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The African Development Bank Group and the Kingdom of Lesotho have signed a loan agreement for US $7 million to support the country’s Tax Modernization Project.
The project aims to strengthen the effectiveness of tax administration to create fiscal space by expanding the tax base, modernizing collection and compliance procedures. This project is part of the Bank’s continued support to the Government’s policy priorities as guided by the current National Strategic Development Plan (NSDP).
The project, which is aligned to the objectives and priorities of Bank’s Country Strategy for Lesotho, comprises the introduction of an e-taxation initiative that will allow online tax services (including registration, taxpayer relationship management, filing and payment). It also involves adoption of a Value Added Tax (VAT) non-compliance detection solution to increase VAT collection and to enhance compliance and enforcement capacity. The project provides for a broader tax base resulting from simplification of the tax regime for the small taxpayer; an enterprise data warehouse along with increased business intelligence capacity; and strengthened institutional and human resource capacity.
The project supports the Government’s commitment to fiscal consolidation and domestic revenue enhancement measures within the medium term expenditure framework as well as plans to mitigate the volatility of the Southern African Customs Union revenue, said Josephine Ngure, the African Development Bank’s Deputy Director General for the Southern Africa Regional Development and Business Delivery Office
. The project is part of the Bank’s commitment towards strengthening the domestic resource mobilization capacity of its regional member countries and is expected to deliver quantifiable results, including increased tax revenues as reflected in the tax to GDP ratio and a reduction in cost of compliance.
The project will also help improve doing business indicators and in particular the ease of paying taxes as well as promote small, medium and micro enterprises.
The Minister of Finance and Governor for Lesotho at the African Development Bank, Moeketsi Majoro, commended the Bank for its support to the implementation of Lesotho National Strategic Development Program and in particular the tax modernization program.
The project complements the ongoing Bank-financed projects in Lesotho especially the Institutional Support for Public Finance Management Reform Project, which aims to enhance fiscal discipline, and strategic allocation of public resources. The other projects are the Economic Diversification Support Project, E-Government, the Urban Power Distribution Project, and Lesotho Lowland Rural Water Supply and Sanitation.
Ngure also visited the Lesotho Lowland Rural Water Supply and Sanitation Project, where she interacted with the project beneficiaries and project management team, and learned at first hand the successes and challenges of the project.