Call to scrap VAT on electricity gains traction
MOSA MAOENG
MASERU – A call to scrap Value Added Tax (VAT) on electricity as a way to enable equity and universal access is gaining ground, thanks to a petition by Kananelo Boloetse and Mokotjo Maseli. The petition that was debated upon by the Natural Resources Cluster on Tuesday could soon addressed by parliament.
It was addressed to the Clerk of the National Assembly on March 31, this year with the subject ‘Petition to scrap VAT and levies on electricity for universal access and equity’.
The duo had requested that upon referral by the Speaker to the relevant committee, the following demands be considered and acted upon; zero rated electricity for VAT, eliminate additional levies as well as implement cross-subsidy tariff mechanisms.
The committee this week invited the ministries of energy and finance and development planning as well as the Revenue Service Lesotho (RSL) to respond to the petition.
This comes after the ministries and RSL denied Boloetse access to the list of electricity users noting that it is ‘customer confidentiality’.
In an interview this week, Boloetse mentioned that they did not approach any relevant entity responsible in this issue before submitting the petition as this is a matter of law and it is only parliament that can amend the law to ensure electricity is zero VAT rated.
Boloetse and Maseli had noted in the petition that energy is the lifeblood of socio-economic progress, a vital force propelling nations like Lesotho toward development and prosperity. Recognising its centrality, both public and private institutions within the energy sector, guided by governmental oversight through the ministry of energy, are tasked with ensuring that energy is accessible across all socio-economic spheres (Kingdom of Lesotho, 2011).
It further read that, the imposition of VAT on electricity in Lesotho undermines this mission as it erects financial barriers that stifle equitable access and hinder the realization of fundamental human rights tied to energy provision.
It noted that electricity is more than a commodity, it is an enabler of rights, a cornerstone upon which the enjoyment of other basic entitlements, education, healthcare, economic opportunity and social equity as well as rests. Its dispensability elevates it to the status of a fundamental right, rather than a mere privilege or contractual luxury.
“VAT, an indirect tax on consumption typically ranging from 15 to 20 percent, is levied across the production chain and on final sales. While designed to generate revenue, its application to essentials like electricity reveals a stark flaw; it is regressive.
Low income households, whose budgets are already stretched thin, bear a heavier burden as VAT erodes their purchasing power by a greater proportion than it does for wealthier counterparts,” reads the statement.
Furthermore, the petition included a call to action; electricity as a right noting that Lesotho’s energy policy (2015-2025) explicitly recognizes electricity as a human need, a stance that clashes with the continued imposition of VAT. If electricity is indeed essential, its taxation contradicts the government’s own framework, which prioritizes reliability, affordability and efficiency in electrification efforts.
By abolishing VAT and associated levies on electricity, government would not only honour its own policy commitments but also take a monumental step toward achieving SDG 7 and uplifting its people.
The Minister of Finance, Dr Retšelisitsoe Matlanyane, has proposed a 0.5 percent increase in VAT on electricity. This announcement was made during her financial policy presentation in parliament on March 19 this year.
According to the minister, the South African government has proposed a similar VAT increase of 0.5 percent. She said if South Africa proceeds with the increment, it could lead to administrative challenges at border posts during the declaration of goods.
She stated: “Although we are not sure if South Africa would adopt the VAT increment, we will face a challenge as it will be 15.5 percent while ours will be 15 percent.”
The proposed adjustment aims to align Lesotho’s VAT rate with regional standards, potentially easing cross-border trade administration. However, the final decision on the increment is yet to be determined, pending further deliberations and developments in South Africa’s tax policy.
Studies show that, in Lesotho, VAT rate on electricity is 10 percent according to the RSL.
The proposed increase is expected to impact consumers and businesses, particularly those with low incomes or those that rely heavily on energy intensive operations.
