Liberia: How Cummings Plans to Improve the Liberian Economy

Presidential candidate Alexander Cummings has made reforming Liberia's tax code, which many find challenging to navigate, a signature economic reform policy. 

Cummings, as part of his tax plan, is proposing a flat rate for customs duties, which he says is necessary to reduce the overall cost of doing business in the country, and to make it easier for businesses to plan and budget for import/export costs.

“We need to simplify our tax code to make sure it is competitive with other countries in the region,” Cummings told the Daily Observer in an exclusive interview, focusing on his economic policies for Liberia.

“We will close any loophole that exists in the tax code. But the way to avoid any loophole is to simplify the tax code. People should not find it difficult to do business in the country, and once you make it too complicated, it is hard to enforce.”

“You don’t bury taxes”

The proposal by the presumptive presidential candidate of the Collaborating Political Parties (CPP), comes as the country's tax rates are among the highest in the ECOWAS region, with corporate tax rates set at 25% and personal income tax rates ranging from 5% to 30%, depending on the taxpayer's income level. 

According to experts, the country’s high tax rates reduce investment and economic output for businesses, which impact their ability to compete with their counterparts in the sub-region.

This situation means Liberia ranks 174 out of 190 countries in terms of ease of doing business, according to the World Bank's Doing Business 2022 Report.  

The report highlights the country’s high tax rate as one of the numerous challenges hampering the country's investment climate, saying the complex nature of the tax system makes it difficult to navigate, creating additional burdens for businesses.

And so for Cummings,  reforming the country’s tax code is a priority that he would pursue aggressively to stimulate economic growth, as it would lead to increased investment and job creation.

Cummings is of the belief that reforming the country’s tax code would increase the competitiveness of businesses in Liberia, as well as to grow the country's revenue and ensure that businesses have the resources to invest in expansion.

“You don’t bury taxes in complicated structures. You make it simple,”  says Cummings, who is one of the few opposition politicians with a clear chance of unseating President George Weah and an even clearer vision for how the country should be governed.  

“One simple way to do it is to charge a flat rate for customs duties instead of people paying for everything they put in a container and ship to Liberia.”

 “So the Cummings administration would look at the tax code, simplify it, removing complication to make sure it is understandable, simple, competitive with the region, and good enough to create jobs for our people.”

According to Cummings, such reforms in the tax code encourages more people to pay taxes and, this way, the governance system works better.

He added that simplifying the tax code would reduce compliance costs and improve compliance rates, as well as the modernization of the tax administration system, to improve the tax collection process and reduce corruption and mismanagement.

“We will simplify our taxation system so that people are encouraged to pay taxes instead of trying to avoid, or even worse, evade paying taxes,” Cummings says. 

“Looking at the tax code, we need to make sure it is understandable, simple, and good enough to create jobs for our people.”

Cummings is of the view that the country tax code is reform, it would generate more revenue for the country and reduce political interference in the tax process.

This may not be very different in principle from the strategy employed by Mary Broh, who paved the way for thousands to abandon power theft and become law-abiding LEC subscribers by simplifying the path to compliance. 

The results were resounding, albeit to a fault — some customers complained that though they had paid the fees to get their LEC meters, the equipment was back-ordered for weeks. But this was the experience of only a tiny fraction of LEC customers.  

As with those who expected the wrath of the power theft law (jail time plus heavy fines), businesses of all sizes might be extremely delighted at the prospect of a simplified tax regime and encourage more business startups to pursue compliance, expand and reinvest in the Liberian economy. 

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Editor’s note: The interview with Mr. Alexander B. Cummings is part of a policy-based interview series the Daily Observer intends to have with all presidential candidates.