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GOVERNMENT  NOTICE NO. 39 OF 2014

The Parliament  of Lesotho Statement  of Objects and Reasons of the Income Tax  (Amendment)  Bill, 2014

(Circulated by authority  of the Honourable  Minister of Finance

Leketekete Victor Ketso)

The  object  of this Bill  is to adjust  personal   income  tax rates  against  the first  and second  thresholds   of chargeable   income.  Lesotho's   effective  tax rate on personal income   has  remained   one  of the  highest   in Sub-Saharan    Africa.   This  has  bur- dened   taxpayers   and  even  encouraged    tax  avoidance    and probably   evasion   in some  instances.   The  adjustment   is therefore   intended   to reduce   the tax  burden and encourage   tax compliance.   Furthermore,    the adjustment   of income  tax rates will  stimulate   consumption     emanating    from  increased    incomes,    and  as  such, Value Added  Tax will  increase.

The Bill again  abolish  the zero rate corporate  tax on extra-SACU   exports  and im- poses   the  standard    10%  rate  to  all  manufacturers.     This  is  the  fulfilment    of Lesotho's    obligations    under  international    and  regional   agreements    to remove very  low tax rate  as a step  towards   regional   integration   and  to eliminate   unfair competition    that  could  arise  from  differentiated    tax  applicable   to other  domes- tic producers   exporting   within  SACU.

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