Monrovia — Liberia’s economic future is at a critical juncture, with the Government facing serious budget deficits and revenue challenges even ahead of the passage of the 2024 Draft National Budget.
By Lennart Dodoo
FrontPageAfrica has seen a memo addressed to the House and Senate Committees on Ways, Means and Finance by Gbarpolu County Senator Amara Konneh who has urged the heads of these committees to prioritize revenue over expenditure when deliberating the Budget.
The April 15 memo obtained by FrontPageAfrica reveals that there would be a US$10.7 million deficit in the Budget. This deficit, Sen. Konneh opined, occurred just a week after the submission Budget when President Joseph Boakai issued Executive Order 128 suspending surcharges on petroleum prices.
Sen. Konneh, as per the memo, indicated to his colleagues that while Executive Order 128 aimed to provide relief for citizens by lowering the petroleum prices, it resulted in an immediate budget deficit, as surcharge revenues were waived, benefiting petroleum dealers instead of consumers.
The memo: “Given the sensitivity of the petroleum sector to exogenous situations beyond our control, permanent relief to citizens can only be achieved if the lower prices can also incentivize consumer spending to stimulate economic activity as expected to increase tax revenue from other sources, partially offsetting the loss in surcharges on petroleum. This waived amount doesn’t benefit the pump price; it rather creates a windfall for the petroleum dealers. While we expect EO #128 to stimulate economic activity if enforced, the short to medium-term consequences it creates for the budget are serious and require immediate action. Moreover, there is a noticeable decline in revenue contributions from nearly every economic sector.”
Senator Konneh’s action memo called for the urgent need for additional revenue mobilization and expenditure reallocation to address the deficit. He urged the the Revenue Sub-Committee of the Ways and Means Committee to review various revenue components and take necessary steps to increase revenue.
Key recommendations for revenue mobilization include:
Reviewing the telecom sector’s contribution, which has been declining despite the significant number of mobile connections in Liberia.
Assessing data surcharges and universal access fees in the telecom sector.
Understanding the reasons behind declining contributions from sectors such as banking, hospitality, insurance, agriculture, mining, forestry, trade, and commerce.
Investigating the causes of declining contributions from the manufacturing sector and identifying strategies for restoration.
Adjusting the Personal Income Tax (PIT) table to reflect changes in the exchange rate, ensuring that taxpayers are not overburdened.
He furhter explained: “One important point to make is the adjustment of the Personal Income Tax Table. Section 8 of the Revenue Code on PIT says “If, during a calendar year,
the average market rate of exchange between the US and Liberian dollar changes by 10 or more basis points from the average rate prevailing for the preceding calendar year, the Minister of Finance shall make an inflation adjustment to the Liberian dollar amount set out in the code”. When the Code was amended in 2011, the government wanted the exempt people earning less than US$81 from paying PIT. Today, due to the depreciation of the Liberian dollar and the state’s refusal to adjust the table, people earning below US$30 are being taxed. And all others are being overtaxed for PIT. The Government must adjust the PIT table but its refusal is due to the potential revenue loss. The current exempt threshold is 0 to 70K Liberian dollars which was set when the rate was under 90LRD to a US dollar. At the prevailing rate, the exempt threshold should be from 0 to about 200K with corresponding adjustments to the other bands.”
In addition to revenue mobilization, Senator Konneh proposes efficient reallocations of expenditures to meet growth targets. Priority sectors for growth enhancements include health, public works, agriculture, and education. The reallocation of funds from debt servicing, security, and public administration is suggested to fund these priority areas without sacrificing service delivery.
To further address the deficit and increase revenue, Senator Konneh suggests reducing the size of the Government. He recommended stopping the allocation of public resources to State-Owned Enterprises (SOEs) that are not revenue-generating and taking legislative action on those that need to be dissolved.
Through a table illustrating withholdings from SOEs and SMEs, Sen. Konneh raised concerns over the decline in withholdings from SOEs, while SME withholdings have shown a significant increase.
“We need to understand the decline for SOEs and the huge jump for SMEs to establish if SOEs are remitting withholdings and LRA’s ability to collect the big jump in SMEs contribution, respectively,” he stated in the Memo to his colleagues.
He pondered what has changed consideirng SMEs are are estimated to contribute $8.5 million in taxes which marks an increase of US$1.4 million over the 2023 actual contribution, it still falls short of the 2022 contribution of $9.6 million.
