Govt under fire for effecting ‘sin tax’
MATHATISI SEBUSI
MASERU – The Revolution for Prosperity (RFP) led government is under fire for implementing the levy on tobacco and alcohol products despite warnings from stakeholders. Interested parties have been warning that imposing the levy on the products will not only see businesses going under or retrenching staff but will also promote smuggling of the products from South Africa. The stakeholders also say increasing levy on tobacco and alcohol products will drive people into using dangerous drugs in a bid to get something cheaper that will satisfy their need to consume alcohol and tobacco. The Tobacco and Alcohol Products Levy Act 2023 was implemented on March 1, 2023 imposing a levy of 30 percent and 15 percent on tobacco and alcohol, respectively.
The Act makes provision for imposition and payment of a levy on tobacco and alcohol products. As per the Act, the levy can be charged by among others value tax (VAT) registered businesses upon the sale of tobacco and alcohol products, RSL or customs officials at all ports of entry into Lesotho, as well as by businesses and individuals (private shoppers). In an interview with Public Eye, Legal Officer at Maluti Mountain Brewery (MMB) Mapulumo Mosisili said the levy means increased cost of production of alcohol by the MMB, with a consequent increase in alcohol products. She said MMB plans to negotiate with the government on the levy but if their efforts fail they will have to abide by the law.
She further noted that with the levy imposed on alcohol products, Lesotho’s alcohol will be more expensive than that of South Africa indirectly promoting alcohol smuggling. Lesotho Liquor and Restaurants Owners Association (LLROA) President Motseki Nkeane also told Public Eye that it is very unfortunate that the government decided to quickly implement the levy despite consultations with the previous government on their concerns regarding the levy which the 10th parliament understood and took into consideration. He said among the things that they presented before the 10th parliament and the Senate with regard to the levy imposition was that it will negatively affect alcohol and tobacco businesses that are only beginning to recover after being closed as one of the measures the former government implemented to curb the spread of COVID 19. “The 10th parliament consulted us about the levy. They understood that it was not the right time to implement the levy. We are just surprised that the new government just decided to implement it without consulting us or even taking into account our submissions in regard to the levy in question,” Nkeane said.
Asked how the levy will affect alcoholic products and tobacco retailers, Nkeane said it will not only see companies losing business and retrenching staff but will also see a lot of the products being smuggled from South Africa as the products are cheaper in the neighbouring country. Once they fail to afford the commodities many people will end up opting for cheaper but dangerous drugs that will satisfy their cravings, he said. He noted another concern as the unclear information on how the levy will be collected considering that as of now a lot of alcohol products and tobacco are being smuggled into the country and the price increases will intensify the smuggling. Nkeane said since March 1, 2023, they have increased alcohol products’ prices and since then business has been very bad. He said last month business was already slow but the increase in prices has worsened the situation.
He said before the implementation of the Tobacco and Alcohol Products Act, 2023, he bought a case of black label for M183 at Maluti Mountain Brewery (MMB) and sold one quart for M18 but since implementation of the Act, the price of a case has increased from M188 to M222 forcing him to sell a quart at M22 each. Also concerned with the implementation of the Levy is the Lesotho Chamber of Commerce and Industry (LCCI). LCCI has expressed concern about the limited stakeholder and industry consultation regarding the levy increase contained in the Tobacco and Alcohol Products Levy Act 2023. Another concern by LCCI is that the date of implementation of the Act was not communicated on time to concerned stakeholders and that the decision will encourage illicit trade in the country. In a statement LCCI further noted that the levy imposes an added reporting burden on legal traders who will see profits decline as the cost of products increases. The Chamber also observed that experience in other territories show that erratic policy decisions stimulate the growth of smuggling and illicit trade.
LCCI therefore strongly advises the government of Lesotho to reconsider the terms of the Act, and offer the private sector real incentives that promote investment, create jobs and grow the economy. “The LCCI believes that this would be more aligned with minister of finance Dr Rets’elisitsoe Matlanyane’s speech who highlighted the role of the private sector to work with the Lesotho government to achieve societal goals.“The goals of business and government are intertwined, and it is only through effective dialogue and policy certainty that mutual benefits can be achieved,” reads LCCI’s statement. On the other hand, the Southern African Alcohol Policy Alliance (SAAPA) is thrilled that the Act have finally been implemented.
In an interview with this publication, SAAPA country coordinator Mothobi Molefi, said implementation of the levy will reduce citizens’ exposure to alcohol and tobacco products, consequently reducing the government’s expenditure towards treatment of alcohol and tobacco related diseases or accidents. He said although consumers of the products will be burdened by price increases and business owners will raise concern about possible losses in their profits, it is the government’s responsibility to secure and safeguard the well-being of its citizens since it bears the expenditure for the policing care, treatment and support for health and social harms of the products. Molefi noted that with the levy, Lesotho has also finally joined countries implementing World Health Organisation’s global alcohol action plan to reduce alcohol related harm. He said SAAPA encourages the government to go a step further and earmark a percentage of the new tax for health promotion.
