With Numerous Tax Holidays to Concessionaires, Gov’t Imposes More Taxes
Monrovia – When investors were trooping into Liberia beginning 2003, to explore investment opportunities, the Government of Liberia in what it termed encouraging more investors relaxed the tax regime, granting tax holidays to big multinational companies.
Beginning 2005 the government of Liberia signed numerous concession agreements at which time it granted tax incentives to multinational corporations but with the economy facing downturn, the government is proposing collecting taxes on goods and commodities that are mostly consumed by the population with plans to also increase fees on mobile phone calls
Within ten years of the regime of President Ellen Johnson Sirleaf some of these concessionaires look have to have achieved their business objectives, leaving the country but blaming the situation on decline in the prices of commodities for their decisions.
Knowing that prices are bound not to remain stable for the unforeseeable future, many of these concessionaires prefer cutting their losses short rather when prices are low while failing to pay to meet with their tax obligations when their various businesses are more profitable during time of high prices.
Arcelor Mittal during the last fiscal year 2015/2016 failed to pay social development funds to counties including Bong, Nimba and Grand Bassa as agreed in the Mineral development agreement signed with the Government of Liberia citing fall in the price of iron ore on the world market.
Mittal failed in the 2015/2016 national budget to pay US$1.5 million to Nimba County, US$500,000 to Bong County and US$1 million to Grand Bassa County all for corporate social responsibility.
Even Firestone Liberia which has been in Liberia since the 1920s paying US 6 cents per acre of rubber for a whopping 99 years when rubber was a hot cake on the World market during which period it made huge profits paying little to the Government of Liberia based on an ancient agreement signed when economic realities were different at the time has failed in recent years to pay some of its corporate social responsibility to counties due to fall in the global price of rubber.
Firestone Liberia failed to pay US$320,000 to Margibi and US$ 50 to Montserrado in the 2015/2016 national budget. Several other companies including Putu, Amlib all failed to pay what was agreed in their various Mineral development Agreements blaming their inability on the global trend in the prices of commodities.
During the profitable years, these concessionaries did not pay extra profit taxes to the Government but the country is now facing the negative impact of the bad times.
By their inability to pay citing global prices decline, the Government of Liberia has proven to be the weaker vessel where it falls at the losing end when things go bad and does not benefit anything when things get better.
Tuning to the poor
After granting tax holidays to these concessionaires and accepting to allow them go free during difficult global situations, the government looks to have turned its attention on the poor consumers to raise taxes.
With high unemployment the Government in a draft Liberia Tax Amendments Act of 2016, among many things wants to raise taxes on Goods and Services Tax.
The Government is pushing to raise taxes at 10 percent of the taxable amount on alcoholic products and additional 5 percent surtax applies to telecommunications services.
The amendment is also taking into consideration excise on Tobacco: Amendments to section 1121, Tobacco and Tobacco products. The amendment is proposing excise tax at the rate of 80% of the amount determined under subsection (a) shall be levied on tobacco and on any product containing tobacco, including cigarettes, cigars, snuff, chewing tobacco, and similar products, whether imported to or manufactured in Liberia.
On the amendment of taxes on alcoholic beverages, water and soft drinks, 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, but not including pharmaceutical products or medicinal preparations if certified by the pharmacy board.
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.
While some may be tempted to say raising taxes on these products will help to deter people from smoking or drinking, it is a known fact that the entertainment places are the fastest going businesses in Liberia at the moment.
Raising taxes to reduce the profit margins of these places will lead to closure of many entrainment centers and loss of jobs for already lowly paid Liberians who are working at these entertainment centers.
The government is also proposing increment in taxes on mobile phone calls. With a three- day for US$1 promotion, still a number of Liberians are still struggling to make calls, as such increasing the tariff on calls will further worsen the situation.
A proposal of increase in taxes on GSM companies by US$0.01 per minute is already a point of disagreement between the two leading GSM service providers, Lonestar Cell and Cellcom.
Lone Star Cell Deputy CEO, Louis Roberts, warned on Monday at a public hearing conducted by the joint Ways, Means and Finance Committee of the Legislature on the draft Liberia Tax Amendment of 2016, that if the tariff is added, it would be the company shouldering the burden, not ordinary Liberians.
But contrary to Roberts’ views, Cellcom 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, 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.
Lawmaker Hold special session
Given the impact of the proposed tax increment, the House of Representatives has agreed to conduct special session on today, Wednesday July 20, 2016 on the draft Liberia Tax Amendment Act of 2016.
Sources told FrontPageAfrica Tuesday that the called special session is a decision of plenary to discuss the tax code amendments proposed by the Liberia Revenue Authority (LRA) and the Ministry of Finance Development Planning (MFDP). It is not yet clear when will the special session be held.
The special session, according to a senior member of the Ways, Means and Finance Committee, is to finalize discussion on the tax bill to ensure its passage by Thursday.
In the draft Liberia Tax Amendment Act of 2016 preliminary sections, a priority amendment contains priority amendments identified at the time of submission. Additional amendments, including technical corrections, submitted to the legislature.
In preliminary section 3, methods of amendment set out the amended version of each affected section of the Liberia revenue code, using an ellipsis to indicate omitted text that is neither repealed nor revised by this legislation.
When passed into law, the amendment will see government generating more revenue in taxes but it might have adverse effect on employment in the beverage industry such as Monrovia Club Breweries that produces Stout, Club Beer which are consumed highly in the country.