Monrovia — The House Joint Committee on Investment and Concession, Judiciary and Foreign Affairs are looking into the RIA Hotels agreement and are expected to give their recommendations to Plenary next week.
In February, local business owners and entrepreneurs staged a peaceful protest during which they shut down their businesses for three consecutive days, citing the imposition of high tariffs on goods they import, constant increment in the exchange rate of one Liberian Dollar to a United States dollar and constant police harassment of petty traders.
Amidst all of this, there is currently before the Liberian Senate an agreement between the Government of Liberia and RIA Hotels Resort Inc., owners of the five-star Farmington Hotel seeking 15-year tax incentives for the hotel.
The government in the agreement noted that the 164 rooms hotel, which is situated on a leased land, will benefit the private sector as well as facilitate the growth and development of travel and tourism that will in turn have "significant benefits to the local economy, reduce high unemployment, revive financial wealth and promote economic development and sustainability".
The agreement seeks to grant the hotel certain some capital allowances and deduction including ten percent incentive deduction for investment activities provided it employs more than a hundred Liberian nationals.
It shall also be exempted from income tax for the first years of its operation if the agreement is ratified.
The investor shall not be subject to import duties on capital spare parts, consumables, equipment and machinery directly used in operations for the first five years of its operation, it would also be exempted from the payment of duties of fuel used in its operations.
"Therefore, investor shall be taxed duty on fuel at a rate of 25 percent of the applicable rate for fuel used in its operations," the agreement requests.
Its custom user fee, the agreement goes on, on all imports shall not exceed 1.5 percent of CIF Liberian port value on imported goods or US$10,000 per item, among others.
Local business man, AminModad, owner of Bella Cassa Hotel in Monrovia, being shock by the incentives being sought by the government on behalf Farmington Hotel wrote on social media:
"Wow! Great initiative by the House! But, what about the few Liberian owned hotels, restaurants, artists, and entrepreneurs operating in the same hospitality sector?
I never heard any Representative or Senator advocate for us with such passion, conviction, and understanding of the prevailing economic conditions.
"Don't get me wrong, I am a proponent of encouraging foreign investments; however, I am of an even greater conviction that if Liberian entrepreneurs can be given the incentives and encouragement to forge ahead competitively, the economy and society will benefit far more.
"Some of us who do have incentives fought for them on our own; in fact, we are still fighting to maintain them and bring them up to par with the larger foreign-owned hotels that might have better lobbyists. Liberians need their Representatives to be proactive for them, too.
"Liberian entrepreneurs (not only in the hospitality sector) are disenfranchised because the institutions and people who should support their growth and ability to compete with their foreign counterparts are not doing so."
"Thus, the playing field becomes perpetually lopsided (against us). I've invested more than US$3.5 million in the hospitality sector by taking high interests-poor termed loans."
"Come rain or shine, I'm paying US$24,000.00 per month on these loans while still paying my taxes. I challenge this House Committee to look into our needs and those of other Liberian owned enterprises that are struggling to survive..."
The Government of Liberia does not hold back in granting incentives to foreign investments often with the hope that such will trigger down to the ordinary people through employment and social services and amenities and generate more revenues for the government.
Concession companies in Liberia usually benefit from these kinds of incentives and tax holidays, but the question often asked is whether these companies meet up the obligations for which these incentives are granted.
For some Liberians, it is unfortunate that Liberian-owned businesses do not benefit from such tax holidays though it is widely acknowleged by the government and its development partners that there is a need to impact local businesses.
Ironically, local businesses already struggling to survive have to compete with these multinational corporations and businessesthat are worth millions of dollars and benefit incentives from government.
Some experts believe there is the need for a cost benefit analysis or an empirical assement to the variations as to whether there is value for money and whether the tax incentives that are given multi-national corporatioons vis-à-vis the jobs that they promise or anticipated.
There are doubts that tax incentives to these companies actually bring about the micro economic growth which trickles down to the micro economic level or enhance small and micro enterprise to prop up or to grow the economy.