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Tax incentives to deprive Sierra Leone much needed resources

Friday, September 4, 2015 - 17:52

At a time when Sierra Leone is recovering from the devastating effects of the deadly Ebola Virus, every revenue source matters to revamp the country’s economy and help put the country back on track.  Tax incentives given to foreign investors to attract investments, will therefore further deprive the country of much needed resources which will further affect all sectors of the economy.

West African governments, including Sierra Leone provide tax incentives, including tax relief and breaks, in the belief that they attract foreign investment which will in turn create jobs. Tax incentives have attracted corporations to acquire large tracts of land which are used for investment purposes, deny local people jobs and sustainable smallholder food production.    

 Sierra Leone has been struggling to meet the Dakar Declaration (2000) commitments on annual education budgets allocations of 20%, and it is feared the country will not be able to meet this commitment, if the government continues the current trend of giving arbitrary tax incentives. Failure to meet these requirements has translated into poor quality education. If the investors pay more tax, it can help the country to get more trained and qualified teachers, inspectors and professors for schools and universities for quality learning thereby replacing makeshift buildings,” a typical scenario for most rural areas in Sierra Leone.  Tax breaks will see the country continuing to fail to meet its obligations to provide quality public services such as road maintenance, electricity and healthcare.  

On 24 August 2015, ActionAid Sierra Leone, joined other ActionAid Country Programmes in the West Africa Economic Community of West African States (ECOWAS) in launching a report entitled “ The West African Giveaway: Use and Abuse of Corporate Tax Incentives in ECOWAS.” The report is a regional ActionAid and Tax Justice Network initiative meant to bring to the table evidence based negative impacts of tax incentives in the region. The report revealed that the 15 countries in the West African bloc are losing an estimated US$9.6 billion of revenue by granting tax incentives to foreign companies.

The tax incentives given to corporate entities are indeed “giveaways” because with or without incentives investors can still invest in our countries considering the value and rare nature of our gold, diamond, bauxites, chromite, iron ore and other minerals.  These giveaways could have been used for social development, which is one of the pathways to poverty reduction.

In Sierra Leone “club” companies have come, exploited and allowed to operate for 10 years without paying the stipulated corporate tax. Just at the peak of investment production, they change name, brand and colour and leave us to figure out what could be done next. What this means is that, 10 years of resources were given away which could have improved our health, education, infrastructure and saving the country from the Ebola losses.

The tax incentives given to corporate entities with no corresponding benefits to West African nations are an injustice to the poor as such resources would have bridged Sierra Leone’s 2015 budget deficit of Le1.3 trillion and enhance capacities for our cities to be safe for our women and girls.

Executive Director for ActionAid Sierra Leone, Mohamed Sillah said during a press conference to launch the report: “The report is an evidence of continued call by Civil Society in the ECOWAS countries on their regional representatives and corporate entities to do more in harnessing fair taxing for social development in poor nations. We are not saying governments should not provide the tax incentives. What we are saying is that the incentives should be rational.”

The report therefore calls for better mechanisms to provide oversight of corporate tax as well as forms of tax harmonization. Download the full report here online

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