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Building fair and transparent tax system in Sierra Leone

By Ibrahim Jaffa Condeh

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KEY PARTNERS … ACC boss Joseph Kamara (left) needs support from the Justice Umu Tejan-Jalloh led Judiciary to make corruption history

Sierra Leone continues to experience the scourge of corruption and its attendant negative impact, both on the people and polity. Thus, there seems to be a symptomatic and causative weak governance architecture, as well as public perception and acceptance of corruption. Yet, the message is that ‘yes we can fight corruption’! One way of tackling the scourge is to build a fair, transparent and inclusive tax system.

It is no gainsaying that combating corruption comes with daunting challenges with the chief one being the lack of political will and the apparent refusal to let go, by those who directly or indirectly benefit from the practice. But the challenges are by no means insurmountable, though daunting, as they require managing public expectations about our leaders and putting in place strong and efficient bulwarks against graft in public sphere.

In view of the above, the Budget Advocacy Network (BAN) has examined the complex and anachronistic tax structure in Sierra Leone with a view to highlight key areas of concerns, reform and opportunities to light the darkened shadows that clouded tax regime in Sierra Leone.

Tax administration is often ranked as one of the weakest performing public sectors in terms of corruption. This sector is most critical to a state’s development and economic health as it radically affects its capacity to spend on public project and programmes, coupled with the problems of inefficiency and siphoning revenue meant for public expenditure into private wastage.

“The absence of a fair and equitable tax system breeds corruption and also dissuades honest tax payers by rendering them less competitive and making the black-market a more attractive alternative. Tax management is an attractive sector for corruption to take place as the opportunities and incentives to engage in illicit activity are abundant. Laws, and that the complexity of tax laws, the high discretionary powers of tax office evasion, also, the low cost of punishment are major factors creating opportunities for corruption in revenue administration,” said the Commissioner of the Anti-Corruption Commission, Joseph Fitzgerald Koroma.

He further said that Sierra Leone, as elsewhere,  should building a fair, transparent and inclusive tax system as evidences of corruption risks can be identified as tax evasion, complicity between tax officers and tax payers, individual responsibility of corruption by tax officers, wide latitude in exercise of discretionary power and convoluted tax laws.

Counter to a fair and transparent tax structure is that of tax evasion, which could occur as a result of underreporting turnover or over-reporting expenditures. Corruption in a nation’s revenue service and widespread repercussions as case studies in developing countries have shown that, as a result of tax evasion, losing half or more of state’s taxable income is not unusual.

The Global Corruption Barometer by Transparent International has consistently reported that 71% of people in Sierra Leone reported paying a bribe to a service provider, the fact of such large amount of a nation’s taxable revenue can remain unaccountable for, which has lasting effects since the quality of public services is damaged as a result of the postponing or discontinuation of many growth and reform projects.

For instance, public officials who solicit and accept bribes with the hope of diminishing tax obligations makes it difficult for a voluntary compliance with tax laws and regulations. Thus, a sincere taxpayer may decide that paying taxes would only further lead to inequities by transferring tax dues to a corrupt and inefficient tax administration. He or she would rather avoid being burdened by this competitive disadvantage and seek to either evade taxes or bribe an official to pay less.

Increase difficulties in relation to tax reform is another consequence of corruption in revenue administration. Major stakeholders such as politicians and bureaucrats strive to retain firm grip and influence on tax system and undermine the calls for legislative amendment.

Tax officials themselves have been seen to be the strongest opponents of reforming a corrupt revenue administration, as our country experienced in the introduction of the ASYCUDA depersonalization and simplification of the tax system threatened the officials more than any other group as they were the main benefactors from the systematically corrupt practices in the sector. This was a time when a consignee would require not less than 15 signatures to clear goods through customs and such number may have reduced but the bureaucracy still persists.

Sierra Leone is not the only example of this situation, as several observers argue that the preservation of highly regulated and complex revenue frameworks can frequently be attributed to the desire of tax officials or civil servants to uphold corruption.

Promoting a fair and transparent tax culture requires the management of public perception on corruption. Data from many national surveys show that public perception is often negative when corruption is rife, and revenue services are no exception to this trend. Also, where a public trust is weakened as a result of corruption, there is a greater incentive to either evade taxes or process fiscal obligations outside the formal sphere. Interestingly, where the general public considers the revenue service to be corrupt, there is the general likelihood that this would undermine the legitimacy of any government.

In a nutshell, the panacea to the aforementioned threats to tax revenue generation is building a fair and transparent tax regime, with effective and efficient bulwarks, by way of systems and processes, to fight corruption, both as a phenomenon and practice.