By Hassan Gbassay Koroma
Stakeholders at the launching ceremony
Budget Advocacy Network (BAN) and Christian Aid last Wednesday officially launched a comprehensive report addressing the alarming impact of tax exemptions on Sierra Leone’s economy. The report provides a detailed analysis of the revenue losses incurred due to various tax exemptions granted by the government.
According to the findings presented in the report, Sierra Leone has witnessed significant financial improvement in the industrial sector but also faces setbacks as a result of tax exemptions, which predominantly benefit foreign investors and large corporations ,with potential revenue loses of billions of Leones, funds that could have been allocated towards crucial sectors such as education, healthcare, and infrastructure development.
The report emphasizes that while attracting foreign investment is critical for economic growth, the current tax exemption policies lack transparency and accountability. The report highlights challenges and made recommendations for tax exceptions incentives that are awarded to companies and industries in the country.
Speaking at the event that was held at the Ministry of Finance Conference Hall in Freetown, Deputy Minister of Finance, Bockarie Kalokoh, described the launching as a milestone.
He expressed how he sometimes feels sad when approving tax exceptions, because exempted taxes should be used to foster development.
He noted, however, that tax exceptions are in line with the laws, particularly mining laws and manufacturing ratifications.
He said at the Ministry of Finance they have developed the tax and duty waiver Act and that they would start implementing it in January 2026.
He called on civil society organisations and government departments and agencies to ensure that tax exceptions are used for development and not for evasion.
He charged that some people have been conspiring to benefit from tax exemptions.
Commissioner General, National Revenue Authority (NRA),Jeneba Bangura, highlighted that the report was very important and it contains issues that are at the heart and core of fiscal policy and economic sustainability in Sierra Leone.
She said it was also important to clarify the responsibility of formulating tax policy, including the issue of tax waiver.
She said at the NRA, they implement and administer fiscal policies in accordance with the law, noting that tax exemptions play a critical role in shaping the country’s investment by reducing operational cost which attracts foreign direct investment and encourages industrial growth.
She said the report provides a critical analysis of how tax exemptions are contributing to the expansion of the industrial sector and highlights the fiscal challenges tax exemptions pose.
She said that tax exemptions play a significant role in the country’s economic development strategy by attracting investment, stimulating production and supporting industrial expansion.
She highlighted that, over the years they have witnessed a remarkable growth in the industrial sector with the sector GDP contribution increasing from NLe8.9 billion in 2018 to NLe35.6 billion in 2023.
She said the progress came at substantial fiscal cost and that the report highlights that tax exemptions in the industrial sector has increased from NLe177 million in 2018 to NLe3.5 billion in 2023, with the mining sector receiving a lion share.
She noted that while the industrial GDP has increased four times, tax exemptions in the other hand has increased nearly 20 times.
She also noted that, the findings of the report underscored key challenges in the country’s tax incentive framework, including the lack of transparency, policy insufficient and weak monitoring mechanisms that undermine the objective of the tax incentive.
Presenting details of the report, Programs and Policy Officer at BAN, Abu Bakarr Tarawally, underscored that tax exemptions play a pivotal role in shaping the investment landscape of emerging economies by offering financial relief that can attract foreign direct investment, drive industrial development, and spur economic growth.
He presented that the rebased GDP shows that the industry sector including manufacturing, mining, construction, and energy subsectors, is the fastest growing sector of the economy.
He cited the need to investigate the level of tax exemptions also going to the sector.
He further presented that as tax exemptions remain a double-edged sword-promoting investment on one hand and potentially reducing public revenue on the other-it was essential to strike a balance between the competing interests.
He presented that the objective of the study was to identify the trade-offs between incentivizing growth and maintaining fiscal balance in tax policy design, to outline the various tax exemptions and incentives legislated in the industry sector and to quantify revenue loss due to tax exemptions in the industrial sector in a bid to guide the government in adjusting policies to maximize net benefits.
He also presented that some of the challenges with the incentive framework includes lack of transparency, policy inefficiencies and sectoral imbalances and weak monitoring and others.
He said the current reforms aim to make tax incentives more transparent, better targeted, and tied to performance metrics, thereby ensuring they deliver tangible economic benefits.
He said one of the most notable reforms is the Tax and Duty Exemption Act of 2023, which was passed as part of the movement’s efforts to streamline the exemption process and enhances revenue collection.
He said the Tax and Duty Exemption Act of 2023 introduced a more transparent and structured approach to the granting of tax exemptions and the Act seeks to reduce discretionary power and to ensure that exemptions are aligned with national development priorities.
He said the industrial sector GDP grew from NLe8.9 billion in 2018 to NLe35.6 billion in 2023, and that it was driven by mining and quarrying .
He said there was also a shift from agriculture to industry and services, but maintaining sectoral balance is essential to mitigate risks from external shocks.
He said agriculture’s share of GDP declined from 34.99% in 2018 to 29.07% in 2023, underscoring the need for balanced growth.
Presenting on the key findings of the report, Nation Coordinator of BAN Abubakarr Kamara, highlighted that mining accounted for 82% of industrial sector revenue between 2021 and 2023, although disruptions from policy changes and COVID-19 affected performance.
He said manufacturing and construction show growth potential but contributes minimally to domestic revenue due to generous tax exemptions.
He said tax exemptions from the industry sector increased from NLel77 million in 2018 to NLeS.5 billion in 2023, with mining receiving the largest share, leading to fiscal inefficiencies
He said they recommended for possible policy reforms including establishment of a clear legal framework and centralized oversight, codification of incentives in primary legislation, establishment of a centralized incentive management body, joint capacity building, alignment with national development goals, conduct periodic impact assessments, periodic reviews, stakeholder feedback, adopt a Performance-Based Incentive Structure, conditional incentives, monitoring mechanisms, introduction of a time-bound exemption regime, incorporate transparency and accountability measures, public reporting and independent audits.
