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The Effect of Ebola on Revenue Collection

February 6, 2015  By Ann Marie Dumbuya

Commissioner-General of NRA, Haja Kallah-Kamara
Commissioner-General of NRA, Haja Kallah-Kamara

The Ebola outbreak has affected the country in many ways with the hardest hit sectors being health and education. Ebola’s impact on the country’s economy has also been very severe due to reduced trade and economic activities, especially the dramatic downturn in the iron ore mining industry which reflected directly on domestic tax collection.

For instance, the original revenue target for the National Revenue Authority (NRA), the semi-autonomous body established by government for the collection of tax revenues in 2002, was Le2.499 trillion representing 12.2% of Gross Domestic Product (GDP). This target was revised downwards to Le2.228 trillion during the IMF/World Bank Spring Meeting held in Washington in April 2014. Sierra Leone’s delegation to this meeting is usually led by the Minister of Finance and Economic Development as it is during these meetings that the IMF/World Bank sets public financial management benchmarks for various arms of government, including the NRA. Most importantly, it is also at these meetings that the country’s economy is appraised and generally NRA’s targets are reviewed.

In December 2014, following the double shock in the rapid spread of the Ebola Virus Disease across the country and the closure of two major mining companies in the country—London Mining and Africa Minerals—a meeting was held in Paris by the IMF on the country’s macro-fiscal estimates. Having realized that the economic effects of Ebola was more pronounced than initially anticipated, drawing on NRA’s poor revenue collection at the peak of the crisis for the months of July and August, the IMF together with Government officials including the Ministry of Finance revised the NRA December revenue target to Le170 billion. Consequently, NRA’s revised annual target for 2014 as per the Paris Meeting/Discussions was Le2.141 trillion. The Authority was able to collect Le2.171 trillion thereby exceeding its revised target by Le30 billion.

Compared to total revenue collection for 2013 which was Le2.127 trillion as indicated in the graph above, one can see that NRA’s performance has been very impressive despite the Ebola crisis. This, according to NRA’s Director of Finance, is due to the effective revenue mobilisation drive undertaken by the Authority in 2014 in the form of severe penal actions on companies/businesses that have defaulted on their tax payments in a bid to compel them to comply with tax obligations. Mr Abdulai Conteh disclosed that the Finance Department of the Authority similarly implemented measures that ensured effective reconciliation with commercial banks to induce them to transfer all tax revenues collected on behalf of NRA to the Consolidated Revenue Fund (CRF).

The NRA has always faced a major challenge with commercial banks who most times delay in transferring funds to the CRF. Banks are known to withhold funds before the close of the year to boost their financial statements. NRA’s Director of Finance stated that in 2014, all tax revenues were transferred to the CRF before the close of December through effective monitoring and reconciliation.

NRA’s Commissioner-General, Madam Haja Kallah-Kamara, has always maintained that even though the Authority entered into a period of slow revenue growth due to the crisis and that such decline in revenue collection will no doubt put severe fiscal constraints on government, the NRA has been very active in providing finances for government to curb the outbreak.  Indeed, just imagine what would have happened if Government had lacked the resources to pay civil servants, particularly teachers who had to stay home due to the closure of schools. In fact, this is not the first time the NRA has been a reliable source of revenue to Government. A case in point in 2013 is when government’s expenditure was mainly funded from revenues collected by the NRA for the first 9 months of that year due to gaps in projected donor partners’ support to Sierra Leone.

NRA Revenue Collected against Target for the period 2003-2014 (Amount in Billion Leones)

Year Actual

Collection

Target Variance
2003 277.8
2004 340.1 314.9 25.2
2005 389.1 405.2 -16.1
2006 463.9 510.4 -46.4
2007 501.9 514.0 -12.1
2008 615.6 638.9 -23.2
2009 700.3 668.3 32.0
2010 955.7 930.5 25.2
2011 1,428.8 1,321.4 107.4
2012 1,874.8 1,853.8 21.0
2013 2,212.5 2,103.4 109.2
2014 2.171 2.141 29.9

As can be seen from the table above, NRA has accelerated tax collection in recent years and this is reflected in its revenue targets which have been increasing rapidly. Nevertheless, the Ebola outbreak may have placed the Authority’s plans of achieving consistent revenue growth at risk as they are being forced to lower expectations on revenue collection due to the economic downturn as indicated in the revenue target for 2015 which is Le2.077 billion. This revenue figure is slightly lower than the 2013 target which was Le2.103 trillion. Above all, it is the first time since 2011 when revenue collection hit the trillion mark that the Authority’s annual target is lower than the preceding year.

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