Fixing the tax sieve

Fixing the tax sieve

MASERU – A tough job where you can’t hide.
That is how Thabo Khasipe describes his job as the Lesotho Revenue Authority (LRA) Commissioner General.
That is because at the end of every financial year, Khasipe must account to his principals within the government of Lesotho why, for instance, the LRA did not meet its revenue collection targets.

Khasipe says that is a difficult task because generally, people do not find it easy to part with their own money to pay tax.
As the country’s foremost taxman, Khasipe acknowledges the negative narrative that tax issues have been dealt with historically.
“We (taxmen) are viewed as the bad ones, even from Biblical times,” Khasipe says with a chuckle.

“This job means you can’t be popular. We always end up with very difficult decisions that must be taken where individuals have failed to keep their part of the bargain.”
It is against this tough environment that Khasipe and his team at the LRA operate.
What makes his job extremely difficult is the fact that, as in most developing counties, there are still very high levels of non-compliance with the country’s tax laws.

“There isn’t a culture yet (in Lesotho) of general compliance to laws, let alone tax laws,” he says.
That absence of compliance to the law is evident in how we drive on the roads, how we litter and the general failure to adhere to public decency as in public urination, he says.

Khasipe says given this reality, the easiest route would be to resort to the stick – to whip people into line and ensure they comply.
The other option, he argues, is “to be forward looking and focus on building a culture (of compliance) with a firm belief that people are intrinsically motivated to do the right thing”.

Against these two diametrically opposed views, Khasipe says the LRA had chosen “to take the harder route” of building, rather than blindly enforcing, a culture of compliance.
“It is tempting and indeed expedient to choose the easier option, but we opted to take the harder and more sustainable route. To be sure, we recognise the need for coercion through the law but it has to be applied strategically as part of our compliance management tool-box, and not the proverbial single hammer that makes the owner see every problem as a nail.”

Khasipe admits also that “changing a culture takes time and a lot heavy lifting”.
“It is tough and will require time. It will not be achieved overnight.”
Khasipe says the LRA had since come up with a strategy that includes a compliance model that seeks to reward those who are tax compliant while punishing those who flout the law.

He says there are essentially four types of taxpayers. There are those who will religiously and voluntarily pay their fair share of tax, followed by a group that want to pay but fail to do so due to ignorance of their legal obligations, then those who will comply if they know that the tax agency will detect any non-compliance with a credible threat of punishment lurking behind the scenes.

Then there is the last group of individuals who are determined to bend and break the law at all costs in an effort to evade tax.
“These ones will never comply no matter what you do. They play a ‘catch-me-if-you-can’ game with the tax agency,” he says.
In an attempt to deal with these disparate groups, Khasipe says the LRA has come up with “a spectrum of interventions that are appropriate for each category”.
“We shouldn’t be painting everyone with the same brush,” he says.

Depending on the severity of the transgression, the assessed motive and profile of the offender, Khasipe says the LRA might consider to impose a penalty, a warning or some form of tax education to encourage compliance.
Khasipe has a chilling warning to those determined to cheat the system saying the LRA “will descend on them like a tonne of bricks.”
He says that the latest weapon in their arsenal is data analytics capacity that the Authority is building through the recent recruitment of top graduates in Maths, Statistics and ICT under the Youth Development Programme.

“Working with our tax accountants, these data analysts triangulate data from various sources to verify the veracity of declarations made to us by our clients. A recent exercise involved comparing sales declared by our clients on their tax return with those they have declared on their income tax return. You will be amazed at the discrepancies we discovered.”

Apart from dealing with external clients and stakeholders, Khasipe also has to keep his staff motivated. He says he needs “all hands on the deck”.
“As the leadership of the Authority, we try to emphasize to our staff the worthiness of purpose of what we do as LRA,” he says.

We seek to focus the entire team, Khasipe says, on the fact that it is through what we do that the Government is able to ensure that pensioners receive their pensions every month, schools, roads and hospitals are built, free primary school education is sustained, the police service provides safety and security and the general civil service is funded.
“The challenge is to try and instil that clear message in the minds of staff.”

