Tax laws harmonisation between Lesotho and the Republic of South Africa

Abstract

Lesotho is geographically landlocked within the Republic of South Africa. Research has been done at border gates whereat Basotho shoppers are able to claim and gain reimbursement of the value-added tax amounts paid against shopping in South Africa. Basotho have to pay 10% general sales tax due on sales at the Lesotho side of the border. This arrangement is administratively difficult to implement and has therefore led to massive losses of sales tax revenue for Lesotho. Also, having acquired their trading stock free of value-added tax, branches of South African businesses are liable to commodity tax in Lesotho. Research has however revealed contrary practices as indicated. It is submitted that the existence of different laws governing economic activities in countries that cannot avoid interacting with one another leads to skewed distribution of resources amongst these countries. It remains unclear whether the provisions of the Lesotho valueadded tax law will address the widespread abuse of the system as well as the glaring evasion of the tax being experienced by Lesotho today. It is in the light of the abovementioned that the hypothesis of this article was formulated: that the efficient collection of tax revenue, the decline in the abuse of the tax system and the evasion of sales tax, will all occur to some significant extent if, amongst others, the Lesotho value-added tax legislation is in harmony with its South African equivalent. In conclusion the harmonisation of the tax rates provided for by statutes of the two countries is recommended.


(J. for Juridical Science: 2001 26 (3): 97-115)