Lesotho
Key Lessons Learned
The importance of identifying and bringing into charge all taxpayers, particularly the large international consortia that were operating on the Lesotho Highlands Water Project
Broadening the tax base brings in significant additional revenues while at the same time allowing for a substantial reduction in tax rates
The taxation of non-residents is an essential part of tax-base broadening
Forms design and the clear presentation of material to taxpayers is an integral and often overlooked aspect of effective tax reform
Katse Dam, the main dam constructed under the Lesotho Highlands Water Project.
I managed two projects for DFID in the period 1991 to 1997.
A key aspect of the Lesotho tax reform was bringing the large international construction consortia operating on the Lesotho Highlands Water Project into the charge to taxation, something that was widely resisted even by the country’s development partners at the time.
The Lesotho Highlands Water Project brought substantial economic benefits to Lesotho and also to South Africa. The UK’s DFID (now FCDO) revenue reform project ensured that the added economic activity was effectively taxed in Lesotho.
The success of the tax reform was demonstrated by a sustained increase in income tax receipts of 2,000% during the six-year period, even at a time when tax rates were cut from 53% to 35% in the same period.
Kieran Holmes at the base of the dam during the construction period.
Other Links
Experience
