"Rebuild or Collapse" - Matlanyane

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Government Stands Firm on Non-Compliance with Tax Obligations

The government has made it clear that it will not provide financial bailouts to state-owned enterprises (SOEs) that have failed to meet their tax obligations. Instead, the focus will be on restructuring or shutting down non-performing entities, according to the Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane. This stance was emphasized during her recent appearance before Parliament's Economic Cluster Committee, where she addressed concerns about the growing debt owed by various parastatals.

Dr Matlanyane stated that Cabinet has decided to conduct a comprehensive audit of all SOEs to determine which can be salvaged through restructuring and which should be closed. The decision came after the committee had previously struggled to engage the minister on several issues, including the adoption of regulatory reports.

During the session, the committee focused on whether there would be any interventions to prevent Revenue Services Lesotho (RSL) from seizing assets from indebted SOEs. In recent weeks, several institutions have had properties attached by RSL in an effort to recover overdue tax arrears. Committee Chairperson, Hakane Sello, noted that RSL had reported significant PAYE arrears across multiple institutions, leading to asset seizures.

He added that RSL had initially indicated that the finance ministry had agreed to possible bailouts, but this claim was later denied by the minister. Mr Sello expressed concern over the lack of compliance by these institutions, despite receiving annual budget allocations for salaries. He urged the minister to explain how such non-compliance occurred and to hold the responsible parties accountable.

No Bailouts for PAYE Arrears

In response to the allegations, Dr Matlanyane firmly denied that the government had ever agreed to settle the debts of these institutions. She clarified that while the ministry may facilitate payment plans between SOEs and RSL, it will not cover the debts on behalf of any institution.

"There is no way the ministry can provide subvention for salaries, which includes PAYE, and then later bail out the same institutions for failing to remit it," she said. "All institutions must pay PAYE. While financial challenges are normal, they must still find ways to comply. RSL has its own procedures for recovering money, and the ministry will not interfere."

When asked to disclose the total PAYE owed by SOEs, Dr Matlanyane declined, stating that she was not authorized to reveal taxpayer information. She emphasized that many state-owned institutions were underperforming and failing to fulfill their mandates. As a result, a comprehensive review is underway to determine their future.

She also called for Parliament to scrutinize audit reports to identify failing institutions. These reports will detail wage bills, tax compliance, and any financial mismanagement, enabling informed decisions about the future of these entities.

"Institutions that no longer benefit the country or fail to comply with RSL should not continue to operate," she said. "The committee should summon the ministries responsible for these institutions, alongside the institutions' management and boards of directors, to account for the failures."

Concerns Over Asset Seizures and Public Image

Economic Cluster member Montoeli Masoetsa raised concerns that RSL's property seizures could damage the country's image. He urged the ministry to intervene at the Cabinet level to ensure compliance without resorting to confiscations.

In September, former RSL Commissioner General, Advocate Mathabo Mokoko, warned that retirement funds of government employees were at risk due to widespread failure by government departments to remit PAYE. She explained that many departments had consistently failed to meet their obligations, despite years of negotiations and warnings.

"PAYE is deducted monthly from civil servants' salaries, but some institutions are not remitting it to RSL. We engage in prolonged negotiations, but where commitments are ignored, we are left with no choice but to seize assets," she said.

Institutions in Debt: A Closer Look

Several key institutions have been identified as owing significant sums to RSL, with some already having their properties seized due to non-compliance:

• Paray Mission Hospital: Owes M8.71 million. Hospital Administrator Sister Clara Rakhomo explained that the hospital faced a difficult choice between paying RSL or purchasing medical supplies.

• Maseru City Council (MCC): Owing M62 million in PAYE and income tax arrears. In 2021, the government provided a bailout of M37 million, reducing the debt to M15 million. However, the debt began accumulating again in 2021.

• Loti Brick: Owed M7.4 million in Corporate Income Tax, Fringe Benefit Tax, and PAYE. RSL obtained a court order to auction the company’s property to recover the outstanding amount.

• Lesotho College of Education: RSL seized a vehicle over a PAYE debt of M96 million.

• Lesotho Housing: Owed more than M35.7 million in tax debt, with interest accruing at 22% per annum. RSL has been authorized to seize movable and immovable property if necessary.

These cases highlight the ongoing challenges facing SOEs in Lesotho, as well as the government's determination to address non-compliance and ensure fiscal responsibility.