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Restaurant owners drag government to court over “sin taxes”

Lesotho Times

Lesotho's widely read newspaper, published every Thursday and distributed throughout the country and in some parts of South Africa. Contact us today: News: editor@lestimes.co.ls Advertising: marketing@lestimes.co.ls Telephone: +266 2231 5356

Moorosi Tsiane/ Mohalenyane Phakela

THE Lesotho Liquor and Restaurants Owners Association (LLROA) has dragged the government to court over what it describes as the “illegal imposition” of unreasonably high taxes on tobacco and alcohol products.

LLROA argues that the 15 and 30 percent hikes on alcohol and cigarette levies respectively have imperiled its members. Thousands working in the alcohol and tobacco industries will be rendered jobless unless the Tobacco and Alcoholic Products Levy Act of 2023, through which the levies were effected is declared unlawful and revoked.

LLROA and other players in the sector have been making spirited pleas to the government to cancel the levies.

After a meeting between stakeholders in the tobacco and alcohol industry and Finance and Development Planning Minister  Retšelisitsoe Matlanyane broke down recently, LLROA has now resolved to fight in the courts.

Minister Matlanyane made it clear at a meeting with the stakeholders in parliament that the government would not revisit the levies, also colloquially referred to as “sin taxes”. This because the levies were meant to fight the scourge of alcohol and substance abuse. The government had  approved the levies not so much for the money, she said.

The LLROA has now asked the High Court to hear it urgently.

The case is set to be heard by Justice Realeboha Mathaba in the Commercial Division of the High Court tomorrow (Friday).

The Minister of Finance and Development Planning Retšelisitsoe Matlanyane and her  Principal Secretary Nthoateng Lebona, Attorney-General Rapelang Motsieloa and Revenue Services Lesotho (RSL) are cited as first to fourth respondents respectively.

In its notice of motion, LLROA asks the High Court  to suspend the implementation of the levies  until there are proper laws to regulate their collection and administration.

Parliament in March 2023 approved a 30 percent levy on tobacco products and a 15 percent levy for alcoholic beverages. The levies were initially tabled in March 2020 by then Finance Minister Moeketsi Majoro. At the time, Dr Majoro said the “sin taxes” would boost government revenues by at least M200 million annually.

Minister Matlanyane has since said the levies are not about drawing money into the fiscus but controlling the scourge of alcohol and substance abuse, particularly among the youth.

However, (LLROA) does not agree with that.

The association’s president, Motseki Nkeane, argues in his founding affidavit that it was illegal for parliament to have passed the levies  as there were no regulations in place, to explain how they should be collected and administered, among other things.

It was also wrong for the levies to  have been implemented with no regulations to give effect to the Act that brought them about.

Above all, the levies had virtually destroyed the tobacco and alcohol industry in Lesotho with the smuggling of both alcohol and tobacco products into the country having increasingly become the norm.

“It is apposite to mention that the laws are yet to be published for the administration of the levies  as per section 9 of the Act which provides that the Minister may make regulations to give effect to the provisions of this Act. I submit that it is improper that the levies have been put in motion when there are no regulations in existence to give effect to the Act….,” Mr Nkeane argues.

“The levies encourage ongoing smuggling of liquor into Lesotho such that licensed businesses are collapsing while the smuggling trade flourishes and the porous borders of Lesotho are allowing the sale of smuggled goods. The goods come in through informal borders all over  Lesotho especially in Berea, Leribe, Botha-Bothe, Mafeteng, Mohale’s Hoek and Quthing.”

He argues that the manner in which the levies were imposed was also illegal and has to be reviewed.

Maluti Mountain Brewery (MMB) was no longer able to have sales due to the influx of illegal imports. LLROA members who took stock from the MMB were no longer able to trade as they could not compete with cheaper smuggled goods.

“The practical effect of the levies in the manner and mode in which they are imposed, which is illegal and reviewable, is that MMB is not able to have sales due to influx of illegal imports. Our members who stock at MMB are not able to trade and the foregoing calamity is forcing businesses to shut down and give way to smuggling to thrive.

“It was not legislative intent (sic) that there be business Armageddon in the liquor trade in Lesotho, and if so, the intent is so grossly unreasonable that the court is enjoined to intervene,” he said.

Mr Nkeane said it was not only the liquor traders who were suffering but  other sectors which relied on the sector like the transport sector, security companies, property companies, among others.

“In the end the decision of the Minister becomes unjustifiable looked from almost all angles. It has had bad economic repercussions for the country at large. The ultimate sufferer in the decision of the minister is an ordinary Mosotho consumer who is the client of the applicant. The applicants’ members are pushed into passing the financial burden to the consumers.

“The application should be treated as an urgent application because companies are faced with the decision to shut down businesses, retrench employees, terminate sublease contracts with landlords, manage expenditure and overheads while holding their breaths concerning the ultimate decision to be made by the court.

“I submit that if this matter is not heard on urgent basis the applicant will not be afforded substantial redress in  due course, breach of the rule of law will continue,” Mr Nkeane states.