That, Khasipe admits, was one of his biggest challenges when he assumed the reins at the LRA at a time when “there were very low levels of staff motivation”.
Through this new strategy that seeks to evoke intrinsic motivation within staff, he has observed “some progress, albeit still very fragile due to low levels of trust”.

Khasipe says Lesotho’s problems stem largely from the fact that we do not have an economy of our own.
“We do not have an economy fundamentally. The structure of our economy is intricately linked to what happens across the border and that undermines our ability to build and sustain livelihoods here,” he says.
That, to Khasipe, has been our biggest undoing.

Lesotho, which is entirely surrounded by South Africa, is a geographical oddity. The country basically relies on imports for every little commodity from its biggest and richest neighbour.
Khasipe says while this position in which Lesotho is located within South Africa might look like a blessing in disguise, it could also be viewed as a curse in disguise.

“This geographical position has prevented us from building a real economy to sustain livelihoods and grow,” he says.
Instead we have all our commercial hubs located along Lesotho’s borders, with a counterpart town just across the border in South Africa.
Khasipe says these counter-part South African towns are “busy sucking capital out of Lesotho”.

“We open bank accounts across the border, we take our children to schools across the border. Many middle class Basotho live and spend their Lesotho earned incomes in Ladybrand and, increasingly lately, Bloemfontein. We buy property there,” he says.
“That’s capital flight. A huge hemorrhage that no economy can survive. For there to be any economic growth, capital has to be circulating in the economy. Then the multiplier effect is your friend.”

He maintains that “With the current anaemic rate of economic growth of less than 1%, it is a mathematical fact as per the so-called Rule of 72 it is going to take us at least 72 years to double our current GDP of M40 billion to where Eswatini is today at around M80 billion. A 10% growth would see us achieve that in about seven years.”
Khasipe says the way our human settlements are arranged “does not allow us to create a viable economy so that there can be growth”.

While we cannot do anything about our location as a country, which was a product of a colonial process, Khasipe says we can do something about the arrangement of our human settlements.
The tiny villages dotted sparsely across the country – which all require roads, water, electricity, clinics, schools and other services – stretch the little resources that the country has. It will take too much and too long to build the requisite infrastructure.
“Besides, our cities and towns were never planned, they just morphed,” he says.

Khasipe also takes issue with the capital, Maseru, itself arguing the city is a byproduct of lack of planning. In fact, he says there was never a deliberate process to plan and build Maseru.
“There was no plan for people to settle here. Like all other towns, Maseru was just a police camp (Kampo), a temporary settlement” he says.
“The result is a chaotic city that has made it extremely difficult and inordinately costly to fix”, he says.

The solution, Khasipe argues, is to come up with one mega city for Lesotho, that is well planned. Rather than take infrastructure to the sparsely distributed people, let us take people to the infrastructure built at a central location,” he says.

He argues that two million population is already minuscule, there really is no need to further split it into ten districts.
Perhaps Mokhotlong or Thaba-Tseka, due to their proximity to Durban, “which is the gateway to trading with the rest of the world” would be the best locations for such a scenic mega city (The only African city that gets snow) which can connect Central South Africa (Bloemfontein) with Durban via a proper and equally Trans-Maluti scenic highway.

With closer access to the sea, Lesotho shall be able to trade with the rest of the world while also acting as a direct transit and logistics hub for central South Africa and Durban.
“Until we confront this reality, we are going nowhere,” Khasipe says.
“We just need to build one East/West highway and have a population of 1.5 million people staying in the city. Only then shall we have an economy (to talk about),” he says.

As Lesotho’s former ambassador to Kuwait, Khasipe is probably speaking from experience. He says Kuwait, with a population of 3 million people, has only one city –Kuwait City.
Qatar, the richest country in the world on a GDP per capital basis with 400 000 people, also has just one city, Doha.
Lesotho must go that route if it wants to entertain any dreams of jerking up its economy, Khasipe says.

