From the Editor’s Keyboard

Revive the spirit and letter of taxation in Sierra Leone

27 December 2016 at 06:24 | 1577 views

By Abayomi Charles Roberts, PV General Editor, Edmonton, Canada.

While reflecting on this Christmas season I noted that Jesus Christ was born around the time a census was to be held in his home area.

Also, that particular head count was to enable the Roman government at the time to update its taxation drive. This was, apparently, to help the tax authorities keep pace with whatever significant changes may have occurred in the population that was then under Roman control.

This prompted me to consider how Sierra Leone often seeks loans and grants from other countries and international bodies. Some of these donors and lenders, like the International Monetary Fund (IMF), are typically forthright in demanding that our country meets certain pre-conditions. It seems they are just being courteous as they hint that we do a better job at managing our money as a nation.

I get the message and here is my contribution. It is all in the spirit of constructive discussion which I hope would lead to a follow-up that is both collective and sustained.

Taxation is like a Matchbox
One way we can start making Sierra Leone self-sufficient and less reliant on outside donations and debts, is to revive our taxation system. It is easy to say “I am proud Sierra Leonean” and quite a challenge for us to collectively think and act like proud patriots of Sierra Leone. My focus is on taxation because it is not only universal, but also prudent.

It may not work right away. Yet, given time and assertive implementation as a source of public service funding, taxation is probably the most viable option for Sierra Leone to revive its economy. I refer to taxation not just as law or policy, but as a national way of life.

In North America, taxation is no doubt an integral part of tradition. Taxation is a government’s way of doing something that many people may not like; just so that most people can do the many other things that they like to do as a community. It is no surprise that consistent taxation is one feature that sets Australia, Canada, the USA, and Western Europe apart from places like Sierra Leone.

People in ‘The West’ complain about taxes the same way they complain about the weather. Tax structures, like the weather patterns, hardly ever change just because of complaints. The best that can happen is to have tweaks or adjustments according to the preferences of the government of the day. Even then there is always a risk of the matchbox effect. If the government pushes one end of the container too hard, the box opens at the other end. Then there is a risk of spilling precious match sticks. The key is for the government to carefully strike a balance between tax measures that promote the national interest while attracting investments and tempting investors to continue in business.

Glimpses of Sierra Leone’s Taxation History
There was a time when every bicycle on the streets required a licence plate marked KTC (along with a serial number), for instance. That was in Kenema where I spent part of my childhood. The Kenema Town Council had a policeman nicknamed ‘Danger Boy’ and he was a menace to tax evaders. That was how entrenched the taxation culture was in the town. Ironically, there was a laissez-faire taxation policy in the Western Area - at least at the personal level of income and other earnings. People in the provinces would migrate to Freetown and its environs, just to avoid paying taxes in their actual places of residence.

Also, in the early days of the NPRC regime of Captain Valentine Strasser and his deputy Captain SAJ Musa, income tax was a major focus. The main Income Tax office (then at Electricity House building in Freetown), suddenly sprang to life in 1992 as the new military junta announced strict policies mainly targeted at business enterprises.

The message was clear: pay your business taxes or face the wrong side of the law. The hallways of that Income Tax office were bustling with business, and the elevator (lift) of Electricity House overflowing. That influx was in response to the NPRC directive, as business owners rushed in to make payments that were most probably overdue.

That NPRC initiative may not have lasted very long, or paid off well enough. I even doubt if the seemingly increased revenue actually trickled down to ordinary citizens and public services. Of course there was the war going on at the time; a good reason or easy excuse to spend more on armaments as priority. Yet, it struck me that it only takes clear communication and a firm government to boost national revenue from taxes.

Taxes as bitter pills that work with time
My proposal will require several key processes that should be carefully coordinated, monitored and evaluated for effectiveness. Let us make taxation a whole new Act of Parliament or an amendment to the existing one. That way, all the three branches of government get to play equal, tripartite roles.

First, there should be an extensive social awareness campaign that explains taxation as a national policy, a law that makes payment of taxes a civic duty. We need to make everyone appreciate that paying taxes is an obligation that is in the best interest of us all. Begin with the younger generation by teaching the basic concept in social studies (or civics) classes in schools. The theme should be collective responsibility to contribute to a public fund that will benefit everybody.

