Insight
Taxing informal sector will antagonise the poor
Published
7 years agoon
By
The Post
English folklore has it that there was once a man called Robin Hood, who together with his Merry Men, used to rob the rich to distribute the loot among the poor. So, the man is your typical knight in shining armour, one would say.
I have also had the privilege of watching the 1990s movie, Robin Hood: The Prince of Thieves played by Kevin Costner. Yes indeed, he and his band robbed the soldiers and the Sheriff of Nottingham’s convoys of horses and carts of food and everything valuable, and distributed them around the group, which he had put together and was a leader of.
There is also a story of a restaurant in Madrid, Spain. It turns out the inspiration behind the establishment of this restaurant is the story of Robin Hood. Ironically, the restaurant is called Robin Hood Restaurant. This eatery serves breakfast in the morning and lunch during the day and charges its customers like your normal restaurant would.
In the evening, the proceeds collected from the morning and during lunch are used to feed the homeless. It is quite clear that the restaurant is not necessarily robbing anybody, but they do get money from the ‘rich’ and redistribute the wealth the way Robin Hood did, save for the fact that Robin Hood used force to achieve his goals. One may argue that governments achieve this redistribution of wealth via the use of taxes.
Taxes, in their many forms, are charged on economic entities by government to finance public expenditure. So, how is this related to the above tale? Think of it this way, there is a need for a road that runs through a village whose community is comprised of people with high incomes, low incomes and those with no income at all.
All the members of this society need this road, but maybe only those at the top of the income and wealth pyramid can afford to have it built. What the government would do is to proportionally charge some or all of those income earners some levy, which after collecting would be utilised to build this road.
In this way, with the road that serves everyone in place, the government would have redistributed that wealth (just as they do in that Madrid restaurant), which had previously been confined to only those at the top of the pyramid.
The Government of Lesotho, just like any government, has to impose levies on a variety of assets and many forms of income in order to finance the all-important service delivery.
Tax revenue collected in Lesotho varies from time to time due to a myriad of factors. In the recent years, tax revenue as a percentage of GDP has averaged anything between 23 to 25 per cent. This translates to around 45 per cent of total revenue collections.
Swaziland, which just like Lesotho depends heavily on SACU receipts, had their tax revenue as a percentage of GDP at 26.4 per cent in 2015/16.
Tax systems differ widely across countries and in some cases within countries. In an effort to boost its revenue collection capacity, the Lesotho Revenue Authority (LRA) has recently been the recipient of a lot of media and social media coverage.
The organisation has been the subject of a lot of critiquing by those who perceive its latest actions to be fair and justified; and in equal measure, those who see themselves as victims of its systems restructuring efforts.
The media has recently covered a story of discontentment in the taxi industry where operators object to the introduction of a flat rate tax (8th February 2018 issue of thepost newspaper). The LRA has also embarked on the campaign to improve compliance.
For a cash strapped Lesotho economy, all these are attempts to efficiently and effectively collect revenue for the government in order to facilitate expeditious service delivery.
There was also a serious outcry on social media recently concerning the alleged raking in and inclusion of the informal sector into the tax net. Due to a number of challenges involved in regulating this sector, it has always proven difficult to impose tax on it. This includes a large number of these businesses.
This sector is largely made up of people who popularly go by the nomenclature, “Baitšokoli” (literally meaning strugglers). Although unregulated, the sector holds a huge potential for an improved revenue collection.
Income tax in Lesotho is charged on income and profits of economic entities where they apply a 20 percent and 30 percent progressive two rate structure.
For the earnings ranging from M1 to M56, 964 per annum, the former rate is charged and the latter is charged on earning above M56, 964. The law also provides that a tax credit, which is a rebate made to entities that earned taxable income in a given year, be directly deductible from the earnings after applying the marginal tax rates to the income.
This is equivalent to M6, 732 for the fiscal year 2017/18. This would mean that someone who gets a monthly income of M2, 805 or lower per month is essentially exempted from paying this income tax via a rebate. How much do participants in the informal sector actually make per month?
