20 October 2017

Liberia: IREDD Urges Govt to Grant More Tax Relief to Local Businesses

Deacon Johnson: "IREDD considered the Executive Order a welcoming development and a direct response to our advocacy campaign for fairer taxation in the country."

The Institute for Research and Democratic Development (IREDD) has called on the government through President Ellen Johnson Sirleaf to grant further tax relief to Liberian owned businesses in the form of percentage duty waiver on goods they imported into the country for sale.

This call, according to Deacon Bob N. Johnson, project manager of IREDD-OSIWA, is predicated on information gathered that many Liberian owned businesses are heavily overburdened with import duties, foreign exchange rate effect, bank interest, related charges on loans, etc., thus leaving their businesses in huge deficits - bleeding and slowly approaching discontinuity.

He made these statements yesterday in Monrovia at a press conference, where he commended President Sirleaf on Executive Order No. 89, which institutes policy measures to stimulate economic growth by reducing administrative, business process requirements on concessionaires, small and medium-sized businesses, manufacturers, etc.

According to him, the Executive Order comes at a time when IREDD is implementing an Open Society Initiative for West Africa (OSIWA) funded project that seeks to promote government's effort towards self-sufficiency in revenue generation and domestic resource mobilization that is expected to sprout homegrown growth and development.

The Executive Order contains intrinsic policy measures that are intended to stimulate economic growth with emphasis on reducing administrative or compliance cost, business process requirement on concessionaires including small and medium-sized businesses and the manufacturing sector.

Though the policy action came barely at the exit of the President Sirleaf-led government, however, if implemented consistently with its spirit and intent, it will serve as major bolster for the development of domestic and international businesses, Deacon Johnson added.

Deacon Johnson said the release of the Executive Order by President Sirleaf is a timely coincident which stands to buttress the institute's ongoing advocacy on closing the loop on illicit tax practices, provide education on leakages and weaknesses in tax administration and by extension support advocacy for fairer tax governance and reforms.

He, however, disclosed that IREDD's work is two fold including helping national government to efficiently manage and expand its revenue generation capability and providing lead into untapped sources of revenue to enable national government maximize tax revenue generation to enhance growth and infrastructural development without necessarily shifting the huge burden specifically on Liberian owned small and medium-sized businesses and consumers.

"The advocacy campaign is engendering wider public discussion on the impact of excessive tax burden on businesses, particularly Liberian owned businesses and by extending to consumers who are notably stricken by income gap or poverty. We are committed to gathering inputs on the issue for possible policy measures as ways to ease the huge tax burden," he said.

Deacon Johnson added that IREDD considers the Executive Order a welcoming development and a direct response to its advocacy campaign for fairer taxation in the country, a regime that will enable local businesses to meaningfully contribute toward domestic resource mobilization efforts of the national government based on one of the general principles of taxation - "The Ability-To-Pay."

Meanwhile, Deacon Johnson encouraged the government to ensure strict adherence of Executive Order No. 89, and that all relevant government ministries and agencies responsible for its full implementation to accordingly do same so that average Liberian owned businesses will benefit from the intent and purpose of the Order without any precondition whatsoever.

It can be recalled that on October 17, President Sirleaf issued Executive Order No. 89 - instituting policy measures to stimulate economic growth by reducing administrative, business process requirements on concessionaires, small, medium-sized businesses and manufacturers.

According to an Executive Mansion release, the Liberian economy has experienced a protracted downturn in activities and slow growth driven by the continuous and persistent declines in the prices of and demand for Liberia's primary exports of rubber, iron ore and timber. This combination of events has contributed to the low level of business activities currently experienced in the economic outputs of the industrial, commercial and retail sectors.

