The National Dialogue Series continued on Thursday, 11th May 2017 with the topic: ‘Wetin mek we de pay tax? (Why do we pay tax?)’ live on Africa Young Voices Television and simulcast on the Independent Radio Network across Sierra Leone. This is the fourth in the series and the second on the same topic.
The panellists were Mrs. Aminata Kelly-Lamin, Policy and Advocacy Adviser for Action Aid Sierra Leone and Alpha Tanue Jalloh, President of the Sierra Leone Importers and Exporters Association, while Development Communications consultant Batilloi Warritay moderated the programme.
Following are highlights of what the panellists said during the 1hr 30 minutes discussion programme:
Mrs Aminata Kelly-Lamin was asked about her views on tax avoidance and she explained that while it is legal as a result of agreements signed between two countries, tax avoidance is morally wrong. She went on:
“From a poverty stand-point Action Aid viewed it as morally wrong. We believe that if you come to our country to invest and found out that the system is not correct, you should be honest enough not to follow that system but to uphold international best practice or standards.
“Tax Avoidance refers to ways companies and multi-national businesses avoid paying their correct taxes in the various countries they are operating. Tax Avoidance is making Sierra Leone losing out on a lot of money which otherwise would go into providing social services for the general public, especially women and children.
“In 2016, Action Aid Sierra Leone released a multi-country report titled Mistreated Report, which looked at the issue of Tax Avoidance in various countries. The report found out that tax treaties or agreements between countries is one of the ways companies avoid paying correct taxes. Countries hosting big businesses or multi-national companies have a right to tax these companies, but some provisions in the tax treaties restrict the right of host countries from levying certain taxes. So a lot of countries, especially lower-level countries like Sierra Leone, are losing out on huge incomes that would have added to their domestic revenue generation. Bangladesh alone loses about US$85 million annually to tax avoidance.”
Mrs Kelly-Lamin said they (Action Aid) shared the report with the Government of Sierra Leone: the Office of the President, Office of the Vice President, the Ministry of Finance and
Economic Development and the National Revenue Authority (NRA), who are responsible for taxation in the country.
“We had hoped that they (Government) would see and understand the negative impact of some of these kinds of bi-lateral agreements, for example with the United Kingdom, on the country’s economy. We expected that there would be the political will to review these treaties.
“Actually, obligation to these tax treaties is voluntary; they are not absolutely binding. This means that our Government can come out of them as and when they feel it’s not favourable.
“The Office of the President requested the NRA to catalogue all treaties of such nature that were preventing Sierra Leone from generating much needed revenue from taxing multi-national companies but up till now no list has been made available.”
Mrs Kelly-Lamin also cited a Network Movement for Justice and Development (NMJD) study released in 2011, titled ‘Cost Benefit Analysis on Mining Companies’, which found out that certain mining companies including London Mining and African Minerals Ltd were avoiding payment of Corporate Tax.
“While this is also not against the law (because it is usually as a result of tax holiday arrangement between the Government and the companies), it is morally wrong on the part of the companies.
“This study looked at some of the areas that Government often overlooked when multi-national companies come in to invest to determine whether Sierra Leone would benefit or not. In addition, there were several other tax obligations these companies neglected because Government did not monitor their operations well.
“In one instance, the study found out that on the date the agreements were signed the price of iron ore on the international market did not match with the price Sierra Leone agreed to sell. This meant that there was reduction in the royalties we were supposed to get as a country. The royalty is our country’s first entitlement for its mineral assets, and we lost on that.
“Furthermore, although the Income Tax Act requires all big companies to pay a Corporate Tax of around 35 to 37% or so, the NMJD study found out that these mining companies re-negotiated, and London Mining for example was asking for as low as 6 percent.”
For his part, Alpha Tanue Jalloh said:
“Because Sierra Leone is a small and poor country, she gives in to most of such agreements just to encourage big businesses to invest in the country.
“In our regional set-up, the Mano River Union for example, we have a treaty that goods or products coming in from any of these countries should not pay any duty. So you find out that
countries that are manufacturing countries stand to benefit more from such a treaty than our own country which is receiving the products.
