The African Development Bank (AfDB) Group has approved a loan of $4.25m to Lesotho to broaden the country’s tax base and boost government revenue.
The fund is expected to help the Lesotho Revenue Authority to provide digital tax services, including e-taxation and e-payment.
The funds, to be sourced from the African Development Fund, the Group’s concessional lending window, will go to support the Supplemental Financing of the Lesotho Tax Modernization Project.
The project follows the Lesotho Tax Modernization Project (LTMP) that was approved in November 2017 and for which the AfDB Group provided $7.09m in financing.
The funding will be used for the purchase and installation of e-taxation, e-payment, and e-invoicing software and hardware, and for integrating financial institutions and mobile money vendors into e-payment systems.
“The project will allow broadening of the tax base through simplifying and streamlining the tax regime and procedures for the small business and informal sector.” said the Bank’s Director of Governance and Financial Management Coordination, Abdoulaye Coulibaly.
“A strong revenue base is imperative for Lesotho to finance the spending needs on public services, social support, and infrastructure as set out in the National Strategic Development Plan II.”
Over the past two years, Lesotho’s economy has been negatively impacted by sluggish global growth, including in South Africa, a significant trading partner, as well as political instability and the coronavirus pandemic.
The Southern African Customs Union, which accounts for 50% of total revenues, has seen its revenues fall below its historic average, threatening fiscal stability and investment decisions.
The project will improve and consolidate the legal and institutional tax collection frameworks, thereby benefiting taxpayers as well as the Lesotho Revenue Authority. The Authority, which has launched a successful reform and modernization program to reduce the burden and cost of tax compliance, has introduced VAT and improved border management processes.
The AfDB’s portfolio in Lesotho, equivalent to $79m, consists of eight projects in the energy, water and sanitation, and ICT sectors, with nearly one-third of them being multisectoral.
