Tax Holiday A Necessity For Troubled Times In Liberia
THE LIBERIA REVENUE Authority has been on the heels of businesses and ordinary Liberians to pay up taxes. But in these troubled times when businesses are struggling to break even and the national government flirting with a shutdown due to the ongoing legislative wrangle, it is time for authorities to give some serious thoughts to giving taxpayers a bit of relief.
IT IS NO secret that business is tight in Monrovia these days and ongoing drama amongst members of the national legislature is not making it any easier for those languishing at the bottom of the economic ladder.
COMPLICATING MATTERS is the fact that the 2017/2017 budget is at a stalemate as lawmakers
IN RECENT WEEKS, the LRA has been embarking on a vigorous drive to collect lawful taxes due the government by sealing the doors of major businesses who have fallen behind on taxes.
WHILE THE PROCESS is commendable, ongoing uncertainty in Liberia dictates that the aggressive nature of the tax regime needs to be toned down to give business and taxpayers a chance to stay afloat.
EQUALLY SO, the consumer market is taking a hit owing to the declining purchasing power of many still trying to cope with the financial meltdown.
ALL THIS COMING amid recent World Bank and International Monetary Fund projections pointing to deterioration of the economy and declining GDP growth of 0.3%, further down from 0.7% in 2014. “The country is struggling to recover from the twin shocks of the Ebola crisis and the sharp decline in commodity prices, which led to business closures, including of mines and consequent job losses and reduced fiscal revenues. Substantial downside risks remain, which challenge the government’s recovery efforts and plans to diversify the economy to mitigate the impact of such future shocks,” the World Bank said in a recent country overview.
LIBERIA HAS SEEN declining numbers in the mining sector, which was one of the key drivers of economic growth down by 17%, followed by 1.1% decline in the agriculture sector. “The economy was however salvaged by a relatively resilient services sector, which grew by 5%; attributable mainly to the recovery in construction, hotels and trading services. Furthermore, fiscal revenues are projected to decline by 12%, based on the original forecast of US$474million. This will necessitate expenditure cuts by Government in order to maintain the already high fiscal deficit target of 8.5% of GDP in FY2016.”
GDP growth was projected by the World Bank to recover to about 3.9% in 2016 in part due to coming on stream of a new gold mining concession, and improvements in services as rural and urban markets re-open. But the same report indicates that the slowing of China’s economic growth and its potential adverse impact on the global economy are likely to keep already low commodity prices depressed signaling a major downside risk for Liberia, given its dependence on the exports of rubber, iron ore and oil palm for growth, employment and fiscal revenues.
ADDING MORE FUEL to the fire, IMF Directors during a recent visit to Liberia encouraged authorities to boost external buffers. “In order to build up adequate international reserves, the Central Bank of Liberia needs to rigorously implement its agreed three-year financial plan, phase out exceptional support to the banking sector, and limit foreign exchange interventions to volatility smoothing. Directors stressed the importance of enhancing the central bank’s independence and its coordination with the fiscal authorities in order to strengthen liquidity management. Given the constraints posed by the dual currency system, they also agreed that, in the long run, a gradual process of de-dollarization would increase the space of monetary policy.”
IN SPITE of it all, the LRA appears to be unforgiven to businesses struggling to stay afloat.
GOVERNMENT IS MAKING it even difficult by failing to pay debts to businesses. Media institutions in particular are bearing the brunt of hardship with LRA stringent requirement of having tax clearance updated every three months.
MOST BUSINESSES are struggling to get government to pay debts owed within the specified period on the tax clearance. But the LRA remains as difficult and complicated while refusing to work with businesses.
AS A RESULT a lot of businesses are finding it difficult to survive making it more than likely that we could see many businesses shutting shop over taxes owed to government.
GOVERNMENT must move fast to help give businesses some cushion or risk seeing the economy spiraling down a slope that could make it difficult for them to find their way back.
THIS COULD LEAD to more uncertainty over the economic outlook, leading to job losses and a dismal outlook for those languishing at the bottom of the economic ladder.
BUSINESSES are key to the survival of any nation and everything must be done to keep businesses afloat if Liberia is to turn the corner for the better. Giving businesses a tax break could be a start but equally so, government must provide incentives for businesses to thrive instead of making conditions difficult and complicated for them to thrive.