There may never be an accurate answer to this question given the diverse nature of businesses in this informal economy. A number of countries have attempted to tax this sector, mainly using a presumptive tax regime, where tax is charged on what can be considered to be average income since actual income is almost impossible to determine.
Should the Government of Lesotho then impose tax on the informal sector? Based on the preceding discussion, the benefits of fairly and successfully doing that are unquestionably great.
Not only will the LRA know that they are able to register and regulate the larger part of their total potential tax base but the organisation would be able to help some of those self-employed sole traders graduate from the informal set up to a formal set up. In this way, the LRA would be able to offer these players incentives to comply with the tax laws whenever there is such a need.
Being able to collect more revenue would certainly be a cherry on top. More revenue of course means a potential growth in GDP. On the flip side, due to the nature of the Lesotho informal sector, monitoring of this sector for compliance purposes might prove a difficult proposition.
Maybe following the previous point, it might prove to be too costly to collect taxes from this sector rendering this effort futile. There is also another interesting dimension to this.
Other than the obvious economic considerations of taxing the informal sector, there are political connotations as well.
Politicians may be hesitant to ‘antagonise’ the electorate with this plan. The name “Baitšokoli” was born out of empathy for these sole traders and this kind of move has the potential to sway opinion regarding the LRA’s or government’s intentions.
They are seen as survivors and taxing these people might prove unpopular. Maybe the question should actually be whether or not it is worth it at all to include the informal sector into the tax net.
Mosito Ntema
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I closed last week by recording the dreadful news that trashy Trump had been elected called to mind WB Yeats’s poem “The Second Coming.” This is the poem whose opening lines gave Chinua Achebe the phrase “things fall apart.”
Yeats observes “Things fall apart, the centre cannot hold / Mere anarchy is loosed upon the world.”
It was written in 1919 and controversially uses Christian imagery relating to the Apocalypse and the Second Coming to reflect on the atmosphere in Europe following the slaughter of the First World War and the devastating flu epidemic that followed this.
It also reflects on the Irish War of Independence against British rule.
In lines that I can now read as if applying to the recent American election, Yeats mourns: “The best lack all conviction, while the worst / Are full of passionate intensity.”
And then I can visualise Trump in the poem’s closing lines: “What rough beast is this, its hour come round at last, / Slouching towards Bethlehem to be born?”
Trump is certainly a rough beast and isn’t the choice of verb, slouching, just perfect? For a non-allegorical account of the threat posed by the Dump, I can’t do better than to quote (as I often do) that fine South African political journalist, Will Shoki. In his words: “Trump’s administration simply won’t care about Palestinians, about the DRC, about the Sudanese.
It will be indifferent to the plight of the downtrodden and the oppressed, who will be portrayed as weak and pathetic. And it will give carte blanche [that is, free rein] to despotism and tyranny everywhere.
Not even social media, that once revered third-space we associated with subversion and revolution in the first quarter of the 21st century can save us because Silicon Valley is in Trump’s back pocket.”
So what follows the triumph of the Dump? We can’t just sit down and moan and bemoan. In a more recent piece of hers than the one I quoted last week, Rebecca Solnit has observed: “Authoritarians like Trump love fear, defeatism, surrender. Do not give them what they want . . . We must lay up supplies of love, care, trust, community and resolve — so we may resist the storm.”
Katt Lissard tells me that on November 7th following the confirmation of the election result, in the daytime and well into the evening in Manhattan, New York, there was a large demonstration in support of the immigrants Trump despises.
And a recent piece by Natasha Lennard gives us courage in its title “The Answer to Trump’s Victory is Radical Action.”
So, my Basotho readers, how about the peaceful bearing of some placards in front of the US Embassy in Maseru? Because the Dump doesn’t like you guys and gals one little bit.
One last morsel. I had intended to end this piece with the above call to action, but can’t resist quoting the following comment from the New York Times of November 13th on Trump’s plans to appoint his ministers.
I’m not sure a satirical gibe was intended (the clue is in the repeated use of the word “defence”), but it made me guffaw nonetheless. “Trump will nominate Pete Hegseth, a Fox News host with no government experience, as his defence secretary. Hegseth has often defended Trump on TV.” You see, it’s all about the Dump.
