Periodic Monitoring and Accountability: Key to Effective Tax Exemptions

By zainab.joaque@awokonewspaper.sl

Freetown, SIERRA LEONE – Tax exemptions have long been a contentious issue in Sierra Leone’s economic landscape. While designed to attract investment and stimulate growth, questions remain about who truly benefits from these policies. These concerns took center stage at the launch of the Budget Advocacy Network (BAN) report titled “Tax Exemptions in the Industry Sector: Who Wins, Who Loses?” The event, held at the Ministry of Finance Conference Hall, featured a compelling discussion between moderator Aminata Kelly-Lamin and Abu Bakarr Conteh, Deputy Director of Revenue and Tax Division at the Ministry of Finance.

Setting the tone for the discussion, Kelly-Lamin raised the issue of tax harmonization across ECOWAS countries, emphasizing the need for a level playing field. “We have been advocating for a harmonized tax system across ECOWAS and the African Union to prevent harmful tax competition between countries,” she stated.

She highlighted Liberia as an example, noting how discrepancies in corporate tax rates—ranging from as low as 10% in some countries to as high as 35% in others—create an unfair advantage for businesses operating in lower-tax environments. “Liberia has struggled to maintain its corporate income tax at 25% while trying to attract investors. Meanwhile, companies exploit loopholes, extracting resources without making adequate contributions to national revenue.”

Kelly-Lamin stressed the urgency of aligning national tax policies with regional frameworks to mitigate these revenue losses. “If we do not coordinate at the regional level, we will continue to lose significant revenue due to inconsistent tax incentives.”

In response, Conteh provided insights into efforts by ECOWAS to standardize tax regimes. “Since November 2017, we have been implementing the Common External Tariff (CET), ensuring uniform import duties across ECOWAS member states. For instance, if a product attracts a 5% tariff in Sierra Leone, the same applies across the region.”

However, he acknowledged that incentive disparities remain a major issue. “One of the biggest challenges is the way tax incentives are structured across different sectors. A manufacturing company may receive a completely different incentive package compared to another in the same industry. This inconsistency can distort the market and negatively impact revenue mobilization.”

Conteh pointed to the mining sector as a prime example of such inconsistencies. “Some mining companies negotiate bilateral agreements that allow them to pay tax rates as low as 5%, while others pay 15%. This lack of standardization weakens our revenue base.”

Beyond policy harmonization, Conteh stressed the importance of monitoring the beneficiaries of tax exemptions. “Previously, we conducted periodic joint monitoring visits with the National Revenue Authority (NRA) to ensure that duty waivers were used for their intended purpose. If violations were found, beneficiaries were required to pay the waived duties along with penalties. Unfortunately, logistical constraints have halted these visits, but they should be revived to ensure compliance.”

He further proposed reforms to improve tax oversight. “We need to treat duty waivers as managed subventions—setting annual ceilings on how much an investor can benefit and requiring detailed importation plans for monitoring. Any exemption beyond these limits should be taxed accordingly.”

Conteh also advocated for restricting multiple incentives from overlapping tax regimes. “If an investor negotiates a five-year tax exemption under a bilateral agreement, they should not simultaneously benefit from incentives provided in the Finance Act once that period ends.”

As the discussion concluded, Kelly-Lamin reinforced the critical role of accountability in tax policy. “The findings of this report support everything we have discussed here. Periodic assessments and strict monitoring mechanisms are crucial. We cannot continue allowing unchecked tax incentives that result in excessive revenue losses.”

She called on policymakers and regulatory bodies to enforce existing tax laws effectively. “It’s not enough to have policies on paper. Implementation and follow-through are what matter. Those entrusted with oversight responsibilities must be held accountable for ensuring compliance.”

The discussion ended with a strong message: tax exemptions, when well-managed, can be a powerful tool for economic growth. However, without proper monitoring, harmonization, and enforcement, they risk becoming a loophole that drains national revenue. For Sierra Leone to fully benefit from its tax policies, transparency and accountability must remain at the core of all fiscal decisions. ZIJ/1/4/2025