PHOTO: Atty. Kpargoi
Report on a study done on comprehensive tax reform covering four counties in Liberia has been released in Monrovia by the Center for Media Studies and Peacebuilding (CEMESP).
The report was released over the weekend by the Consultant who led the research, Attorney Lamii Kpargoi at the I-Campus on Carey Street.
He said if developed countries must be developed through their taxes, people must feel the pain by enforcing tax payment and later enjoy the benefits of it, adding, “feel the pain and later enjoy”.
In his comprehensive report, he said taxation has been a key component in ensuring that states become accountable and effective, adding that tax based system is what makes democracy in developed countries to thrive.
Consultant Kpargoi further said in his report that though very necessary, tax reforms are usually hot political issues and must be managed accordingly. Reforms will generally mean that some people will feel that they are losers in the process which would lead to a backlash.
The situation is even more difficult, the report says, if the population cannot feel tangible results from taxes that they are already paying. This situation is emblematic of tax reforms act the world over.
The report points out that successful tax reforms need a clear strategy that should include the following elements: it must stress certainty for businesses, consider the future, be simple to understand and use and establish principles.
Tax reform in poorer countries provide much opportunities for an increase in their revenue base while, there may be resistance to such reforms, visible improvements in service delivery may help reduce the resistance and create the opportunity for the population to buy into the venture.
According to Atty. Kpargoi, in developed countries the rulers and tax payers are constantly engaged in bargaining that give government incentives to work towards economic prosperity and enact public policies that meet the demands of their people.
Atty. Kpargoi explained that the success of a tax based system is largely dependent on political will and how effective the political Leadership of the government can ensure that the system works.
However, the need to raise revenue to fund public services is usually not as straight forward, since people usually resists increases in taxation, especially where they do not see improvements in their lives because of tax imposition.
Citing Ghana as a case study, the report said that the government’s attempt to introduce value added tax in 1995 met with public backlash adding that similar problems have been seen in Liberia as it relates property taxes.
In the Liberia case, the noted that the bad legacy of the government’s hut tax regime continues to haunt the collection of property taxes especially in the hinterland and said situation even though it has been more than forty years since the hut tax was abolished by the military regime. The hut tax was taxation that was imposed on people in the country side who owned huts. It was resented since most of those living in the hinterlands received no benefits from the government.
How Rwanda has been focus on Africa in terms of tax reform?
Nearly 30 years later, Rwanda is seen as a success story in many aspects of human development around the world. The country has put in place tax reforms that reforms that have helped it to make these strides, the CEMESP report said.
The growth of the revenue base increases if a can improve its tax collection and expand its tax base. This expansion may also mean a corresponding increase in the amount of money available for the provision of social services like education and healthcare. Whether increased allocations are made to these is a different issue. Few countries demonstrate the commitment of linking their services delivery to their tax policy. In the case of Rwanda, the government has shown its commitment to improve both its tax and health system.
The case of Ghana
The country has instituted tax reforms aimed at strengthening its economy. In 2018, Ghana instituted reforms of its VAT system with the view to increasing revenue for it’s health and education funds. These funds were receiving 2.5% of revenue accrued from the Country’s 15%VAT. Ghana’s first attempt at introducing VAT in 1995 did not go well because of public backlash and at the same time, the plan was accordingly shelved.
Sierra Leone
Like Sierra Leone has had problems with administering it’s tax system. The current Government which came into office in 2018 launched a tax reform program as part of it’s response to declining economy. It attributed this decline to the slow economic growth in both iron ore and non iron ore.
Even at the sub-national level, there are reforms of the tax system taking place. As a means of raising its revenue base, the Freetown city council decided in 2019 to reevaluate property taxes in the city. The council did this by carrying out a thorough aerial mapping of the entire city and then also carrying out in person checks to verify it’s data.
As for Liberia, it has been ranked 76th in the PricewaterhouseCoopers ease of paying taxes indicators for the 2019. The Country’s ranking was probably helped by the innovation around e-filings and Liberia was one of the 17 countries described by the WHO as being off track on achieving the Abuja declaration of allocating 15% of annual government budgets towards health.
Since 2015, Liberia spending in healthcare has continued to fall. In 2015 the country spent US#73 on health represented a 12.55% increase on the previous year’s spending. Since 2015, the country has continued to see decline in its health expenditure with just US$45 being spent in 2018 the report added.
The drop in health spending up to 2018, reversal of the Country’s march towards meeting it’s Abuja declaration targets of spending 15% of its annual budget on health while, the Country’s education expenditure on education was projected to be 2.6% of GDP in 2018.
In conclusion, tax reform is seen as necessary for raising revenue for the provision of basic social services like education and healthcare. Story by Garmah Never Lomo