Executive Lures Legislature Back to Session to Impose More Taxes
Monrovia – The sudden recall of lawmakers back to Capitol Hill might be in the good interest of the government but certainly at the detriment of the citizens.
“I have always said it will bring hardship on the ordinary Liberian. It is good to generate revenue, but there are other ways, and areas we could use to generate revenue.
On the overall I am not in favor of it” – Representative Mariam Fofana of Lofa County
FrontPageAfrica has reliably learned that the recall came about after the President convinced some members of the House to speedily reconsider the amendment of the Revenue Code.
Accordingly, upon reconvening session, lawmakers would consider instilling 10 percent of the taxable amount on alcoholic products and additional 5 percent surtax to telecommunications services. This means, GSM companies and cellphone users would be taxed 1 cent per minute.
These measures, FrontPage Africa has learnt, are to help the government which is in dire need of money, raise some funds to support the FY2016/2017 Budget.
Lawmakers would also be taking into consideration the reduction of salaries of civil servants. Our source, which is in the inner circles of government, hinted us that the government would not be able to function properly with the current state of the economy.
The President has been concerned about the US$46 million increment made in the 2016/2017 fiscal budget and the executive’s current incapacity and the imminent drastic budget shortfall.
Cellcom GSM – one of the biggest GSM Companies in Liberia – rejected the proposition when it was first introduced on the floor about three months ago.
The Vice President for Government and Regulatory Affairs, William Saamoi, said increasing the tariff means a lot of people in Liberia would not be able to afford to make a call as cell phone companies carry the burden of navigating difficult terrains like operating generators, etc.
“We lower the tariff, increase the volume—let the people call, let the businesses generate revenue, let the government make money. You do that today, lot of places where we have low tariff, people will not be able to call and as a business entity, if people cannot call and we cannot make profit, we will shut down our operation in those places and remove our sites to those places we can make profit. From then, you have disenfranchised your people by denying them their fundamental rights to communicate,” he told the hearing.
“So we think we should keep the rate as it is, encouraging us operators to invest more into less populated areas so that the people can communicate,” he further warned that additional tax is a double taxation on consumers.
Imminent Shutdown of Businesses
Excise tax at a rate of 45 percent shall be levied on all beverages with alcohol content in excess of one percent, including beer, wine, stout, ale, gin, whisky, bourbon, and other products intended for consumption by mouth that have the requisite alcohol content, whether imported or produced in Liberia.
Raising taxes on these products will in turn lead to increase in the prices of the products and the poor consumers will bear the cost.
Some pundits have argued that raising taxes on these products will help to deter people from smoking or drinking. However, entertainment centers and joints, being the fastest growing business in Liberia at the moment, would suffer the blow.
Raising taxes to reduce the profit margins of these places would lead to closure of many entertainment centers and loss of jobs for the already measly paid Liberians who are working at these entertainment centers.
Too Much Burden on the People
In an interview with FrontPage Africa over the weekend, Nimba County Representative Larry Nyounquoi said, “We have made our position clear by voting against in the amended tax law because we are of the conviction that this is a post war country which is been occasioned by international externalities like climate change, prices of our major export iron ore and rubber.
“It is too much of a burden to put the tax on the poor people. Let the tax that is to be levied be out of it, it is not going to make any impact on the lives of the people. You will have good roads and building, but it would not impact in the area of having food on the table and getting uniform for school as the calls will allow them save money.
“It is counterproductive to tax inbound calls that our people are so accustomed to because the calls they make is also security.”
Representative Mariam Fofana of Lofa County said, “I have always said it will bring hardship on the ordinary Liberian. It is good to generate revenue, but there are other ways, and areas we could use to generate revenue. On the overall I am not in favor of it”.
A cross section of Liberians speaking to the FrontPage Africa has opposed to the forthcoming decision to be made by the House. Many are of the view that it would rather increase hardships on an already impoverished society.
Dweh Saybeh, a resident of Paynesville told FrontPage Africa he doesn’t deem it necessary. “I don’t think it is necessary, for government has lots of way of generating funds rather than increasing taxes and not to impose the burden on the already huge unemployed population.”
