Sierra Leone: An unfair tax system, corruption and wastages

Sierra Leone’s National Revenue Authority (NRA) hardly sets a target and misses it, according to its newly approved Board Chairman, Lawyer Alpha Muctarr Jalloh.

“But this ambitious goal can be undermined by a loose and unfair tax system, increasing tax expenditure, avoidance or evasion and lack of transparency fraught with corruption and wastages”, he warned.

According to a 2013 Budget Advocacy Network report titled: ‘Losing Out’, between 2011 and 2012 Sierra Leone lost about US$240 million on tax waivers to just four mining companies operating in the country.

This is corroborated by Reports from Christian Aid and Health Action Poverty (HPA), published in 2014 and 2015 respectively, which claim that “tax revenue generated in Sierra Leone has been consistently and unfathomably low for years”, citing massive tax exemptions for the extractives industry, and the use of tax schemes, as the main causes.

In addition, HPA’s Healthy Revenues report published in May 2015 claim that “Sierra Leone loses approximately $199m (£127m) a year – more than three times its health budget for 2015 – to tax exemptions, while tax avoidance and evasion schemes have cost the small West African country $71m (£45m) every year for the last decade”.

Jalloh said he is aware of the challenges but promised to enhance “fair and transparent revenue collection for government”.

There’s also an indication from the Government of Sierra Leone to support Jalloh’s ambition. In its 2015 Budget Speech, Government committed itself to “enhance tax administration to address the new revenue collection challenges, particularly through measures aimed at curbing tax evasion, strengthening controls and reducing duty waivers.

Additionally, in the 2016 Budget Speech Government declared that “Ministries, Departments and Agencies (MDAs) are now required to make provision for import duty in their budget for all contracts that are subject to taxes. As required by law, all duty and tax waivers and exemptions, including waivers for petroleum products, will require prior approval of Parliament. Duty concessions to NGOs, tourism sector and road construction companies will be strictly reviewed.”

Moreover, in its Letter of Intent to the IMF dated 17th November 2016, the Government stated: “Implementing structural benchmarks aimed at improving the revenue base are on track. We have achieved some success in reducing discretionary waivers and broadening of the tax base as a result of the close scrutiny of duty waiver requests: and requiring parliamentary approval of any new waivers.”

Being a lawyer with a wealth of experience, Jalloh believes these moves and intentions of Government can be guaranteed by a comprehensive and robust legislation, and as such he plans to consolidate “all the many but scattered laws dealing with national revenue collection into a new NRA Act to enhance administrative efficiency and revenue generation”.

He intends to work towards reducing rent seeking and develop policies to meet distinct groups; automate the system as far as reasonably practicable and move away from paper receipts issued by vendors to enhance revenue generation and reduce avoidance; explore the possibility of having one tax regime instead of the many different laws that currently regulate taxation in the country; work closely with all local councils to ensure revenue generation from leased properties; build on and develop policies to make the tax system as fair as possible and build confidence so that the compliant tax payer is not over taxed as this may cause problems and avoidance; and explore the possibility of implementing a broad based VAT with a fairly high threshold.

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