Activists Kananelo Boloetse and Mokotjo Maseli appeared before the Economic and Natural Resources Committees of Parliament on Monday, urging legislators to remove Value Added Tax (VAT) and levies on electricity to promote universal access and equity.
Maseli argued that electricity is a basic necessity and should be zero-rated, like other essential commodities. He noted that VAT reduces the value of electricity for consumers.
“When someone purchases M10 worth of electricity, they do not get the full value because of VAT deductions,” he explained.
Boloetse supported Maseli’s stance, citing the VAT Act No. 9 of 2001, which exempts several essential services and goods, such as education, health, public transport, and land purchases.
“These were considered basic needs at the time,” he said.
He also referenced the VAT (Amendment) Act No. 6 of 2003, an act that amended the VAT Act of 2001 to make provision for zero ratings.
This Act zero-rated agricultural inputs, beans, and paraffin, among others. “Paraffin used for cooking, lighting, and heating was exempted from VAT because it was widely used by households,” Boloetse noted. “Now that electricity is used for the same purposes, it should be treated the same,” he added.
However, Principal Secretary (PS) in the Ministry of Energy, Tankiso Phapano, urged for a more comprehensive approach, noting that Lesotho struggles with low electricity generation.
“Levies contribute to expanding access to electricity, and removing them could slow down electrification efforts,” Phapano warned.
Seriti Keta, from the Ministry of Finance and Development Planning’s Department of Micro-Economic Policy and Fiscal Management, acknowledged that electricity is important, but said declaring it a basic need would require statistical evidence.
Keta also pointed out that electricity in Lesotho is costly to produce.
“In the past, electricity was taxed at 5%. But in 2017, amid a financial crisis, the government increased VAT on electricity as part of a revenue-raising strategy, with the goal of gradually reaching the standard 15% rate,” she said.
Setsoto Ranthocha from the Revenue Services Lesotho (RSL) added that under a pure and perfect VAT system, only exports should be zero-rated. However, this principle is not explicitly codified in law.
Moeketsi Ntoi from the Ministry of Finance highlighted SACU’s revenue-sharing mechanism based on imports and exports. “In 2003, Lesotho spent M543 million importing electricity from South Africa, but only exported electricity worth M3.4 million, resulting in a trade deficit of M539 million. This means we owe South Africa a VAT refund due to their higher value addition,” he explained.
The committees directed the Ministry of Finance and Development Planning, RSL, the Ministry of Energy, and the Lesotho Electricity and Water Authority (LEWA) to hold a joint meeting with Boloetse and Maseli to thoroughly examine the matter, including all relevant data and statistics.
They are expected to appear before the committees again on May 27, after which the committees will prepare a report to be tabled before the plenary.
Ntsoaki Motaung is an award-winning health journalist from Lesotho, specializing in community health stories with a focus on sexual and reproductive health and rights, as well as HIV. She has contributed to platforms like “Be in the KNOW,” highlighting issues such as the exclusion of people with disabilities from HIV prevention efforts in Lesotho.
In addition to her journalism, Ntsoaki serves as the Country Coordinator for the Regional Media Action Plan Support Network (REMAPSEN). She is also a 2023 CPHIA Journalism Fellow.
