African Development Fund Extended Loan of $4.25 Million to Modernize Tax Collection and Increase Revenue in Lesotho

The African Development Bank Group’s Board of Directors has granted a $4.25 million loan to the Lesotho Revenue Authority to deliver digital tax services, such as e-taxation and e-payment, to extend the country’s tax base and increase government revenue.

The funds will be used to support the Supplemental Financing of the Lesotho Tax Modernization Project, which will be provided from the African Development Fund, the Group’s concessional lending window. The initiative follows the approval of the Lesotho Tax Modernization Project (LTMP) in November 2017, for which the African Development Bank Group committed funding of $7.09 million.

The funds will be used to install software and hardware for e-taxation, e-payment, and e-invoicing, as well as to integrate financial institutions and mobile money providers with e-payment systems. By simplifying and streamlining the tax regime and procedures for small businesses and the informal sector, the project will broaden the tax base.

Sluggish global growth, notably in South Africa, a significant commercial partner, as well as political instability and the Covid-19 outbreak, have all harmed Lesotho’s economy in the last two years. The Southern African Customs Union’s revenue, which accounts for half of overall revenue, has fallen below its historical average, jeopardizing fiscal stability as well as economic planning and investment.

The initiative will benefit both taxpayers and the Lesotho Revenue Authority by updating and consolidating legal and institutional tax collecting procedures. The Authority has implemented VAT and enhanced border management systems as part of a successful reform and modernization initiative aimed at reducing the burden and cost of tax compliance.

The Bank’s portfolio in Lesotho, worth $79 million, includes eight projects in the areas of water and sanitation, energy, and information and communication technology, with roughly one-third of the projects being multisectoral.

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