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Striking a harmonious chord: Reassessing Lesotho’s tourism levy

Business

Motsamai Mokotjo

The tourism sector has historically played a vital role in Lesotho’s tax revenue collection.

However, the introduction of the Tourism Levy through the Tourism (Amendment) Act of 2006 has stirred controversy and raised concerns, particularly among young individuals in the entertainment sector who organize events, parties, and concerts.

This contentious legislation, specifically Section 18B (1), combined with the low international levy rates and doubts regarding its revenue-generating capacity, has led to calls for its repeal.

While the government aims to strengthen its tax base through this levy, it must also take into account its impact on the struggling entertainment sector and the growing youth unemployment crisis in the country.

The Tourism (Amendment) Act of 2006 introduced the Tourism Levy as a means to boost revenue from the tourism industry. Section 18B (1) grants the Minister the authority to impose this levy, known as the Tourism Levy, on tourism enterprises.

Subsequently, the Act stipulates a percentage of tourism receipts to be collected and deposited into a fund, with the appointment of a collecting agency for enforcement purposes. The primary purpose of this levy is to support the growth and development of the tourism sector.

Nevertheless, the Portfolio Committee on Natural Resources, Tourism, and Land Cluster of the tenth Parliament expressed reservations about the levy’s effectiveness.

The committee raised concerns about the low international levy rates outlined in Schedule II of the Subordinate Law and questioned whether the Ministry could generate sufficient revenue. Consequently, the committee recommended disallowing all provisions of the Tourism Levy Regulations in 2021, and even called for the disallowance of the Subordinate Law itself.

In the current administration, the entertainment sector remains wary of the government’s intentions to collect these levies.

Despite the existence of the Tourism Levy, there has been minimal enforcement by the Lesotho Tourism Development Corporation (LTDC) and the responsible ministers, as mandated by the Act. This lack of enforcement raises questions about the government’s commitment to expanding the tax base and its impact on the entertainment sector, which is already grappling with significant challenges.

Currently, there is the Tourism Levy 2022, which aims to collect 50 percent of the levy for promoting tourism, allocate 30 percent for administrative purposes, and dedicate 10 percent to the Ministry of Tourism for formulating tourism-related laws and regulations.

The intention is for enterprises such as accommodation owners, tour guides, and event organizers to collect this levy.

From the perspective of the electorate, particularly the youth, the government’s stance on the Tourism Levy is a matter of concern. On one hand, the government seeks to increase revenue to support social programs such as pensions and disability grants, which are crucial for citizens’ well-being.

On the other hand, young event organizers and entertainers fear that the levy will hinder their ability to earn a living and contribute to the country’s economic growth.

It is essential for event organizers to realize that the government’s interest in collecting taxes extends beyond filling its coffers. Tax revenue from events can fund critical welfare initiatives benefiting the entire population. This aligns with the National Strategic Development Plan (NSDP) II, which prioritizes enhancing inclusive and sustainable economic growth and private sector-led job creation.

NSDP II identifies tourism, along with creative industries, as key sectors for growth and employment generation. Lesotho’s unique landscape offers vast opportunities for adventure tourism and entertainment-related activities, making it an attractive destination for both domestic and international tourists. The creative industries encompass a wide range of activities, including fine arts, films, theater productions, music, fashion, and literary arts.

However, the creative industries remain largely informal and face various challenges, including piracy, inadequate protection of intellectual property rights, limited funding sources, and insufficient infrastructure support.

The government’s commitment to the growth of the tourism and creative industries should be evident in its development plan. However, the imposition of the Tourism Levy raises concerns about its potential negative impact on these sectors, particularly the entertainment industry.

While the government has a legitimate interest in expanding its tax base and supporting social programs, the Tourism Levy introduced by the Tourism (Amendment) Act of 2006 and Tourism Levy 2022 pose a significant threat to the youth in the entertainment sector. The apprehensions and concerns expressed by event organizers and entertainers cannot be ignored.

To strike a balance between revenue generation and the growth of the entertainment industry, the government must revisit the Tourism Levy and consider the recommendations of the tenth Parliament’s Portfolio Committee on Natural Resources, Tourism, and Land Cluster.

A collaborative approach involving stakeholders from the entertainment sector can help develop a fair and equitable solution that benefits both the government and the youth-driven entertainment industry.

The country’s journey toward inclusive and sustainable economic growth and private sector-led job creation should encompass the aspirations and concerns of all its citizens, particularly the young entrepreneurs and entertainers who contribute to the vibrancy of the cultural and social landscape.

 In doing so, the government can strike a harmonious balance between collecting taxes and nurturing the creative talents and economic potential of its youth.

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