“Some big companies enjoy tax holiday for a period of 4 to 5 years based on the volume of their investment. These tax breaks are normally direct taxes to the State for operating a business in the country, such as Corporate Tax.”
However, Mrs Kelly-Lamin noted:
“Sometimes some companies abuse this tax holiday privilege. When they come they get tax holiday for five years, and then another five years. By the time it’s 10 years they change their names and sign new agreements and enjoy the benefits all over again. The Government loses out and it’s us the people who bear the loss in the form of inadequate social services.
“Going forward, Government should enforce existing laws which are good, and review old treaties with countries like UK, Denmark and Italy as examples. It is possible that some of the provisions in these treaties still impact on our agreements with companies from these countries in recent times. The fact that Sierra Leone signed these treaties means that they supersede our domestic laws.
“I also suggest we introduce a progressive tax system, wherein the more income you get the more tax you pay.”
Alpha Tanue Jalloh suggested that the NRA should spread the tax net rather than concentrating more on imports.
“The transport sector for example; they just renew their licenses annually and that’s it. The transport sector should also report their income and pay taxes to Government. There are so many other areas. There are shops that are not registered, and there are small outlets that are doing bigger businesses than shops but they deliberately prefer to remain as such simply because they don’t want to pay tax. Charcoal sellers, wood sellers, they all make profits and therefore eligible to pay taxes.”
Meanwhile, Mrs Kelly-Lamin reasoned:
“The collection of taxes is one thing; the utilization of tax money is another.
“The State has to prove to the people that they are using the money for the benefit of the general public. The Auditor General’s report year in year out has proven that there are many holes in the system in terms of utilizing public monies. It shows that monies entrusted by the State to Ministries, Departments and Agencies to provide social services- schools, hospitals, roads, water, electricity- are not being used correctly.
On the question of newspaper allegation that the ‘NRA chopped tax monies’, Mrs Kelly-Lamin said: “I can only reference the recent Auditor General’s Report which claims that there are
certain questions which the NRA failed to answer in relation to money given to them to manage their own affairs. Even the Okada riders have a right to ask Government how and on what tax monies are spent, because they pay Le5, 000 as tax to Council.
Asked about his comments on the new Finance Act by a listener, Alpha Tanue Jalloh said: “The whole process is shrouded in secrecy. From the Ministry of Finance and Economic Development, it goes directly to Parliament. We believe there are finance experts who should have seen this bill and discuss it before it is sent to Parliament, but that is not the case and this is not the first time. Even with the 2016 Alcohol and Beverages bill; we didn’t know who put it together and how. It just appeared in Parliament. It’s full of unthinking figures which you can’t see in a similar bill in any part of the world.”
Links to Action Aid’s ‘Mistreated Report’: http://www.actionaid.org/2016/02/mistreated-how-shady-tax-treaties-are-fuelling-inequality-and-poverty
A 2013 report by BAN and partners NACE, Christian Aid, IBIS and Tax Justice Network Africa titled ‘Losing Out’ revealed that Sierra Leone was losing US$ 224 million annually to tax avoidance by just four mining companies operating in the country.
Did you know?
Land Owners Tax requires tenants to pay 10% tax to the Government from their rents. This tax targets the tenants directly and not the landlords.
About the National Dialogue Series:
The National Dialogue Series is a joint initiative of The Sierra Leone Association of Journalists (SLAJ), Campaign for Good Governance (CGG) and the Independent Radio Network (IRN). The main objective of the programme is to develop a healthy culture of national discourse on key development and political issues and to shift the focus from individuals and personalities as the country prepares for national elections.
It is becoming evidently clear that as Sierra Leone approaches the 2018 Elections, there is a compelling need to enhance the capacity of citizens in their civic responsibilities and also help to increase the level of awareness and understanding of major issues among members of the public.
The National Dialogue Series come to you in the form of a 1hr 30 minutes live TV and Radio simulcast bi-weekly programme across the IRN network, TV and social media nationwide.
The next topic is ‘We don ready for the 2018 elections? (‘Are we ready for the 2018 elections?’) on Thursday, 25th May, 2017.
Ahmed Sahid Nasralla
National Secretary General
Sierra Leone Association of Journalists
Wednesday May 24, 2017.