The release added: "Whereas, firms in all segments of the Liberian economy, including importers and exporters, face regulatory, administrative, and tax mandates and demands, which, during this period of protracted economic downturn, pose a burden heavier than would exist during periods of growth and expansion, and in many instances jeopardize the continuity of businesses; and whereas, today, during this period of protracted economic downturn, these firm, operating under these conditions also contend with a narrow local commercial loan market that causes them to seek loans and investments from cross-border capital markets, which, themselves, are postponing actions and decisions on Liberia-directed loans and investments as a consequence of the period of elections and political transition.

"Whereas, potential investors have curtailed or cancelled planned investments throughout the economy; and whereas, this period of protracted economic downturn, and this period of transition combine to produce consequences, which further excite expectations that the current situation will indefinitely persist; and whereas, continued health of the Liberian economy depends on expansion of investments by companies to strengthen economic growth, expand jobs creation; and stabilize incomes; in parallel with investments in the public sector."

The release continued: "Whereas, households, during this period of protracted economic downturn are burdened by difficult austerity measures, which disproportionately are affecting low income groups, and whereas, government revenues declined such that investments in public infrastructure and continued critical reforms of government institutions have slowed jeopardizing important achievements; and whereas, the prevailing economic and market conditions in Liberia highlight the need to develop tax policy and institute measures that incentivize and protect local industries.

"Whereas, the adoption of the ECOWAS CET effectively limits Liberia's ability to use import duty as a tax policy instrument to protect local industries from unfair competition and dumping; and whereas, in the exercise of the Executive Power vested in the President by the Constitution, the President may issue Executive Orders in the public interest, either to meet exigencies or to address particular situations which cannot await lengthy Legislative processes."

Executive Order No. 89 concluded as saying: "Now, therefore, the Government of Liberia hereby issues this Executive Order instituting policy measures to stimulate economic growth by reducing administrative and business process requirements on concessionaires, small and medium-sized businesses, manufacturers, sole-proprietorships, and partnerships."

Tax Clearances

Tax clearances issued by the Liberia Revenue Authority shall be valid for a period not less than six (6) months. This is intended to reduce the administrative burden associated with the frequent processing of tax clearance.

Duty Free

Any and all concessionaires, registered businesses, and non-governmental organizations, which have been granted duty free status by virtue of the prerogatives of the Executive or by Acts of the National Legislature for all or some of their activity shall not be abridged and henceforth shall be strictly adhered to and enforced in accordance with governing agreements.

Tax Penalties and Interest

All tax penalties and interest are waived. Principal amounts, which are due and have been subjected to assessments of tax penalties and interest, remain outstanding, and are not waived by this Executive Order. Collections of principal due are to be enforced taking into due consideration the causes of non-payment and the aim to secure the status of going concern of the businesses concerned.

Import Declaration Permits

With the exception of goods that pose a threat to national security or public health, all companies, sole proprietorships and partnerships importing goods into Liberia for resale are exempt from seeking permits to import, a regime, which is administered by the Ministry of Commerce and Industry. Companies, sole proprietorships and partnerships must, however, continue to declare to the Ministry of Commerce and Industry, their intent to import goods into Liberia.

This declaration henceforth shall not be used as a tool by any agency of the Government of Liberia to exercise discretion in the administration of the prohibition on Import Declaration Permits. The intent of companies, sole proprietorships and partnerships to import goods into Liberia for resale shall be expressed to the Ministry of Commerce and Industry in a detailed import schedule, which the Ministry of Commerce and Industry shall promulgate within ten (10) days of the effectiveness of this Executive Order and make known by Official Gazette; and its use shall be at no cost to the public.

Protection of Domestic Manufacturers

As a further mitigating measure, the Minister of Finance and Development Planning shall, by administrative regulation, impose a surcharge not exceeding 10% advaloremon goods imported into the country in such quantities that may undermine the survival of local manufacturers.

Logging Sector Related Charges on Class A Species

The following holding Forest Management Contracts are revised to the fees and rates set below:

Revised Schedule of Logging Charges

Descriptions Fees and Rates

Stumpage 6.00%

Export 6.00%

Port handling fee (per cbm) $5.00

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