Sacu end will slash Lesotho’s income

Sacu end will slash Lesotho’s income

MASERU – Lesotho faces a devastating reduction in tax income if regional customs dues are axed under moves toward free trade, the central bank says, adding to the woes of a country hit by AIDS, textile and mining job losses.

While many anti-poverty campaigners say global free trade would help poor African states sell their products, Lesotho – impoverished, underdeveloped and with poor road routes to South African ports – is unlikely to benefit. Under the five-country South African Customs Union (Sacu), Lesotho gets more than its fair share of tax on imports to itself, Botswana, Swaziland, South Africa and Namibia – a deal that aims to compensate the country, surrounded entirely by South Africa, for its lack of industry.”There are signs that Sacu is out to sign free trade agreements and this puts Lesotho in jeopardy,” Lesotho Revenue Authority Assistant Commissioner Retselisitsoe Motsoeneng told Reuters.Some observers say Lesotho is already in jeopardy.Unemployment is estimated at around 50 per cent, over 30 per cent of adults are HIV positive, there are over 100 000 AIDS orphans and many of the country’s two million people rely on food aid.In the year to March, Sacu revenues made up 54,7 per cent of the country’s total tax receipts – or 1057,8 million maloti (US$159 million) – more than income tax and value added tax combined.The Lesotho currency is pegged to the rand 1:1.Income tax receipts fell by nine per cent during that year as companies closed, possibly linked to the increasing departure of the key textile industry.The demise in December of a global textile agreement that set quotas to cap Asian production has led to Chinese and Korean firms closing down or cutting back in their Lesotho factories.This has pushed up unemployment in a country already suffering after migrant workers in South Africa’s gold mines lost their jobs.”No matter how hard we try to broaden the tax base or continue to improve the efficiency in tax revenue, Sacu revenue will still dominate tax revenue,” Motsoneng said.Much of this income would be lost if US-Sacu negotiations on free trade that began in June 2003 bought down tariff walls, he added.-Nampa-ReutersUnder the five-country South African Customs Union (Sacu), Lesotho gets more than its fair share of tax on imports to itself, Botswana, Swaziland, South Africa and Namibia – a deal that aims to compensate the country, surrounded entirely by South Africa, for its lack of industry.”There are signs that Sacu is out to sign free trade agreements and this puts Lesotho in jeopardy,” Lesotho Revenue Authority Assistant Commissioner Retselisitsoe Motsoeneng told Reuters.Some observers say Lesotho is already in jeopardy.Unemployment is estimated at around 50 per cent, over 30 per cent of adults are HIV positive, there are over 100 000 AIDS orphans and many of the country’s two million people rely on food aid.In the year to March, Sacu revenues made up 54,7 per cent of the country’s total tax receipts – or 1057,8 million maloti (US$159 million) – more than income tax and value added tax combined.The Lesotho currency is pegged to the rand 1:1.Income tax receipts fell by nine per cent during that year as companies closed, possibly linked to the increasing departure of the key textile industry.The demise in December of a global textile agreement that set quotas to cap Asian production has led to Chinese and Korean firms closing down or cutting back in their Lesotho factories.This has pushed up unemployment in a country already suffering after migrant workers in South Africa’s gold mines lost their jobs.”No matter how hard we try to broaden the tax base or continue to improve the efficiency in tax revenue, Sacu revenue will still dominate tax revenue,” Motsoneng said.Much of this income would be lost if US-Sacu negotiations on free trade that began in June 2003 bought down tariff walls, he added.-Nampa-Reuters

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