The Commissioner General of the National Revenue Authority (NRA) Alieu Sesay was the guest speaker at this year’s Sierra Leone Chamber of Commerce, Industry and Agriculture’s (SLCCIA) Business Luncheon organised at the Bank Complex on the theme, ‘Tax Evasion, Avoidance and Compliance’.
The issue of taxation, according to Henry Akintola Macauley, President for SLCCIA, was a concern to the private sector in the country and as a result there was need to have the Commissioner General of the NRA to talk to them on the issue.
Making his presentation to members of the private sector, the NRA Commissioner General said, tax evasion and avoidance was crucial as they affect the size of government’s fiscal space and the quantum, and quality of public spending. Tax evasion he said entails taxpayers deliberately misrepresenting or concealing the truer state of their affairs to the tax authorities to reduce their tax liability. “By contrast, tax avoidance is the legal utilization of the tax regime to one’s own advantage, in order to reduce the amount of tax that is payable by means that are within the law”, the NRA boss explained.
According to Alieu Sesay, evasion in Sierra Leone takes the form of failure to declare assessable income, claiming deductions for expenses that were not incurred or are not legally deductible and by failing to pay NRA the taxes that have been deducted from a payment. He further explained that, there are sources of evading indirect tax which, he said is often done through smuggling activities. “There are two main types of smuggling: technical and physical’, Sesay said explaining that, technical smuggling occurs within the customs and controlled areas and physical smuggling occurs outside the customs controlled areas.
Speaking on the effect of tax evasion and tax avoidance on the economy, the NRA boss said, it causes a significant loss of revenue to government that could be used to fund improvements on health and education. “It also allows some businesses to gain an unfair advantage in a competitive market and further hinders business growth due to uneven playing field created by the tax evaders…” Sesay said tax compliance in Sierra Leone has been very low over the years estimating it to be at 11% and this he said could be attributed to the large and diverse informal sector of the economy. “The size of the informal sector is an obstacle to income tax collection. Only about 20% of the work force is employed for wages and salaries…” Sesay said.
He further explained that, there are incentives for the payment of tax since according to him, tax payment was regarded as a social choice and that, people are willing to pay tax because of the social contract that exists between them and their governments and as such “citizens expect governments to provide goods sand services, whether public or private goods and their effective provision enables citizens to pay tax in return for the enjoyment of these goods”.
On the measures taken or planned to combat tax evasion in the country, Sesay said management at NRA has embarked on massive sensitization of the business community on the tax regime with a view to increasing voluntary compliance and that, there is a five years modernization drive at the NRA which is aimed at re-engineering the NRA’s business and procedures and that, they have got the support of DIFID and the government of Sierra Leone.
By John Baimba Sesay
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