By zainab.joaque@awokonewspaper.sl
Freetown, SIERRA LEONE – A recent Tax Exemption Report by the Budget Advocacy Network (BAN) has highlighted both progress and persistent challenges in Sierra Leone’s electricity sector. While the sector’s contribution to domestic revenue has grown, extensive tax exemptions continue to erode potential gains, raising concerns over long-term fiscal sustainability.
The electricity subsector has seen a steady rise in its tax contributions, growing from just 0.15% of total domestic revenue in 2021 to 1.38% in 2023. Within the broader industry sector, electricity accounted for 8% of total revenue collections during this period. The report attributes this improvement primarily to increases in personal income tax and corporate income tax payments, which together make up over 80% of the sector’s total tax contributions. Meanwhile, GST collections, although historically low, have shown signs of growth.
Despite this progress, the report underscores a critical issue: tax compliance remains weak, and revenue losses due to exemptions are mounting. BAN’s analysis reveals that while the sector’s tax revenue is improving, it still falls far short of its potential due to the extensive incentives granted to energy producers and distributors.
Tax exemptions granted to the electricity subsector have significantly impacted government revenue. In 2023 alone, forgone revenue reached NLe 320 million, primarily driven by import duty and GST exemptions on equipment and materials. Corporate Income Tax (CIT) exemptions have also played a major role in widening the revenue gap. The report notes that between 2022 and 2023, GST exemptions on imports saw a marked increase, further straining the country’s tax base.
BAN’s findings indicate that, much like the manufacturing and construction industries, the electricity sector is forfeiting more revenue through exemptions than it contributes in tax payments. While these incentives are designed to support energy expansion, particularly in rural and underserved areas, they also pose a challenge for domestic revenue mobilization.
The government has justified these tax breaks as necessary to boost electricity access and improve infrastructure under its renewable energy initiatives. However, the growing gap between forgone revenue and actual tax contributions raises questions about the effectiveness of these incentives. BAN warns that unless carefully managed, these exemptions could undermine efforts to create a sustainable fiscal framework.
The report calls for urgent policy adjustments, including enhanced compliance monitoring and a reevaluation of exemption policies. Policymakers must strike a balance between promoting energy development and ensuring that the sector contributes fairly to national revenue. As Sierra Leone pushes for economic transformation through energy sector investments, aligning tax policies with long-term fiscal stability will be crucial. ZIJ/1/4/2025
 has highlighted both progress and persistent challenges in Sierra Leone’s electricity sector. While the sector’s contribution to domestic revenue has grown, extensive tax exemptions continue to erode potential gains, raising concerns over long-term fiscal sustainability.){kind=link}