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Gov’t urged to review existing tax incentives

By Ibrahim Tarawallie  

The Budget Advocacy Network, BAN, National Advocacy Coalition on Extractives, NACE, and Tax Justice Network Africa, TJNA, have in a report titled ‘Losing Out’ called on the government to review all existing tax incentives granted to mining companies, with the purpose of reducing them and ensure that Parliament is able to play an oversight role in the process.

The report, which was launched on 15 April 2014, estimated that government lost revenues from customs duty and Goods and Services Tax exemptions alone worth Le.966.6bn (US$224m) in 2012, amounting to an enormous 8.3% of GDP, base on figures obtained from the National Revenue Authority, NRA, and also indicated that in 2011, losses were even higher – 13.7 per cent of GDP with the annual average loss over the three years – 2010-2012 – amounting to Le.840.1bn (US$199m).

During the launch, BAN Coordinator, Abu Bakarr Kamara, questioned both the size of the exemptions and the way in which contracts have been awarded.

He noted that foreign companies have been encouraged to take over huge tracts of land for agribusiness and that has resulted in too many tax incentives being granted to companies behind closed doors, at the discretion of a very small number of ministers and officials, with limited involvement of Parliament, let alone the public.

However, to ensure transparency and accountability in the granting of tax incentives, the report recommended that the government enact the Revenue Management Bill into law and ensure that the bill commits them to produce an annual public statement on tax expenditure, the beneficiaries and revenue losses.

“The government should ensure that the Revenue Management Bill includes an additional clause that mandates the Ministry of Finance and the National Revenue Authority to provide parliament with a cost benefit analysis of all tax incentives granted and also abolish discretionary tax incentives (i.e., those given to individual companies or organizations),” the report recommended.

According to the report, the government should as a matter of policy ensure that tax incentives granted to companies are in accordance with national legislation, and work with other governments in the Economic Community Of West African States, ECOWAS, to ensure that there is no regional ‘race to the bottom’ in lowering tax rates and increasing tax incentives to corporations.

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