The New Goods and Services Tax Causing Chaos in Sierra Leone 

Abdul R Thomas
Editor - The Sierra Leone Telegraph

11 January 2010

The introduction of the new 15% Goods and Services Tax (GST) has brought chaos to the shops and markets of Freetown, as rogue traders and shop keepers take advantage of a poorly implemented ‘stealth tax’ to raise prices far beyond the reach of the average Sierra Leonean who earns less than 50 US Cents a day.

The government of Sierra Leone desperately needs every single cent it can raise in taxation to afford the Le1.5 Trillion it is planning to spend on health, education, water, electricity, roads, police, the military and other activities. The international donors are committed to spending $300 Million in support of President Koroma’s spending plans.

But with the current stand off between the government and the business community, each blaming the other for the chaos and price hike inflicted on shoppers, government’s taxation revenue target for 2010 is seriously at risk.  

The GST is aimed at replacing a ‘basket’ of seven different consumer taxes, which themselves had created a lot of confusion for shoppers and very little returns for government, with respect to taxation revenues.

There are those in Sierra Leone who are not convinced that by simplifying and consolidating the consumer tax structure, government would increase its revenue base. So what is the problem with the GST?

It is the responsibility of every government across the world, to levy and raise taxes in order to pay for the goods and services that government has to provide for its citizens, which the private sector cannot provide. Equally, it is the duty of every citizen to pay those taxes as and when they are levied. This simple concept is what keeps nation states viable and sustainable.  But such taxes must be seen to be fair, proportional, progressive, and timely.

Those in Sierra Leone that argue against the imposition of the GST finds it difficult to understand the rationale behind the arbitrary 15% being levied by the government, when the average consumer tax paid before GST was 5%. They therefore question the fairness of the GST, for the vast majority of people who just cannot afford to pay the 15% hike in prices of goods and services.

There are also those questioning the proportionality of the 15% being levied on a wide range of goods and services, at a time when most Sierra Leoneans have received zero salary pay increases. Whilst some civil servants have been promised pay increases of up to 20% in 2010, not many are happy with the 15% GST either, as the retail price index is predicted to reach well over 16% by the end of 2010.  

Critics also argue that the introduction of the GST ought to have been progressive. The rationale for a ‘phased-in’ approach is that it would help to cushion some of the pain caused by the expected increase in prices, as well as providing less of a cover for unscrupulous traders, determined to exploit customers by inflating their prices.

What is most perplexing for those trying to understand government’s rationale for introducing the GST at such difficult time of the global economic cycle, is that Sierra Leone’s economic growth has been largely driven by donor funds and government borrowing, rather than industrial productivity. Unemployment is over 70%, while GDP Per Capita is less than 50 US Cents a day.

Most consumer items sold in Sierra Leone are imported. With the current depreciation of the Leone against the US Dollar, prices of those goods are set to continue to rise. This, critics believe, makes the introduction of the GST an untimely proposition, which will add to the suffering of the already poor masses.

A review of recent news reports from Sierra Leone shows that traders and shop keepers are themselves ill-prepared for the GST. Whilst most do not have ‘cash registers’ to record sales transactions and dispense receipts, others are claiming that they do not understand how the GST works.

The President of the Sierra Leone Chamber of Trade and Commerce, and the Chairman of the Sierra Leone Importers Association are now calling for the government to halt the implementation of the GST. It is reported that both sides have met and vowed to work together to increase awareness of the GST.

If the government was hoping to bring some sanity to its Consumer Taxation Policy, it seems the introduction of the GST has achieved the opposite. A danger for the government’s monetary policy is the adverse impact the GST is likely to have on inflation. Hopefully this has been factored into the government’s projections for 2010.

In our Review of Sierra Leone’s Economic Performance - 2009, we asked the question: ‘Will the new Goods and Services Tax to be introduced in January 2010 provide a lifeline for the government ahead of 2012, or will it become the government’s political albatross, as consumers turn their backs on the shops and head for the black market?

It would appear that the GST is fast becoming a political albatross for President Koroma’s government. Whether he would find the courage to press ahead with the newly introduced tax, along with the chaos it brings remains to be seen in the coming days.

But with recent corruption scandals at the government’s Agency responsible for collecting the Goods and Services Tax - The National Revenue Authority, consumers would be forgiven for questioning the faith and trust they have in the system that is designed to take money from them to pay for education, health, water, electricity, and roads.

The newly appointed Acting Commissioner General of the National Revenue Authority - Ms. Kallah Kamara will be hoping to bring sanity, order and discipline to this all important government department. But will she inspire the confidence of tax payers and the business community to meet their taxation obligations?

President Koroma’s ambition to increase the government’s tax revenue base is now pinned on Ms. Kallah Kamara’s ability and experience to review the implementation of the GST, establish robust financial management systems, and pursue good governance, probity and transparency at the National Revenue Authority. 

Will the Acting Commissioner General rise up to the occasion? 

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