The government’s decision to revise some provisions of the Finance Acts, was said to be in compliance with the ECOWAS Common External Tariff (CET) for which Sierra Leone is one of the two remaining countries that have not been implementing the sub regional tax regime.
This the government has said was done to further improve domestic revenue collection while at the same time protect the local industries for job creation and reduction in the cost of living, with the review of the Finance Acts 2008, 2017 and 2018.
The reduction of excise duty on alcoholic beverages with less than 10 percent of alcohol content from US$4 to US$1.5 per litre, is expected to yield a net gain in revenues of around Le54 billion.
For those with more than 10 percent of alcohol, the excise duty is reduced from US$6 to US$2 per litre. The objective from such reduction according to the Minister of Finance is to reduce the local price of these products, minimise smuggling while protecting the local industries.
Also it is projected that the imposition of an excise duty of 20 percent on non-alcoholic beverages (energy drinks) will generate additional revenue of Le6.8 billion.
Finance Minister Jacob Jusu Saffa said in his presentation to Parliament, that the amendment of the Finance Act 2017 is in relation to the imposition of specific excise duty on imported beer, spirits and other alcoholic beverages, which previously did not look into the smuggling of such products and by implication domestic revenue.
The Act however is currently awaiting President Bio’s assent before it will be fully implemented by the National Revenue Authority (NRA).
Import duty on wheat or meslin flour was also reviewed downward from 20 percent to 10 percent to reduce the cost of essential food items, especially bread. The impact of this revision the Minister says will be revenue-neutral as the higher rate of 20 percent was never implemented by NRA.
In the same vein, import duty on fruit juice is also reviewed downwards from 30 percent to 20 percent in line with the ECOWAS Common External Tariff, whose implementation in Sierra Leone commenced effectively on the 18th of June 2018.
The revision is expected to generate Le591 million in additional revenue. The 10% excise duty imposed on fruit juices is meant to reduce the incidence of diseases related to the consumption of sugary drinks. Additional revenue of Le2.0 billion is expected to be generated through this tax.
However Deputy Financial Secretary Matthew Dingie has cautioned that it is too early for people to start making projections of increase in revenue as that will only be feasible when the first consignment is imported.
He said that when importers stop importing, alcohol smuggling became the order of the day and was filtering in to the market, even though the market was made available for local content to thrive, the industry was unable to scale up to match the demand of the consumers.
The downward review of excise duty on alcoholic beverages as proposed in the revised 2018 Finance Act, is expected to reverse this trend and only a small proportion of the revenue lost so far, the government is hopeful could be recovered during the second half of the year.
As a result, excise tax on alcoholic beverages and other goods has been revised downwards by Le8.2 billion from Le23.3 billion in the original budget to Le15.1 billion.”
In the same way, excise duty collected on imported alcoholic beverages was said to have been abysmal in the first half of the year, recording only Le1.9 billion. This was said to have happened because the existing higher excise duty imposed on imports of alcoholic beverages as provided for in the Finance Acts of 2016 and 2017.
These rates substantially increased the cost of clearing alcoholic beverages at the Customs and Excise Department of the NRA, which led to significant reduction of importation of these goods while smuggling increased.
The earlier projections also assumed the passage and subsequent implementation of the 2018 Finance Act at the beginning of the year. The Act was passed in March 2018 and implementation started in May 2018. The delayed approval had adverse implications for domestic revenue collection in 2018.
“While we recognize that taxes fuel the country’s economy, we should instead implement a progressive kind of taxation, not the regressive kind” said Tanue Jalloh, President Importers Association. “These laws have affected this country and not only us importers, as the increase in tariffs and excise duties, slows the process thereby causing delay in the revenue generation.”
By Zainab Iyamide Joaque
Monday July 23, 2018.
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