29 May 2018

Liberia: Weah's Tariff Cut Ultimatum Backfires

Photo: FrontPage Africa
(file photo)

Today, May 29, is the deadline for LRA Commissioner General Elfreda Stewart-Tamba to make a report in compliance with the 72-hour ultimatum issued by President Weah to reduce import tariffs on consumer goods.

President George M. Weah's decision to give a 72-hour ultimatum to the Liberia Revenue Authority (LRA) to ensure that tariffs on basic commodities are reduced, including the ECOWAS Common External Tariff (CET), has been considered "unilateral" and without the involvement of the Legislature.

Today, May 29, is the deadline for LRA Commissioner General Elfreda Stewart-Tamba to make a report in compliance with the 72-hour ultimatum. The LRA is expected to present a new schedule, to ensure immediate tariff reduction on a wide range of basic commodities and other consumables imported into the country.

"The president has observed that the current tariff regime, including the ECOWAS Common External Tariff (CET), is causing a serious hike in the cost of basic commodities in the country, thus adversely affecting the Liberian people, especially the poor. The president deems this as unacceptable and further expressed that it contravenes the premise of the pro-poor agenda," noted a statement from the office of the presidential press secretary last week.

The president's decision has triggered a bipartisan response from members of the 54th Legislature, with Nimba County District # 8 Representative Larry Younquoi arguing that the 1986 Constitution gives the authority to the Legislature, to review and approve treaties and financial instruments, including tariffs.

The House Chairman on the Committee on Good Governance & Government Reform, Rep. Larry Younquoi, told the Daily Observer in an exclusive interview that the ECOWAS CET Tariff was adopted by Liberia as part of the Protocol or Treaty as member of ECOWAS.

Representative Younquoi said the House of Representatives and the Liberian Senate approved the ECOWAS CET Tariff, attested by former President Ellen Johnson-Sirleaf and in accordance with the Constitution; therefore the reduction of the ECOWAS CET Tariff must be done by the Legislature.

"Besides the adoption of International Treaties or Protocols, the Legislature also has the authority to approve tariffs or taxes as well as sanction the printing of money," Representative Younquoi said. However, he said even if it's an "Executive Order," it will last only for a "year."

Meanwhile, the CET was introduced to the Legislature in 2016 by former President Ellen Johnson-Sirleaf, with calls for its adoption.

The introduction of the CET enabled Liberia to join other ECOWAS countries in establishing a common customs union, making trade and commerce easier within the ECOWAS sub-region.

According to ECOWAS, in any situation where a group of countries decides to form a customs union as part of the goal to achieve economic integration, they must establish a common external tariff, which would set the same customs duties, import quotas, preferences or other non- tariff barriers to trade applicable to all goods entering the territory of the group, regardless of which country within the group they are entering. It was for this purpose that the 15 Member States of the Economic Community of the West African States on 25th October 2013, adopted the ECOWAS Common External Tariff (CET).

The CET would guarantee predictability and stability in trade: importers would be able to make long-term plans with the confidence that the tariff would remain the same. Policies affecting import tariffs can no longer be changed arbitrarily.

As a result of the predictability and stability in trade, more foreign direct investments would be attracted.

Increased turnover resulting from an enlarged domestic market: the whole region would become a single market for imported products.

Increase in economies of scale resulting in the enlargement of domestic industries.

Increased production and productivity: with an expanded market to satisfy, production and productivity would increase.

Discourage smuggling: to certain extent, smuggling is encouraged by the disparity in tariffs. The application of common tariffs across the region would remove the incentive to smuggle products into countries that previously had high tariffs for those products.

However, economic observers say while the president's move may be embraced by the masses, there is the need for careful consideration before pulling out of the CET regime, bearing in mind that it is a regional tax regime.

Also, as the FY2018/19 draft national budget is already before the legislature, reduction of tariffs would adversely impact the national revenue envelope and another major budget shortfall should be anticipated.

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