- Chris Dunton is a former Professor of English and Dean of Humanities at the National University of Lesotho.
Recently, an audio recording featuring the distressed MP for Thaba-Bosiu Constituency, Joseph Malebaleba, circulated on social media. The MP appears to have spent a sleepless night, struggling with the situation in which he and his associates from the Revolution for Prosperity (RFP) party were denied a school feeding tender valued at M250 million per annum.
In 2022, Lesotho’s political landscape underwent a significant shift with the emergence of the RFP led by some of the country’s wealthiest individuals. Among them was Samuel Ntsokoane Matekane, arguably one of the richest people in Lesotho, who took the helm as the party’s leader and ultimately, the Prime Minister of Lesotho.
The RFP’s victory in the general election raised eyebrows, and their subsequent actions have sparked concerns about the motivations behind their involvement in politics.
In an interview with an American broadcasting network just after he won the elections, Matekane made a striking statement, proclaiming that he would run Lesotho exactly as he runs his business.
At first glance, many thought he was joking, but as time has shown, his words were far from an idle threat. In the business world, the primary goal is to maximize profits, and it appears that the RFP is adopting a similar approach to governance.
Behind the scenes, alarming developments have been unfolding. A communication from an RFP WhatsApp group revealed a disturbing request from the Minister of Communications, Nthati Moorosi, who asked if anyone in the group had a construction business and could inbox her.
This raises questions about the RFP’s focus on using government resources to benefit their own business interests.
The government has been embroiled in a series of scandals that have raised serious concerns about the ethical conduct of its officials. Recent reports have revealed shocking incidents of misuse of public funds and conflicts of interest among key government figures.
Over the past two years, the RFP has been accused of awarding government contracts to companies affiliated with their members, further solidifying concerns about their self-serving agenda. For instance, vehicles purchased for the police were allegedly sourced from suppliers connected to a Minister’s son and MP.
The MP for Peka, Mohopoli Monokoane, was found to have hijacked fertiliser intended to support impoverished farmers, diverting crucial resources away from those in need for personal gain.
Such actions not only betray the trust of the public but also have a direct impact on the livelihoods of vulnerable communities. Monokoane appeared before the courts of law this week.
While farmers voice their concerns regarding fertiliser shortages, it seems that Bishop Teboho Ramela of St. Paul African Apostolic Church, who is also a businessman, is allegedly involved in a corrupt deal concerning a M10 million fertilizer allocation, benefiting from connections with wealthy individuals in government.
The procurement of fertiliser appears to be mired in controversy; recall that the Minister of Agriculture, Food Security and Nutrition, Thabo Mofosi, was also implicated in the M43 million tender.
The renovation of government buildings with elaborate lighting systems was contracted to a company owned by the son of an MP. The RFP’s enthusiasm for infrastructure development, specifically road construction and maintenance, is also tainted by self-interest, as they have companies capable of performing these tasks and supplying the necessary materials, such as asphalt.
Minister Moteane finds himself in a compromising situation regarding a lucrative M100 million airport tender that was awarded to his former company. Ministers have even gone so far as to award themselves ownership of diamond mines.
Meanwhile, the nation struggles with national identification and passport shortages, which according to my analysis the RFP seems hesitant to address until they can find a way to partner with an international company that will benefit their own interests.
The people of Lesotho are left wondering if their leaders are truly committed to serving the nation or simply lining their own pockets. As the RFP’s grip on power tightens, the consequences for Lesotho’s democracy and economy hang precariously in the balance.
It is imperative that citizens remain vigilant and demand transparency and accountability from their leaders, lest the nation slide further into an era of self-serving governance.
In conclusion, the RFP’s dominance has raised serious concerns about the motives behind their involvement in politics. The apparent prioritisation of personal profit over public welfare has sparked widespread disillusionment and mistrust among the population.
As Lesotho navigates this critical juncture, it is essential that its leaders are held accountable for their actions and that the nation’s best interests are placed above those of individuals.
