Liberia: US$57.5M Investments Under House’s Scrutiny for Tax Holidays
... If the agreements are ratified by the legislature, G5 and Dura Plast would be the latest companies to be granted a tax holiday by the legislature in the absence of a cost-benefit analysis focusing on their economic and revenue impacts.
President George Weah has submitted to the House of Representatives two different investment agreements worth a total of US$US$57.5 million.
The agreements, which concern the development of beverage and plastic manufacturing plants, have been forwarded to committee rooms for internal debate by members of the House of Representatives. The Committees are expected to look into the President’s request for a lengthy tax holiday for the two investments, namely G5 Plus Breweries and Dura Plast.
Currently, many large-scale investments benefit from different kinds of tax breaks granted by the legislature against the promise of creating jobs and other aspects of economic development.
However, these tax exemptions, which have swelled in the last two decades — negatively impacted the country’s budget growth in the form of foregone revenues — making the country more heavily dependable on external grants and small-business taxes to fund almost all of its development projects, as well as revenue in the form of budget support.
If the agreements are ratified by the legislature, G5 and Dura Plast would be the latest companies to be granted a tax holiday by the legislature in the absence of a cost-benefit analysis focusing on their economic and revenue impacts.
According to a 2019 report from the World Bank, while tax concessions are a universal feature of tax codes around the globe, the extremely narrow tax base in Liberia, as well as lack of scrutiny on granting incentives and the fiscal implications, calls for changes in the approach to tax concessions.
It added that tax exemptions generate real costs in form of foregone revenues,with a significant cost to the government — exceed their benefits and considerably erode the general tax base.
The G5 investment, which is worth US$35 million, is geared towards the development of beverages production plants in Liberia.
The company is expected to produce carbonated drinks (cans and plastic bottles), malt and energy drinks; and alcoholic beverages, according to an excerpt of Weah’s communication to the House. According to the President, the presence of G5 is projected to create around 4,000 indirect employment in the short term (building of the facility) and 350 permanent jobs in the long run.
The Dura Plast agreement, according to the President, is for the development and operation of a plastic production and recycling plant in Liberia. Dura Plast, which already manufactures plastic products, is seeking to expand its business with the US$22.5 million deal.
At least 5,000 indirect jobs are expected during the construction of the Dura Plast plant, and in the long run, 250 direct skilled and unskilled permanent jobs are to be created, the president said.
The company is expected to produce bottles, pvc pipes, pvc fittings, poly-tanks, plastic pots, plastic pans, among others. While recycling plastic chairs, tables, bottles and more.
Weah stated in his Communication that the Investor shall also provide an annual company-administered grant of US$10,000 for scholarships to deserving Liberian students in high school and university residing within the county where the plant is located.
The Liberian President has urged the Legislature to ratify the Agreement as it is expected to benefit the local economy, including the creation of jobs and helping to ensure a cleaner and healthier environment through the recycling plant.
Meanwhile, the House Committees on Investment and Concession and Judiciary have been tasked to scrutinize the DuraPlast US$22.5 million investment which is for a term of 15 years.
The G5 Plus agreement is expected to be reviewed by the committees on Investment and Concession, Commerce and Industry and Judiciary.
The Committees are expected to report within two weeks — giving the house members the opportunity to cast a vote either to approve or reject the president request either with amendment or not.