That of course will not be achieved overnight. A 50-year vision is required. It will require loads of political will and foresight to move the capital to the mountains of Mokhotlong.
Lesotho would not be the first country in Africa to move its capital city. He says such projects have been undertaken successfully elsewhere in Africa.
He cited the case of Nigeria which moved its capital, Lagos, which was one big sprawling slum, to Abuja.

Even South Africa is currently toying with the idea of building their first post-Apartheid city, he says. As recently as October last year, Tanzania moved its capital from Dar es Salam to Dodoma, a more central location.
Khasipe says Lesotho’s prospects will remain dire until we deal with the fundamental issue of the economy. And the matter of the economy is intricately linked to our human settlements, he says.
He says to jump-start up Lesotho’s economy will require a new settlement model for the capital city.
That sounds not only fresh but a hard-sell.

The idea, which Khasipe says will take decades to implement, will likely find very few takers among a generation of politicians that critics say are fixated only with political self-preservation and wealth accumulation.
The idea appears to run parallel to the current drive to push for political, judicial and Constitutional reforms under the mandate of SADC.
The thinking is that the reforms will act as a “magic bullet” in solving Lesotho’s well-documented political and economic woes.
Khasipe says that may not be entirely true.

“A new Constitution will just be a Band-Aid because there are fundamental issues (that must be resolved) and they are economic,” he says.
“The cake has become smaller and smaller and the fight will only get more intense,” he says.
He cites the case of the United Kingdom “where they don’t have a Constitution but are guided by convention, which they respect while we exploit every loophole in our written constitution”.
“The issues are not so much about the law but are economic. As long as we have not dealt with the economy, we will be going round in circles.”

Khasipe was raised by a mother who was a house-wife while his father was a miner in South Africa. For most times of the year, his father was not always around at home in Mohale’s Hoek.
It was a happy childhood.
“We were not affluent in any way, we struggled like everybody else. We would see our father once a year and in no time he would be gone,” he says.
Yet it was not until he was in his early 20’s that Khasipe made some “significant discovery” about his childhood.

While preparing to leave Lesotho for post-graduate studies in Kenya, his mother, a devout Christian, called him for a “family prayer” in which she earnestly beseeched God to look after her son in a foreign land.
“It was during the prayer when she expressed how thankful she was to have a son even though she had given up on him after birth. She said I was so sick shortly after birth that she literally accepted that God was going to take me,” he says.

But by the grace of God, I pulled through, he says.
It was within this Christian environment with such a protective, loving mother that Khasipe was brought up.
He graduated with a Degree in Economics from the National University of Lesotho in 1995 and went to acquire a Masters’ Degree in Economics, an MBA and a professional accreditation as a CFA Charterholder.
But Economics was never his first choice. While growing up, his dream was to be an engineer.

He says this view was as a direct result of a lack of career guidance and the glorification of the natural sciences by teachers and the community.
And so he got enrolled into a science pre-entry course (then referred to as LESPEC) only to get bored to the core.
He says while doing the university pre-entry course, he “discovered” himself and took a decision he has never regretted.

“There was something missing while I was studying the sciences. Science was just too abstract and dry. There was no debate and there was no life,” he says.
Khasipe then decided to apply and got admitted into a Bachelor of Arts in Economics – and “fell head over heels” in love with the subject.
He graduated from the university in 1995. He later enrolled for a Masters in Economics from the University of Nairobi which he finished in 1998.
He lectured at the NUL for two years and worked briefly at the Central Bank of Lesotho, the then Lesotho Telecommunications Authority, now Lesotho Communications Authority (LCA), among other positions.

Khasipe also served as Lesotho’s ambassador to the Arab Republic of Egypt between 2008 and 2014 where he successfully recommended and oversaw the decision to move the embassy to Kuwait.
He was then appointed the Deputy Executive Secretary to the SACU Secretariat in Namibia before he was headhunted to head the LRA.

Abel Chapatarongo and ’Mamakhooa Rapolaki

 

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