Sierra Leone News: More taxes to impact directly on consumer spending

The signing into law of the Finance Act 2016 has seen an increase in consumer spending as the tax laws directly impacts on consumers. The implementation so far increases the prices of essential goods and services that the people need. Imagine the impact of the new excise duty on imported alcohol, the 15 percent Goods and Services Tax added to electricity tariffs and the fuel subsidy that the International Monetary Fund (IMF) says should be removed to address the country’s unstable economy; all these directly affects the people as wages and earnings do not change with the inflationary trend and the volatility of the Leone to foreign currencies especially the Dollar.

After the enactment of the Finance Act in March this year, the first to implement was the Pay As You Earn (PAYE) tax. For those in the monthly income bracket of Le2 million and more, income tax was raised from 30 percent to 35 percent. This is now in full force as it is deducted before the worker collects his/her take home pay.
Withholding tax has also increased from 5 percent to 5.5 percent. This tax likewise influences prices of goods and services.

Few weeks ago the alcohol tax or excise duty on alcoholic product as provided in section 22 of the Act came into force. This triggered public outcry as the prices of imported alcoholic drinks increased almost by 50 percent. A can of Becks beer is now sold at Le12,000 (depending on the outlet) from Le8,000 few weeks ago. However, the prices of locally produced Brewery Star beer, Guinness Stout remain the same. This law is also meant to protect the Brewery as it uses locally produced Sorghum, provides jobs, and pays other taxes directly to the National Revenue Authority (NRA).

NRA is also pushing for NGOs to do their tax returns. This will help the authority determine how much was coming in the country as charity. Most if not all, according to Mohamed Bangura the Corporate Affairs manager of the revenue authority, have not been properly accounting for what they receive as aid on behalf of the people.

As part of the IMF conditionality, citing Ambassador Henry Macauley minister of energy, the 15 percent GST has been added to electricity tariffs. For instance, paying a Le100,000 electricity bill means Le15,000 which is 15 percent of that amount is deducted as GST tax.

The second quarter assessment done by the IMF as part of the extended credit facility recommended that fuel subsidy paid by Government should be removed. This was not implemented at the time as the government was concerned about the impact this will have on the ordinary people with the subsequent increase in transport fare. But as the alternatives to strengthen the economy are yet to recover, it is highly likely that fuel subsidy will soon be removed. 

The consumer will be paying the commercial pump price, which had been restricted to companies and other entities. This will combat smuggling of fuel from Sierra Leone to neighbouring Guinea and Liberia as it is frequently reported. The retail pump price of a litre of fuel is Le3,750 but in neighbouring Guinea, it cost around Le5,000.
All is not well with the economy though Government is struggling to stabilize the situation. Over Le100 billion is spent annually just on fuel subsidy to keep the pump price down against the forces of demand and supply. Likewise, over $160 million is needed for the importation of rice. The truth is, people should brace up to pay more taxes though their salaries will not see an increase at least for 2016.

Source: Awoko