By ‘Majirata Latela
Alcohol and tobacco traders are evidently angry and have made little effort to conceal their chagrin.
Their discontent stems from the Parliamentary Portfolio Committee on the economic and development cluster’s recommendation that the Alcohol and Tobacco Levy Bill be adopted with some amendments.
On March 2 last year, the minister of finance tabled the Tobacco and Alcoholic Products Levy Bill, 2020 in parliament.
The Bill was referred to the parliamentary committee for consideration in terms of Standing Order No. 51 (5). The committee thereby invited the ministry of finance to a briefing session in accordance with the Standing Order No. 54 (2).
Motseki Nkeane, chairman of the Lesotho Liquor and Restaurant Owners Association (LLROA), told theReporter newspaper that the association members that were seriously disappointed at how the committee has given its recommendations on the Bill.
He said the association has been in wait to be summoned to contribute to the drafting of the Bill and were informed the committee was yet to consult other stakeholders that included Lesotho Revenue Authority (LRA) and the ministry of finance.
“We are disappointed with the committee because we explained to them how the Bill was going to affect our businesses. Even though they have advised parliament to adopt it with amendments, we clearly do not want the Bill. We are still not happy with the three percent and six percent that the committee has recommended to be increased on the levy of alcohol and tobacco respectively.
“We want those who are responsible to address the issue of smuggling before the Bill because it will attract many alcohol and tobacco smugglers to enter into the market to illegally sell those products.
“Covid-19 has hit many businesses and the business of alcohol has been acutely affected. With the introduction of this Bill, several businesses are facing a bleak future if it can be passed as law,” he strongly argued.
The ministry of finance contented that the objective of the Bill is to introduce a levy on tobacco and alcoholic products with the aim of reducing the consumption of these products to acceptable levels.
The ministry observed that the prevailing excessive use or abuse of these products contributed to several socio-economic hazards which mostly affect public health in adverse manner.
“It will also normalise the price differentials that exist between Lesotho’s towns and those of neighbouring South Africa., thereby putting Lesotho’s economy on an equal competitive footing,
“The Bill empowers a vendor who sells these products to charge the levy at the rate of 30 percent for tobacco products and 15 percent for alcoholic products, collect and remit the levy to the LRA. The levy is charged on the consideration for the products exclusive of value added tax (VAT). The person who bears the burden is the final consumer of these products,” the ministry urged.
Upon receiving the objectives of the ministry over the Bill, the committee called upon stakeholders to give their inputs over the Bill. The stakeholders were Maluti Mountain Brewery (MMB), British American Tobacco (BAT), Lesotho Liquor and Restaurants Owners Association (LLROA), Private Sector Foundation Lesotho (PSFL), Lesotho Chamber of Commerce and Industry ( LCCI) and South African Alcohol Policy Alliance Lesotho (SAAPA).
While reporting to parliament the committee pointed out that stakeholders were not consulted during the drafting of the Bill. Stakeholders also proposed levy should not be introduced in order to secure government total product taxes from MMB, preserve jobs and to keep MMB sustainable for many years.
Those who were involved showed that the proposed levy would not achieve its intended results but instead the government would lose M800 million in revenue in the next three years. That it was advised, would almost double the income projected to be collected from the total levy over the next two years from MMB alone.
They further pointed out that the 2020 budget statement indicated that government’s projected revenue from the total levy on alcohol and tobacco would be M00 million annually. The loss of revenue from MMB alone was set to double the anticipated incremental revenue from the levy and will therefore result in a net negative impact for the country from revenue perspective.
Moreover, stakeholders urged that the government must implement the Alcohol and Tobacco Act of 1998 before any spike in levy.
“The licensed liquor and tobacco dealers will be forced to close their businesses due to high prices and this will enable the illegal dealers to benefit. The levy will not only affect the sales of the registered companies but also results in the loss of many jobs
“Introducing levy of 15 percent on tobacco products would just make illegitimate stakeholders and illicit companies more active in the market because raising a levy would not necessarily stop people from smoking nor reduce consumption.
“Consumers will not buy legal products but buy from the illicit operators. Raising a levy would be tax upon a tax. Studies have shown that 20 percent of local liquor traders are operating legally while 80 percent are working illegally. Therefore, introducing a levy will only worsen the problem of illegal trading,” the committee reported.