By Lawrence Williams
A Tax Perception Survey conducted
by the Public Financial Management (PFM) Consortium reveals that the tax system
in Sierra Leone is very complex for most business people.
Many of the businesses interviewed do not know how to file their tax returns as well as low knowledge of tax-related laws and policies.
The survey was conducted to know the views of taxpayers regarding the taxes they pay, their knowledge of the tax system and their level of confidence in those handling tax revenue.
The survey targeted 2,755 businesses across all districts and 80 percent of them were already registered with the National Revenue Authority, and about 63 percent have either paid registrations fees, Goods and Services Tax (GST), amongst others.
For large scale businesses whose annual turnover is above five billion leones, only 30.8 percent know how to file their tax returns whilst 69.2 percent don’t know how to do it. These facts are almost similar for medium businesses whose annual turnover is above 350 million leones but below 5.5bn. leones. The survey finds out that there is even a lower understanding of tax processes and procedures among micro and small businesses.
The statistics presented in the report show that percentages of businesses with low knowledge of the tax administrative reforms implemented by the NRA more than double the percentages of businesses with knowledge of those reforms. Additionally, more businesses perceived the tax system as too complex to handle.
The attitude and practice of business owners toward taxation are also captured in the report. The facts indicate that the tax compliance rate is at 62.9 percent of businesses interviewed and this is largely attributed to the fact that taxation is both a legal obligation and civic responsibility. However, some businesses still found a way to evade tax. These businesses cited high rates and multiple charges as reasons for tax evasion. Nonetheless, 79 percent of the respondents said they are willing to pay tax – and pay more of it – when they start seeing tangible outcomes from what government and local authorities do with the revenue collected. These respondents have a concern for accountability and transparency of tax revenue.
Finally, the survey looked at the conduct of tax collectors from both the NRA and local councils in relation to tax administration.
Although business executives gave a very good impression about tax collectors generally, they could not possibly avert their eyes to issues of corruption. About 11 percent of businesses claimed to have offered gifts to NRA officials and about 8 percent also claimed to have done so for local council officials. These gifts range from physical cash, food and drinks, household items to building materials, clothing, etcetera.
Though the report did not state whether these gifts were offered through persuasion or coercion, both the NRA and local councils have a zero-tolerance policy on corruption that seeks to prevent the abuse of office for private gain. Equally so the national anti-corruption laws make it a corruption offence for an individual, acting in his official capacity, to induce, solicit or accept an advantage or cause same to be conferred on him.
In the final analyses, the Consortium concludes that there is a need for a robust tax education program and the government should make efforts to simplify tax collection processes and procedures to enhance confidence in the NRA. It recommends that the Ministry of Finance should review tax policies that are deemed to be unfriendly to the business community to avoid making the tax system too complex. The Consortium also advised the government to improve on fiscal transparency and the delivery of social services to the people.