The rising exchange rate between the United States and Liberian dollars is creating severe economic hardship for the vast majority of Liberians across the country. Reports reaching our business desk from rural Liberia speak of rising fuel and food prices as transport fares hikes. In the Monrovia area, similar development is taking place as fuel price hits L$400 at some filling stations.
The purchasing power of many households is directly affected requiring action from the government. As the rate currently stands at L$88 to US$1, the purchasing power of majority Liberians, who earned their living on the Liberian dollar, has dwindled.
Also affected gravely are all government workers who fall within the government’s minimum wage bracket of US$100.
In 2009 and 2010, the government of Liberia (GOL) announced a policy, as part of its poverty reduction strategy, removing tax burden on all employees that fall within the minimum wage bracket, which at the time, stood at about US$80.
During this time, the government was cognizant of the prevailing economic situation in the country and raised the minimum salary for civil servants from US$15 in 2006 to US$80 per month in 2009.
The Government also substantially reduced income tax in 2010 in order to increase nominal income for employees.
It was therefore expected that during the interim, private sector employers would use the public sector initiative as the point of reference in determining the minimum wage for their employees.
But with the rising exchange rate between the US and Liberian dollars, a senior government official has hinted our business desk that all employees of government including those earning minimum wage are now required to pay taxes because they now earn above L$70,000 per year.
According to the revised Revenue Code of Liberia, Liberians earning between L$0.00 to L$70,000 are not required to pay income tax.
The Code, however, notes that those earning from L$70,001 to L$200,000 are required to pay 5% tax on the excess money above the L$70,000.
But many people, especially those who fall within GOL’s minimum wage bracket, are contending that their income shouldn’t be taxed.
With GOL minimum wage at US$100 and the exchange rate at L$88 to US$1, all GOL minimum wage earners fall within the 5% tax range.
The question being asked by those who fall within this rage is what happened to the GOL’s tax waiver policy? Going beyond this question meanwhile is the reduction in the purchasing power of those falling within this category and how it is affecting various homes.