Alcohol, tobacco levy sows discord

MATHATISI SEBUSI

The Tobacco and Alcoholic Products Levy Bill of 2020 has left stakeholders in alcohol and tobacco trade in discord – with one section applauding the significance of the legislation while others assert that it is bound to kick them out of business. Some interested parties say the levy is going to negatively affect their businesses and could result in them retrenching staff for the sustainability of their businesses, or closing shop due to pressure from the black market.

There are also those who argue that this step will save the country a lot of money on addressing issues emanating from excessive use of alcohol. Stakeholders including Maluti Mountain Brewery (MMB), the British American Tobacco, Lesotho Liquor and Restaurant Association as well as the Lesotho Chamber of Commerce and Industry (LCCI) are worried by the economic impact the levy will have on businesses. They are also concerned about the country’s revenue collection which is expected to drop if the Bill is turned into law.

They say the levy will not achieve its intended purpose of reducing use of the products by consumers but will encourage them to rather buy from illegal dealers, thus forcing licensed liquor and tobacco dealers out of business. They state that the proposed result in the government losing 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.

They, therefore, propose that the levy should not be enacted in order to secure government total product taxes from MMB, preserve jobs and keep the brewing company sustainable for many years. On the other hand, the South African Alcohol Policy Alliance Lesotho (SAAPA) is happy with the Bill as they believe that it communicates commitment of the Lesotho government to act on their recent signing of the World Health Organisation’s Global Alcohol Action Plan 2022-2030.

“This is a significant bill which reflects global recommendations made by WHO to reduce alcohol related harm. Since 2010, the WHO has recommended the increase in price of alcohol together with reduced availability and marketing restrictions as the ‘three best buys’ actions member states could take to reduce alcohol related harm. “In addition, increased price will also generate more revenue for government. A policy of increased price for alcohol products therefore has a double benefit – increased revenue and reduced consumption,” SAAPA PRO Mothobi Molefi says.

Molefi notes that the government spends resources on police managing roadblocks or responding to road crashes and spends more resources on managing and treating hospital trauma admissions from stab wounds, road crashes and domestic violence as a result of alcohol consumption. The SAAPA vouches to motivate that government go even further by earmarking a percentage of this levy to be used for health promotion programmes. The LLROA, through spokesperson Nkeane Motseki, similarly expresses content that the Senate has not approved the Tobacco and Alcoholic Products Levy Bill of 2020 – noting that this follows their meeting with the senators on Friday seeking intervention on certain issues the Bill contains.

Motseki says relevant stakeholders were not consulted during the drafting of the Bill, and that the first time they heard of it was from the Portfolio Committee on the Economic and Development Cluster. He adds that they are not against the Bill, but are concerned that there are things that government has to address before it can talk about the levy – including but not limited to, ensuring that 80 percent of illegal alcohol and tobacco traders are registered and pay tax.

This to ensure that the burden of the levy is not only felt by the minority that has been abiding by the law and paying tax as expected of them. He said the government should also address illicit selling and buying of tobacco and alcohol in the country and implement the Alcohol and Tobacco Act of 1998 before it can increase the levy. “There are laws in place that should be implemented to regulate selling and buying of alcohol in the country before imposing the levy. “Imposing the levy on us is more like adding more financial burden to few law abiding companies while majority of traders that do not even pay tax will continue to enjoy all the benefits,” he said.

Motseki further noted that timing to imposing the levy on the two products is off considering that the sector was closed during past lockdowns that were meant to curb the spread of Covid-19. He said due to Covid-19, most businesses closed doors, others are still struggling while yet others are only finding their feet now. “The levy will push us out of business without doubt. In the process, illicit companies will be at advantage,” he said. The National Assembly has approved and passed a report by the Portfolio Committee on the Economic and Development Cluster recommending that the Bill be adopted with amendments made; including reduction of alcoholic products levy from 15 percent to three percent and tobacco levy from 30 percent to six percent.

The Bill has since been passed to the Senate, which is currently receiving submissions from the government and the stakeholders. The Principal Chief of Matšekha, Chief Lesaoana Peete, indicates that ongoing submissions the Senate will then make a decision whether the Bill is passed or returned for further consultations. According to the report by the Portfolio Committee on the Economic and Development Cluster, minister of finance tabled the Tobacco and Alcoholic Products Levy Bill 2020 in March 2020. According to Ministry of Finance, the aim of the Bill is to introduce levy on alcoholic products and alcohol as a way to control their consumption to acceptable levels.

For his part, finance Minister Thabo Sofonea notes that excessive use of the products contributes to several socio-economic hazards which mostly affect public health in an adverse manner. He said the introduction of the levy introduction is also intended to normalise price differences that exist between Lesotho and South Africa thereby putting Lesotho’s economy on an equal competitive footing. The final consumer of the products is the one that is expected to bear the burden of the imposed levy.