Call to halt sin tax

RETHABILE MOHONO

MASERU – Parliament’s Economic and Development Cluster has recommended that government suspends proposed increases on levies for tobacco and alcoholic products, citing growing concerns from key industry stakeholders and the threat to local businesses.

The recommendation comes in response to finance minister, Dr Retšelisitsoe Matlanyane’s recent tabling of the Tobacco and Alcoholic Products Levy (Amendment of Schedule) Regulations of 2025, which proposes to raise levies on tobacco from 15 percent to 20 percent and on alcohol from 7.5 percent to 10 percent.

According to the committee’s report, the Ministry of Finance and Development Planning intends to implement these increases gradually, with long-term targets of 20 percent for tobacco and 30 percent for alcohol.

However, the committee has advised the ministry to halt the proposed 2.5 percent increase on alcohol and 5 percent hike on tobacco, pending further consultation with key stakeholders – including Maluti Mountain Brewery (MMB) and the Lesotho Liquor and Restaurant Association (LLROA).

In its submission to the committee, MMB expressed deep concern over the continuous rise in alcohol levies, warning of dire consequences for the local beverage industry.

“In the past financial year, we experienced a reduction in production and sales, which led to employee retrenchments and the closure of our depots in Mohale’s Hoek and Maseru,” the company stated.

MMB added that high taxes are pushing customers to purchase cheaper alternatives from South Africa, further diminishing its market share.

“Continued increases could ultimately force us to stop production altogether – or worse, shut down permanently,” the brewery warned.

The brewing giant recently announced a 4.6 percent price hike across its product range, effective March 1 citing the need to sustain operations in a challenging business environment. The company stated that the price changes follow a re-evaluation of its pricing model and are necessary to maintain business efficiency and affordability.

The government has defended the proposed tax hikes as part of the 2025/2026 National Budget, which outlines a phased increase in ‘sin taxes’ to reduce dependence on external funding.

“This phased approach is intended to allow time for administrative adjustments and business adaptations,” Dr Matlanyane told parliament during her budget speech.

She added that the levies are expected to boost domestic revenue and support national development programmes.

However, the move has sparked widespread backlash. LLROA president, Motseki Nkeane, criticized the government for failing to properly consult stakeholders prior to implementing the levies.

“It was particularly disappointing that the original implementation date of March 1, 2023, was not communicated in a timely manner and that stakeholders were not adequately educated about the levy,” Nkeane said.

He warned that the tax puts legal businesses at risk, while giving unlicensed traders a competitive edge.

“Small traders are still recovering from Covid-19-related alcohol bans and rising living costs. There is a real danger that licensed businesses will be pushed out of the market,” he added.

The Tobacco and Alcohol Products Levy Act initially came into effect in March 2023, introducing levies of 30 percent on tobacco and 15 percent on alcohol. After an outcry from businesses, the government later reduced the rates to 15 percent and 7.5 percent, respectively.

While industry stakeholders continue to oppose the tax, some advocacy groups support it. The Anti-Drug Abuse Association of Lesotho (ADAL) welcomed the levy, saying it will help reduce alcohol consumption. ADAL director, Mphonyane Mofokeng, urged the government to allocate a portion of the revenue to health promotion programmes.

Conversely, the Southern African Alcohol Policy Alliance (SAAPA) accused the government of caving in to business pressure when it previously reduced the levies, stating that alcohol abuse remains a major social issue.

“We were disappointed that the government prioritized commercial interests over public health,” said SAAPA chairperson Thabo Mokhutšoane.

Youth activist, Thuso Leino, from BachaShutdown also condemned the tax reduction, arguing that the government has failed to protect young people from the harms of alcohol and drug abuse.

Meanwhile, small business owners remain worried about the financial toll of the levies.

“We are still trying to recover from the effects of Covid-19, and business is still slow. We haven’t been able to rehire all our staff,” said a bar owner in Maseru.

As the debate continues, Parliament’s Economic and Development Cluster has urged the Ministry of Finance to return to the table with stakeholders to find a balanced solution that supports both economic development and public health.