Only through collective effort and a strong commitment to transparency and accountability can Lesotho ensure a brighter future for all its citizens.
Ramahooana Matlosa
Attentive readers will recall that some weeks ago, I scribbled a series of pieces on elections due to be held in the UK, France, South Africa, and the USA. These elections were unusually critical for the well-being of their countries and even that of the world.
The results of the last of these elections are now with us and we are faced with the devastating news that Donald Trump is heading back to the White House.
I can hardly think of worse news to swallow or to equip the world to survive the years ahead.
The Dump, as I call him, is one of the most odious, dangerous, untrustworthy individuals currently inhabiting planet Earth. To cite a few of his demerits: he is a convicted felon; he believes climate change is a hoax; he is a sexist and a racist (one of his former military advisers has gone so far as to describe him as a fascist).
He is a snuggle buddy of the Russian dictator Vladimir Putin and will probably discontinue aid to Ukraine as it resists invasion by Russia. Western European allies such as France, Germany and the UK are dismayed at his victory, as he holds the principles of democracy and constitutionalism in contempt.
As for Africa, well, he once described it as a “shit country,” so don’t look forward to much support from him.
Readers who spent time at the NUL will remember my dear colleague Katt Lissard who is now back home in New York. She spent some years with us as a Professor specialising in Theatre studies and was the Artistic Director of our international Winter / Summer Institute for Theatre for Development.
Many activists in the USA like Katt, who don’t see themselves as part of the political mainstream, chose to campaign for the Democrats and Kamala Harris in the hope of keeping Trump and the far right out of power. Confronted with the news of Trump’s victory, she sent an email to friends noting this was “just a brief check-in from the incomprehensible USA.”
She then explained: “We’re in shock and the early days of processing, but white supremacy, misogyny and anti-immigrant bias are alive and well and driving the boat here.” So, how do Katt and millions of decent, like-minded Americans plan to weather the storm?
Katt explained: “We were deeply depressed and deeply furious as it became clear that one of the worst human beings on the planet was going back to the White House, but we are still breathing and know that we will in the days ahead begin to formulate plans and strategies—and not just for heading north across the Canadian border.”
Picking up on that last point, it may well be that many decent Americans might just up and off across the border; Canada had better prepare for an avalanche of applications for residence permits.
And not just from Americans; in, for example, the American university system alone there are many many Africans employed in high positions (Professors and such-like), who must now face the fact they are living in a country whose leader despises them and who may opt to get out.
In her email written to her friends, once the news from hell had been confirmed, Katt quoted a piece by Rebecca Solnit, one of the most exciting writers at work in the USA today (readers may remember that I have previously reviewed two of her books for this newspaper, Whose Story is This? and Recollections of My Non-Existence).
Now Solnit is a feminist and at the heart of her work is a dissection of the way women have been marginalised in the USA (let’s remember that Kamala Harris, the Presidential candidate who lost to Trump, did so partly because so many American males could not bring themselves to vote for a woman.
I am thinking of the kind of male who invaded the White House when it was announced Trump had lost the 2020 election, bare-chested and wearing cow-horn helmets on their numbskull heads).
Solnit has this to say on our response to the Trump victory: “They want you to feel powerless and to surrender and to let them trample everything and you are not going to let them.
You are not giving up and neither am I. The fact that we cannot save everything does not mean we cannot save anything and everything we can save is worth saving.
You may need to grieve or scream or take time off, but you have a role no matter what, and right now good friends and good principles are worth gathering in.
Remember what you love. Remember what loves you. Remember in this tide of hate what love is.” And then: “A lot of us are going to resist by building solidarity and sanctuary.”
What is so morale-boosting about Solnit’s piece is not just her vision but also her command of language.
Her writing is so crisp and elegant. Language comes at us at its best, of course, in literature, and when I heard that the Dump was on the move back to the White House, I immediately recalled one of the most startling poems in the English language, “The Second Coming” by the Irish poet WB Yeats.
I’ll kick off with that next week.
To be concluded
Chris Dunton
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