights will accrue to the United States.
“And to regularise the matter, Lesotho and the United States have to agree on administrative arrangement that ensures proper taxation,” Likhang added in an interview with Public Eye last week.
He confirmed therefore that there is a plan in place to tackle the matter as part of the international taxation agenda. In so doing developing countries in Africa have opted to use their grouping, the Africa Tax Administration Forum (ATAF) to maximise leverage by uniting their voice.
ATAF is recognised as the leading body in Africa when it comes to tax matters. Lesotho is a member of the tax forum which gives the country an opportunity to pursue a solution as part of the African community.
“Any solution agreed between ATAF and the developed countries will necessarily involve capacity building. We shall essentially be following the model that was successfully implemented by the World Trade Organisation wherein capacity building was a key element of trade negotiations between the developed and the developing world,” Likhang added.
According to the 2019 economic report on Africa, African governments must widen the tax base by bringing hard-to-tax sectors into the tax net, including agriculture, the informal economy, the digital economy and the natural resources sector.
Reforming tax administration systems through digitisation and other information technologies could increase revenue mobilisation.
“Countries that have digitised their tax administration have increased compliance rates and saved on compliance costs. The rollout of digital technologies needs to be accompanied by capacity building for policy makers and tax collectors on how to take advantage of data generated through digitisation for more efficient assessments,” the report reads.
Standard Lesotho Bank Chief Executive Officer, Mpho Vumbukani, in one of his recent presentations said the world is indeed moving towards the new digital era, warning that Lesotho should be ready to move in that same pace with the rest of the world.
“The world is going digital and if we do not embrace technology it says we are losing out on opportunities to grow our businesses. The reality of today is that the economy is going through digital channels and it becomes important that we move towards embracing this new world because even if we were to stand still it is coming our way.
“So we might as well not wait for this train to hit us but, instead, be ready to actually say how do we get our businesses to thrive in this new era of the economy,” Vumbukani said on Tuesday at a graduation ceremony on a skills and development programme which was organised by the bank.