MASERU – Improvements in the wholesale and retail trade industry, as well approximately 123 percent increases in the mining and quarrying industry contributed significantly towards ensuring that the Lesotho Revenue Authority (LRA) exceeds the revenue target by a whopping M114.60 million in 2018/19 fiscal year.
Tax revenue collections in the 2018/19 fiscal year amounted to M6,983.95 billion against the target of M6,869.91 billion.
The revenue collections also registered a year-on-year growth of M114 million, which is equivalent to 16 percent.
The growth may have been mainly supported by IT, which grew by M466 million or 19 percent. However, it was the inland VAT collection on the wholesale and retail trade industry which left the LRA Commissioner General Thabo Khasipe pleasantly surprised.
The industry recorded a M275 million increase against the poor performance in the import VAT where the growth rate significantly declined from 28 percent in 2014/15 to 0 percent in 2017/18 before recovering to 2 percent in 2018/19.
The growth, according to Khasipe, came as a result of the introduction of a new strategy “Rea Aha” which came into force in 2018.
The five-year strategic approach was implemented to, among others, build key strategic resources which should then be used as sustainable sources of strategic advantage in achieving desired outcomes of maximising revenue collection, deepening the culture of voluntary compliance, enhancing the quality of service and reducing the cost of collection.
“Generally, we did very well when it comes to the VAT collection but I am specifically happy that most of our collections in this area come from the collections within the country. This is thanks to our new strategy; it is a sign that people now understand their role in this whole situation.
“Promotion of the voluntary compliance culture also helped us a lot because at first we had people who did not want to comply at all but now things are different since the new strategy,” Khasipe said in an interview with Public Eye on Wednesday this week.
He went on to emphasize that the authority now uses simplified business taxation which allows small and medium sized companies to pay their revenues easily without having to go through tedious processes just to pay tax.
The small and medium companies include those in transport, wholesale and retail.
VAT collections have been struggling to meet targets since the 2013/14 financial year but things started improving in 2017/18 where the revenue authority remitted M2,414.01 million against the target of M2,362.67 which was a 2.1 percent increase compared to the previous year.
Minister of Finance Dr Moeketsi Majoro expressed satisfaction towards the revenue collected in 2018 but lamented the poor performance in corporate income tax efforts.
“We are thankful for the M6.9 billion received today from the LRA which erases their several years of missing the target. This is a pleasant surprise because we did not expect it.
“It says our systems are repairing themselves and also gives confidence going forward that we will collect more of what is due from taxpayers to the government so that we can deliver the services that we have the responsibility to deliver.
“Corporate income tax, however, is not doing extremely well and I think we should have conversation about that,” Majoro said during his presentation on Wednesday.
There have been struggles in the income tax collections since the 2016/17 season which saw the sector failing to meet the target by 7.26 percent.
But it was in 2017/18 financial year where the decline was even more shocking with a 15.56 percent decline. The past financial year, however, saw a marginal increase of 2.01 percent.
In comparison, even the Personal Income Tax this year performed better than the Company Income Tax, recording a year-on-year growth of 4.0 percent from the previous 2.3 percent.
LRA has been missing the target since the 2016/17 season, collecting M5,989.53 billion in that year against the target of M6,381.01 billion. In this year the revenue authority missed the target by M392.82 million.
In 2017/18 financial year the target was also missed by an increased M607.55 million, with the LRA collecting M5,989.53 billion against the set target of M6,597.08 billion.