Sierra Leone: NRA Board Chairman Bemoans Revenue Mobilization Challenges

By Ahmed Sahid Nasralla (De Monk)

Although Sierra Leone has shown encouraging trends in revenue mobilization growth in recent years, enormous challenges still remain. Board Chairman of the country’s tax administration authority, Alpha Muctar Jalloh, notes that these challenges are mainly macroeconomic and administrative.

Alpha Muctar Jalloh, NRA Board Chairman

Alpha Muctar Jalloh, NRA Board Chairman

“It is a priority for the Government to strengthen tax administration, block leakages and inefficiencies which may exist in tax collection. These challenges are mainly macroeconomic and administrative,” said Jalloh recently at a conference on Domestic Revenue Mobilisation organised by the Center for Policy Studies, University of Sierra Leone, in collaboration with the Institute of Public Administration and Management (IPAM), at the British Council in Freetown.

Under macroeconomic challenges, Jalloh mentioned the decline in commodity prices particularly in the Iron Ore sector and high rates of tax evasion and avoidance; the deteriorating exchange rate and its ramifications on importation; and the slow economic recovery and prolonged austerity measures.

 

Sierra Leone has a narrow tax base which reduces revenue potential and increases the country’s dependence on taxes from a small section of society. The formalisation of the highly growing informal sector remains a daunting challenge for taxation.

 

Prior to the twin economic shocks of the Ebola Virus Disease outbreak and international commodity price collapse, Sierra Leone was well on the road to economic boom. In 2013 domestic revenue funded about 77% of the government budget. Whilst the country is trying to recover from these shocks, the effect on revenue mobilisation remains evident. Last year, 2016, domestic revenue funding dropped to 55%, with the rest met by borrowing and donor funds.

In the policy area, Jalloh highlighted the topical challenges of proliferation of tax exemptions and the looming national elections. In addition, socio-political response to tax policy proposals, he said, is causing delays in implementation of tax policies.

 

Furthermore, he talked about a host of administrative challenges hindering the efficiency of the National Revenue Authourity (NRA) including auditing of specialised sectors; assessing the effectiveness of tax incentives; difficulties in the procedures and criteria for tax rulings and tax decisions; difficulties in identifying physical location of business entities; continued retention of revenue by MDAs; compromising staff and taxpayers; lack of fully automated and integrated tax systems and the cultural problem of corruption.

 

However, Jalloh said the opportunities for the NRA and for the country to enhance its domestic revenue mobilisation to provide for its citizenry going into the future are immense and achievable within the short, medium and long term goals set by the NRA.

 

“The NRA has clear, measurable targets for improving domestic revenue mobilisation which are in line with international best practices,” said Jalloh.  “Whilst the challenges should not be underestimated, we have seen from our peers in the ECOWAS and the broader Africa region that progress is possible. Through proposed reforms we believe the NRA can move this country towards a more self-dependent situation, reducing reliance on donors support and indebtedness.”

In 2016, the NRA collected Le 2.799 trillion, which is roughly 12.2% of GDP. The NRA target for 2017 is set at Le3.64 trillion, which implies a 30% increase on the previous year’s collection. The ultimate goal, said Jalloh, is to reach the ECOWAS target of 16.9% tax-to-GDP ratio by 2021.

Sierra Leone has undertaken some significant transformation of its tax system in recent years, with the implementation of new policies and reforms that have produced substantial and consistent increases in revenue collection. Jalloh said this transformation is an ongoing process through which the NRA seeks to continue evolving and improving within the economic climate.

In a bid to meet the much needed revenue to address the government’s fiscal space, the NRA, according to Jalloh, is currently embarking on reforms, including the establishment of a centralised debt management and compliance unit; improve Customs valuation by updating the Price Reference Database with original price data from Cargo Tracking Company; fully operationalise the newly constructed Mobile Scanning System, a non-intrusive technology for import examination; continue to work with the Revenue for Prosperity (R4P) under the DFID funded programme with NRA to modernise revenue administration; and design a new tax administration improvement programme through the IMF’s RMTF Technical Assistance programme.

Proposed Tax Policy measures for 2017 include the imposition of excise on tobacco imports and increase in the import duty rate for same- from 10% to 20%; consolidation of domestic revenue, allowing revenue retaining MDAs to remit their collection into the Consolidated Revenue Fund; restriction of duty waivers by ensuring incentives are granted transparently through existing legislations; legislate a royalty charge of 0.5% on turnover for the telecoms service providers; impose 20% excise on gambling and betting tickets sales; review license fees for alluvial and small scale mining and fisheries operators; and roll out specific excise duty policy to all alcoholic imports.

“These proposed reforms are aimed at leading the NRA in the direction of increased revenue mobilisation,” said Jalloh.

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Categories: Sierra Leone

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