LRA Boss Pushes Lawmakers to Ratify Tax Bill to “Grow” Domestic Revenue

The Liberia Revenue Authority (LRA) has urged the House of Representatives and the Senate to ratify the Value Added Tax (VAT) bill as part of efforts to enhance domestic revenue generation. The Commissioner General of the LRA, James Dorbor Jallah, emphasized the potential benefits of transitioning from the current Goods Service Tax (GST) regime to a VAT regime, highlighting its broader tax base that could result in generating around 5-6 percent of GDP.

The Commissioner General of the LRA, James Dorbor Jallah, said the GST system narrowly generates less than 3% of Gross Domestic Product (GDP) while a VAT system with a broader tax base generates about 5-6% of GDP.

Jallah made the statement Monday, 8th April 2024 during the opening program of the revenue component of the draft 2024 National Budget on Capitol Hill.

He stressed the importance of identifying critical areas with significant revenue potential and leveraging the VAT system to strengthen domestic revenue collection. He indicated that the draft VAT bill is already before the Legislature for consideration and approval, underscoring its crucial role in enhancing tax revenue in Liberia.

When passed, the VAT bill will not increase domestic revenue, it would also give the LRA teeth to bite as it relates to some stringent decisions that would ensure that the revenue house does its work appropriately.

A VAT is similar to a sales tax, except that is‌ paid incrementally at all levels of production, on only the value added at each level, to prevent pyramiding and eliminate the need to separate business inputs from retail sales.

“Additionally, as we strive to grow more domestic revenue, we need to identify critical areas with great revenue potential and tap into them. One such area is transitioning from the current GST regime, which has a narrow tax base and generates less than 3% of GDP, to a VAT regime with a broader tax base and generates about 5-6 percent of GDP in many developing countries where it is designed and implemented properly,” Jallah told members of the Joint Budget Hearing during the opening of the 2024 Draft National Budget scrutiny.

“The draft VAT bill is before this Honorable Legislature,” Mr. Dorbor opines. “Mr. Chairman and members of the Joint Committee on Ways, Means and Finance, a draft VAT Law is currently before you, awaiting your approval. We believe its implementation is of paramount importance, as VAT, contributing over 30% of tax revenue in ECOWAS countries, remains an untapped potential revenue source in Liberia. Addressing this gap will undoubtedly fortify our domestic revenue collection efforts,” the LRA boss narrated.

Moreover, the LRA has developed a new Corporate Strategic Plan (CSP) and a Domestic Revenue Mobilization (DRM) strategy from 2024 to 2028 to drive domestic revenue growth.

“These strategic blueprints are not mere documents, but represent our concerted efforts to evolve, innovate, and adapt to the dynamic landscape of revenue mobilization. In conclusion, I am confident that, with the support of this honorable body and the meticulous implementation of our new DRM strategy and our new corporate plan (CSP), Liberia can transcend the billion-dollar mark in domestic revenue,” the LRA boss argued.

Earlier, the chairman of the Joint Budget Committee’s hearings, Rep. Dixon Seboe said the Committee will intensively work to scrutinize the 2024 national draft budget and make the appropriate allocations. The co-chairman of the Joint Budget Committee, Sen. Prince Moye said they are prepared to perform their constitutional mandate and wish to get the necessary support from Ministries and other institutions of government.”

The Ministry of Finance, the LRA, and the Board of Tax Appeals kick off the revenue hearing on Monday.

Today - Tuesday, April 9, 2024, those who make presentations are the Liberia Maritime Authority, Liberia Telecommunication Authority (LTA), National Fisheries and Aquaculture Authority (NAFAA), Forestry Development Authority (FDA), and the Ministry of Transport.

On Wednesday, April 10, 2024, the spotlight will be on another batch of government agencies. The Ministry of Commerce & Industry/Liberia Business Registry, Ministry of Foreign Affairs, Ministry of Justice, Liberia Immigration Services (LIS), Liberia National Police, Liberia Petroleum Refining Corporation (LPRC), Liberia Petroleum Regulatory Authority, and the National Road Fund are among those expected to appear.

Day four will witness presentations from the Ministry of Public Works (MPW), the Ministry of Internal Affairs (MIA), and the Ministry of Post & Telecommunications (MPT).

Commissioner Jallah expressed confidence in the potential of these strategic initiatives, alongside the cooperation of the Legislature, to propel Liberia towards achieving significant milestones in revenue collection. The National Budget scrutiny process, led by the Joint Budget Committee, aims to meticulously assess the 2024 draft budget and allocate resources accordingly.

Various government agencies, including the Liberia Maritime Authority, Liberia Telecommunication Authority, and the Ministry of Transport, are scheduled to present during the revenue hearings to ensure comprehensive budget deliberations.