“As an ordinary Liberian, increase tariff on calls will pose serious challenge on communication, as we know communication is serious asset. Bulk of us Liberians depend on remittances from relatives living in the United States and other parts of the world and we get this assistance through communication,” Wilkon Docan said.
Insufficient Money in Circulation
Despite having two currencies in the country – the old Liberian dollar, new Liberian dollar and the U.S. Dollar – circulation of the money on the market is very minimal, especially the U.S. dollars.
FrontPage Africa gathered that the Central Bank of Liberia is currently refusing to honor checks written in U.S. dollar simply because there isn’t sufficient money in the country. This has reportedly worsened the state of the economy.
FrontPage Africa inquired the following from the Central Bank but did not respond on the following issues:
- Is the CBL currently rejecting checks written in U.S. Dollars?
- If yes, why and how did the CBL come up with that decision?
- What is the current state of the economy amid the three currencies – the old Liberian dollars, the new Liberian dollars and the U.S. dollar?
- How is the CBL curbing inflation in the wake of fallen prices of Liberia’s key export commodities?
- What comments do you have to the news of lack of enough money in circulation?
The Central Bank is yet to respond our inquiries since last Friday and a Saturday morning follow-up.
Though there are fears that the state of the economy would affect the conduct of the 2017 general and presidential elections, the Communications Director of the National Elections Commission, Mr. Joey Kennedy, said the Commission has been receiving financial support from the government and it was very optimistic that the 2017 elections would be held without hitches.
State of the Economy & Poverty
Recently the World Bank announced that about 54 percent of the population of Liberia is living below the poverty line. This means they live on less than $US2.00 a day.
World Bank’s Country Economist Daniel K. Boakye said the figure was contained in a 2014 Household Income and Expenditure Survey (HIES) implemented by the Liberia Institute of Statistics and Geo-Information Services (LISGIS).
According to the survey report, the figure amounts to 2.1 million Liberians who were unable to meet their basic food and non-food needs between January and August 2014.
Mr. Boakye also noted that 18 percent of this population lives in extreme poverty.
In her 2016 State of the Nation address, President Elle Johnson Sirleaf recognized the ailing state of the economy.
She, however, attributed the state of the economy to exogenous factors including the 2014 outbreak of Ebola Virus Disease and the precipitous decline in our traditional exports of iron ore and rubber.
“The economy is under severe stress. We are in difficult times. As we all recognize this situation is causing hardship for many ordinary Liberians,” she said.
In 2016, there was a staggering 90 percent decline in Gross Domestic Product, the greatest by any nation since World War II. Liberia also inherited an unsustainable debt level of more than 600 percent of GDP brought about by debt un-serviced for over two decades.
Citizens Shift Blame on Government
A resident of Paynesville Michael Flomo blamed it on the economy. “The poor state of our economy is largely blamed on the government. This government has refused to engage into realistic venture like creating access to finance for Liberian entrepreneurs.
The government has relaxed taxes for those multi-million dollar companies, but places high taxes on Liberian businesses which are generating money to remain in the economy.
Corruption is a major factor affecting revenue growth; we are not generating the real revenue the country is able to produce.
For me, there is nothing that can be done right now; we will just be in this until Madam Sirleaf’s time is over. If in 12 years she could not move this economy forward, then it will happen in few months?”
Eric Davies, a resident of Central Monrovia, says poor performance of the economy could be attributed to capital flight.
“Bulk of the people in this government are from abroad, so right now it’s chopping time. Those people are sending the money to their families abroad.
The other thing is this government depends on support from the international community too much, so the day country like America and the UK reduce their support, it would affect the economy. Nobody should blame what is happening on UNMIL; UNMIL’s leaving is not a surprise.
Are you telling me the Harvard-trained did not know what to do for the economy to remain stable after the draw down,” he said.
Report by Lennart Dodoo – 777788805, [email protected] | (Al Varney Rogers and Henry Karmo contributed to this story)