The Importance and Responsibility of Paying Taxes in Liberia
The collapse of Liberia’s economy during the civil war led to the country’s financial system having problems. However, Liberia’s financial system improved since the election of President Ellen Johnson Sirleaf in 2006. The major source of government revenue in Liberia is taxed, which are levied on companies’ profits and personal incomes, real estate property, international trade, and sales of goods and services domestically. Despite being the primary source of government revenue, Liberia’s tax system faces myriads of challenges, including withholding taxes and tax evasion. Additionally, the tax collection system is dependent on integrity amongst civil servants, although integrity is far from being guaranteed. Widespread corruption also presents a significant challenge to Liberia’s tax system. Indeed, reports of dismissal of three senior tax collectors in 2010 following a conspiracy with a rubber company to reduce taxes indicated a problem with the system. These challenges notwithstanding, Liberians have a responsibility to pay taxes and payment of taxes because in Liberia, like other countries, paying taxes increases government revenues that help in financing schools, hospitals, and other important infrastructure.
All citizens and residents living within Liberia’s territorial confines have a responsibility or duty to pay taxes because the system has stabilized. Liberia’s tax system steadied after the enactment of the Revenue Code of Liberia 2001. Moreover, a major boost to Liberia’s tax system came in 2015 when the Government of Liberia enacted legislation that created the Liberia Revenue Authority (LRA). The LRA is a key player when it comes to Liberia’s tax collection and channeling the tax revenues to the government to help fund public services (USAID 6). Individuals in Liberia have a duty to pay income tax, which is levied on the gross income of resident and non-resident individuals in Liberia (PricewaterhouseCoopers 7). Another type of tax levied by the LRA is corporate tax involving the taxation of legal entity residents, including general company, life insurance, agricultural and renewable resource projects, as well as mining and petroleum companies (PricewaterhouseCoopers 11). Another major type of tax in Liberia is withholding tax, some of which include interest, royalties, license fee, and similar payments; dividend excluding resident corporations; rent where the aggregate annual rental income exceeds LIB$ 70,000; gambling earnings; and payments by mining, petroleum and renewable resources projects in the form of interest, dividends, and services. Others include payment for the acquisition of an investment asset in Liberia, payments to high-risk suppliers, other payments other than for employment services (LIB$100,000 or more for services), as well as payment by a government agency other than those already mentioned (PricewaterhouseCoopers 18). There is also a goods and services tax that is imposed on every taxable supply of goods by a registered manufacturer; every importation of goods that are considered taxable; and every supply of services considered taxable by registered services providers.
The Liberian government has improved tax payment systems by integrating technology. In 2018, the government, led by President George Weah, launched a mobile payment system that was developed with assistance from USAID’s Revenue Generation for Governance and Growth (RG3) team (Kitain and Shavurov). The system has since enhanced the ability of Liberians to pay taxes, thereby increasing government revenues channeled to important infrastructural projects. Moreover, thanks to e-filing, Liberia’s annual tax collected in 2020 is expected to increase from that collected in 2018, as shown in the chart below.
Figure 1. Liberia’s Total Annual Tax Collection (2008-2020)
paying taxes in Liberia offers revenues to the government, thus reducing the country’s financial burden and dependency on donors and borrowing. For instance, Liberia’s national and supplemental budget for the 2010/11 financial year allocated around $390 million in total expenditure (Rohacek et al.). This money was used to develop the country rather than wait for donors to help the country to develop it. Moreover, taxes accounted for roughly 64 percent of government revenues that year with non-tax revenue from fees accounting for 19 percent. Donor and borrowed funds accounted for only 17 percent of the government’s revenue in the 2010/11 financial year (Rohacek et al.). The significant difference between tax revenue and donor/borrowed revenue highlights how important paying taxes is with regard to reduction in donor/borrowed funds. Payment of taxes in Liberia is important as it also promotes domestic growth. With the improved tax payment systems in the country, many citizens and residents can now pay taxes and fees with ease (Webmaster Admin). More people are involved in tax payment, and as a result, revenues and funds are channeled to small businesses that are undergoing rapid growth in the country. Lastly, a significant rise in the number of people paying taxes in Liberia has helped the government in terms of paying salaries and wages of public servants. With a growing public servant population, Liberia requires a huge budget that is adequately settled by tax revenues.
Taxes are a major source of government revenue in Liberia. Citizens and residents within Liberia’s territorial confines have a civic duty to pay taxes. Failure to pay them can result in huge fines and imprisonment. Paying taxes is important as it increases government revenues that help in financing schools, hospitals, and important infrastructure; reduces the country’s dependency on donors and borrowing; promotes domestic growth, and helps the government in terms of paying salaries and wages of public servants.
Kitain, Alexander, and Umar Shavurov. “Liberia Launches Mobile Tax Payments, Opening Doors to Increased Revenue for Domestic Development.” 23 July 2018, dai-global-developments.com/articles/liberia-launches-mobile-tax-payments-opening-doors-to-increased-revenue-for-domestic-development
PricewaterhouseCoopers. “A quick guide to taxation in Liberia/” 2013. https://www.pwc.com/gh/en/assets/pdf/a-quick-guide-to-taxation-in-liberia-2013.pdf
Rohacek, Martin, et al. “Re-Starting Liberia’s Tax System from Scratch.” D+C, 24 May 2011, www.dandc.eu/en/article/re-starting-liberias-tax-system-scratch
USAID. Benchmarking the Tax System in Liberia: A Study Prepared by The Revenue Generation for Governance and Growth (RG3) Project, 2017. https://www.dai.com/uploads/BENCHMARKING%20THE%20TAX%20SYSTEM%20IN%20LIBERIA.pdf
Webmaster Admin. “Liberia: Compliance with Taxation Is Easy When Citizens Get the Benefits It Yields.” AllAfrica.com, 17 Apr. 2018, allafrica.com/stories/201804170257.htm