Sierra Leone government failing to achieve its tax collecting obligations as poverty grows

Sierra Leone Telegraph: 2 March 2017

Much is expected of Sierra Leone’s National Revenue Authority (NRA), with regards the Koroma government’s objective of closing the massive gap between government spending and the revenue it generates to pay for public service delivery.

The blatant and unlawful reluctance of big companies to pay taxes, and the acquiescence of corrupt government ministers and public officials in aiding and abetting company directors to defraud the state, is largely responsible for the abject poverty seen in Sierra Leone today.

Less than two Trillion Leones of the Seven Trillion needed by the Koroma government to meet its spending commitments is generated through taxation, as questions are raised about the accuracy of the amount of taxation collected and declared every year by the NRA.

The Koroma government has been accused of perfecting the art of cooking the books, in order to mask the huge discrepancy that exists between taxation collected and revenue deposited into the consolidated accounts.

As a result of the massive budget deficit, which critics say is of the government’s own making, almost 80% of its spending are being met through foreign aid and borrowing.

The total size of the government’s borrowing requirement has risen from almost zero in 2006 to a staggering $3 billion today. Yet poverty, mass unemployment and declining public services have become a feature of the Koroma government’s legacy, after ten years in power.

Corruption, the misappropriation of public funds by those in power, poor prioritisation and allocation of government spending, lack of accountability and the abuse of power, have crippled the country’s economy and social fabric.

With presidential and general elections peering over the horizon, the ruling APC is continuing to ramp up the country’s debt, in its efforts to raise funds for its election campaign, rather than improve public service delivery.

This also raises question about the collection of and accountability for the millions of dollars that are being collected from big companies, many of which have become financial patrons of the ruling APC party.

Last week it was reported that the largest iron ore mining company in the country – African Minerals Ltd., has paid a miserly £6.1 million, since the introduction of the government’s 2010 legislation aimed at curbing non-payment of taxes by foreign companies.

The minister of mines-  Minkailu Mansaray, who is also aspiring to become the next president of Sierra Leone, reported that the company has now paid a total of nearly £6.1 million as expatriate tax which before now, was being diverted to the  countries of origin of its expatriate workers.

It is also reported that African Minerals Ltd is the first foreign company to comply with the nation’s newly revised tax laws, and possibly the only company that has paid a dime.

The Mineral Resources Act of 2010 requires all mining companies to pay tax on their expatriate employees to the government of Sierra Leone.

Mineral Resources Minister Minkailu Mansaray also said that the country has developed a new direction in an effort to ensure that the country receives maximum benefit from the extraction of the country’s mineral resources. But where is the evidence?

After ten years in power, little effort has been expended by the APC government in maximising the collection of taxes from big companies.

The country’s economy is in shambles. Government is struggling to pay the salaries of public sector workers.

The ruling APC party’s Agenda for Prosperity has become an Agenda for Austerity, as the people of Sierra Leone struggle to make ends meet.

President Koroma’s reliance on China to help bail out the economy has not materialised. The Chinese are now having cold feet.

The suspected suspension of China’s investment proposals in Sierra Leone may be due to three reasons:

Firstly and perhaps most importantly, is the fact that elections are due in Sierra Leone in just over twelve months. The political uncertainty of the ruling APC winning the 2018 elections has cast serious doubts over the Chinese decision to increase their investment portfolio in Sierra Leone.

President Koroma was in Beijing, China last December to discuss China’s investment promises in Sierra Leone.

He was in China to also introduce some of his party’s top potential presidential candidates for the 2018 elections to senior officials of the Chinese Communist Party, in what was dubbed ‘a beauty parade’.

It is understood that the Chinese were less than impressed with the presidential candidates on offer.

With over ten ruling APC candidates now competing to succeed president Koroma as president in 2018, the Chinese are believed to be less than comfortable with almost all of the proposed candidates as China’s partner for development in Sierra Leone.

China is wary about its investment plans for Sierra Leone and the high risk now presented by the uncertainty of the 2018 elections result.

Secondly, it appears president Koroma may have shot himself in the foot just few weeks after his visit to China, when he appeared to have switched allegiance by visiting Israel in search of investment partners.

The much promised Chinese expansion of investment across several industrial sectors in Sierra Leone – fisheries, mining, energy, tourism and agriculture have not materialised, hence president Koroma’s visit to Israel in January. But the response of the Israeli government and potential investors was less than favourable.

Cash urgently needed by president Koroma to help pay for the running of public services has dried up.  There is serious austerity in the country and poverty gap is widening.

A third possible reason for China’s seeming suspension of investment promises in Sierra Leone could be due to president Koroma’s failure to convince the people of Sierra Leone, the World Bank and the IMF about the need for the construction of a second international airport at a cost of over $400 million.

Sierra Leone cannot feed itself. The country’s health service has fallen apart after decades of under-investment. Standards of education are falling, with fewer children gaining access to quality education.

Less than 40% of the country’s population have access to clean drinking water. Access to electricity is even more alarming, with only 10% of households in the country with electricity – though intermittently.

Had the proposal gone ahead, the 400 million dollars international airport construction work would have been funded through a loan to the Sierra Leone government, provided by China.

But the overwhelming response of the people of Sierra Leone is that the country does not need a new airport, certainly not with the current massive poverty in the country.

The fact is that China does not need a new airport in Sierra Leone. What it wants is an expanded waterway across the river that flows past the existing airport to enable larger vessels to ship iron ore to China.

But critics say that any expansion of the river will include land adjacent to the existing Lungi airport, which will certainly lead to the closure of Lungi airport itself.

It has therefore been impossible for president Koroma’s ruling APC to honour its promise to the Chinese for the construction of the new international airport, much to the disappointment of China.

China’s friendship with Sierra Leone dates back to the 1960s – especially with the ruling APC party. But with elections in the country looming, and the uncertainty as to who will take over from Koroma in 2018, there is little hope of any increase in China’s investment in Sierra Leone until after 2018.

Meanwhile tax receipts continue to woefully lag behind government’s spending, as government borrowing rises.