We do not need wordy slogans, but simple rhymes and illustrations to convey the message. For example, we should make everyone aware that it is tax money that is used to care for the aged, the mentally challenged, etc. That is, the whole society pays various taxes to help the affected families in taking care of their loved ones. Cite examples like the money going to pay salaries of teachers, healthcare workers and other public servants. Highlight public services that are not mainstream by explaining that taxes fund or subsidize psychiatric (mental) hospitals, homes for the old, low-cost housing, specialized healthcare centres for tuberculosis, leprosy, blindness, polio, etc.
We may even liken taxation to a bitter pill that cures malaria, for effect.

Reward compliance and punish evasion
Secondly, reinforce the National Identification (ID card) system. Let us make it an advantage to carry a national ID card which also contain a person’s social insurance number and vital personal details. These details could be used to determine which Sierra Leoneans qualify for specific benefits. It may not be easy at the start but we have to start somewhere at some time, and move on from there.

The third component of my proposal would be the task of regaining people’s confidence in the whole concept of taxation. That is, getting the people to believe that their tax money will always be spent properly, and not embezzled by public officials. Here, the carrot-and-stick approach may be applied. Public servants get rewarded for excellence in accounting for public funds put in their care; and poor performers disciplined accordingly.

There are three main sides to this aspect of my proposal. One is to show people credible and evidence that everyone is paying his or her fair share of taxes. Second is convince people that those who evade (or avoid paying) tax are duly punished. Third is to make people see and believe that public officials who misuse or steal tax money are duly and promptly punished. For example, promotion to higher office (or bonuses, overtime pay, or extra days of paid leave of absence) could be tied to a public official’s input in facilitating the levy and collection of taxes. On the flip side, people should clearly see that jail time and fines are being fairly and firmly enforced for both tax evasion and the misappropriation of tax money.

In this regard, we only have to look at affluent economies and see how strictly they enforce punishment for tax evasion. Prominent citizens of these countries have been seen to go to jail for tax evasion.

Link tax payment to partial refunds
The question then arises as to who exactly deserves which benefit; and how much of the said benefit is given out to each person. That would be the fourth side to my proposal. There should be fairness and a sense of the-strong-helping-the-weak in our taxation code. The latter is typical in Sierra Leonean culture and it should not be too difficult to explain to people.

In this regard, I suggest a proportional system or a progressive system; whereby businesses and higher income earners are required to pay more. I also suggest that citizens and other residents subsequently get tax breaks in the form of refunds - provided they pay their taxes in the first place. Here again, the possession of a valid National ID card could be used to qualify people as beneficiaries. Hopefully, details of ID cards would help the government to classify citizens, residents, and tourists/visitors into appropriate taxation brackets.

If people try to take advantage of the letter of the law; the spirit of the law should be applied firmly - as interpreted by tax officials or the courts.

Wooing worthy investors
All this might seem to scare foreign investment initially. However, I believe businesses which deserve to operate in Sierra Leone would see the sense in taxation.

Entrepreneurs and investors worthy of Sierra Leone’s hospitality should know that it is standard practice in successful economies. Our part would be to convince potential investors that tax implementation would be fair and consistent across the nation.

We need to make them have confidence that their tax money would support entrepreneurial initiatives for the long haul; and that we welcome and promote investments that are mutually beneficial to both the nation and the investor. For example, government could give tax breaks to companies on the basis of the number of jobs they create, or the location of their operations in designated areas of Sierra Leone. If there are investors who get scared off, it is their prerogative to protect their own interests. Hopefully, the well-meaning ones would return to Sierra Leone as policies begin to work. Others would probably be the kinds of investors we do not want to be doing business in Sierra Leone.

Taxes take care of everybody’s business
I guess some cynics would counter with the argument that there is hardly any money for Sierra Leoneans to meet their basic human needs, let alone to pay taxes. That may be true but mainly for personal earnings. So the focus could be on business enterprises, for a start.

A key to the whole strategy is to make everybody understand how a well-conceived taxation strategy works. While we each have personal and familial needs, there are some needs that are common to everybody and which can best be met by people as a community. That ‘community’ has another name called ‘government’. We could also explain that the various levels of government (municipal, district, national) are really levels of ways to counter the adage that: “everybody’s business is nobody’s business”.
Let us make taxation to mean: Everybody’s business is Government’s business”.

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