A new report out today says Sierra Leone lost an annual average of US$ 200 million from 2010 - 2012 to mostly iron ore miners African Minerals and London Mining Company.
If tax expenditure continues in its present trend, it is likely that Sierra Leone will lose more than US$240m a year from tax incentives in the coming years, the report adds.
Titled "Losing Out", and carried out by five organisations, the report uses figures obtained from the National Revenue Authority and says tax concessions given in the form of custom and duty waivers, corporate income tax and domestic tax waivers had resulted "in massive revenue losses for Sierra Leone" with domestic tax incentives carrying the heaviest losses.
The report is based on a research done by Budget Advocacy Network (BAN), the National Advocacy Coalition on Extractives (NACE), Tax Justice Network Africa (TJNA) , ActionAid and IBIS.
It says Goods and Services Tax exemption losses alone was over Le 9 billion (over US$200) in 2012 - amounting to about eight per cent of GDP.
In 2011, the losses amounted to nearly 14% of GDP.
"There has been a massive rise in revenue losses since 2009 – the result of tax incentives granted to the mining sector in relation to the major investments that took place during 2010-2012" says a press release from the research organisations.
The report says government will lose more revenues by continuing to provide "significant corporate income tax incentives to mining companies" which are estimated at US$ 131 million from 2014-16.
"Nearly all of these losses are the result of the agreements with African Minerals and London Mining" it says.
In 2011, Sierra Leone spent more on tax giveaways than on its development priorities, with mining firms the biggest beneficiaries, says the 28-page report.
The following year, the tax exemptions amounted to more than eight times Sierra Leone’s health budget and seven times its education budget.
Coordinator at Budget Advocacy Network, Abu Bakarr Kamara, questions both the size of the exemptions and the way contracts have been awarded. He says "foreign companies have been encouraged to take over huge tracts of land for agribusiness" something he says "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."
He told Politico that mining company suppliers had been exempted from paying Goods and Services Tax, which he questioned, adding that worse still there was no way of knowing the goods these suppliers bring in for the companies and which they sell to the public.
Coordinator at NACE, Cecilia Mattia says that "Without public scrutiny, it is impossible for elected parliamentarians, the media and civil society organisations to determine whether such deals are really in the country’s interests."
In the agribusiness sector, the government now gives all investors a 10-year holiday on corporate income tax payments and reductions on customs duties, according the findings in the report, but says however that Swiss company, Addax Bioenergy which operates in Bombali district, received a 13-year exemption from income tax.
The report calls for a review of all mining contracts and tax incentives to reduce the tax giveaways.
It also calls for the strengthening, enactment and speedy implementation of the Revenue Management Bill that would require the government to reveal all tax exemptions.
(C) Politico 15/04/14
