The 2016/17 National Fiscal Budget of US$623million has been passed by the House of Representatives, pending concurrence from the Senate.
Plenary overwhelmingly voted in favor of the budget based on recommendations from the Joint Committee of the Legislature on Ways, Means, Finance and Development Planning and Public Accounts, chaired by Bong County Representative Prince Moye.
The Executive submitted a Draft Budget of US$555.9million but additional revenues were realized during the budget hearing on Capitol Hill thereby forming an increase of about US$67.1million to be generated in the fiscal year, which has affected the budget allotments to some ministries and governmental agencies. It is yet to be known if there is any increment in civil servants’ salaries.
The fiscal year runs from July 1, 2016 to June 30, 2017.
The post-budget hearing, comprising the revenue and expenditure components, lasted for 15 days from the 2nd to the 16th of September after an in-house wrangling concerning the recusal of Speaker J. Alex Tyler. Under the former Chairman of the Ways, Means, Finance and
Development Planning, Rep. Moses Kollie, the budget hearing lasted for about 45 days, with only the completion of the revenue component.
In the Draft Budget, out of the U$555.9 million submitted by the Executive, U$495.5 million go to Core Domestic Revenue; US$30.2 million as Grants; and US$30.1 million as Contingent Domestic Revenue.
Accordingly, health gets US$77 million; education US$83 million and social development spending gets U$10.5 million.
Additionally the government allocated U$20 million toward elections; U$10 million for UNMIL drawdown; U$5 million for agriculture; U$15 million for road construction; U$3 million for road maintenance; and U$1.5 million for airport runway rehabilitation.
Contingent Domestic Revenue
In order to support the Contingent Domestic Revenue of U$30.1 million out of the unfunded Contingent Envelope of US$140 million, President Ellen Johnson-Sirleaf earlier submitted a bill to amend the Special Amendment to the Revenue Code of 2011, to increase excise tax on tobacco, phone calls, and alcoholic and non-alcoholic beverages.
The President proposed that beginning July 1, the Liberian government will increase the excise tax on all tobacco products from 35% to 80%, upon the approval of the Legislature, and it would mean that every call made in Liberia is expected to incur a tax of U$0.01 (1 U.S. cent).
The President also wants the Legislature to increase the excise rate on alcoholic beverages from 35% to 45% and further requests adjustment in the GST Rate from 7% to 10%; a revision of Section 16 to grant Special Investment Incentives to certain businesses as well as a revision on Section 904 on the Advance Payment or Turnover Tax.
Rejection of Proposed Tax Hike
In a public hearing held recently by the Joint Committee of the Ways, Means, Finance and Development Planning in the Joint Chambers of the Legislature, a number of influential business entities rejected a proposal to the Legislature to increase excise tax on tobacco, phone calls, and alcoholic and non-alcoholic beverages.
Cellcom GSM, the Liberia Coca Cola Bottling Company, the Monrovia Breweries, as well as the Tobacco Associations of West Africa, among other businesses, said the tax increment would not only affect production and sales, but would also encourage redundancy, unemployment and poverty.
Lonestar Cell MTN was the only company that supported the proposal for tax increment on phone calls made within Liberia, and promised to bear the responsibility without passing the cost onto its consumers.
Parallel House Passage
During the in-House wrangling, the House Chamber unanimously amended the Special Amendment to the Revenue Code of 2011, with a slight increment on the excise tax on tobacco as well as alcoholic and non-alcoholic beverages, but without any increment on phone calls made within Liberia.
On Monday, President Ellen Johnson Sirleaf vetoed the Act of 2016 amending the Liberia Revenue Code of 2011.
Article 35 of the Liberian Constitution gives the President the authority to approve or disapprove a bill sent to her by the National Legislature.
In a letter on her action to the lawmakers, President Sirleaf said: “By virtue of the authority in me vested under Article 35, I cannot approve this bill, and must therefore veto the bill in its entirety principally because of these reasons and concerns.”
In her letter, President said the bill as enacted by the Legislature would not have the desired fiscal impact, especially considering the current impact of the global economic downturn on the country’s economy.
The President said the bill would also have an adverse impact, given other measures government has taken, including Liberia’s accession to the World Trade Organization (WTO) and her status as a signatory to the ECOWAS Common External Tariff (CET) and ECOWAS Trade Liberalization Scheme (ETLS).
President Sirleaf resubmitted another bill with several proposals that, without them, she said would present disastrous consequences for the 2016/2017 National Budget. For example, resources required for conducting the elections, preparing for UNMIL drawdown, and undertaking critical social services that were not available.
President Sirleaf proposed to adjust goods and services’ tax from 7% to 10%, that would not only raise U$20 million for the National Budget, but would also help to ensure that Liberian goods and services remain competitive within the context of the ETLS and WTO, since every country in the West African sub-region has a VAT rate of around 17%.
She also proposed to increase excise taxes on tobacco from 50% to 80%, consistent with ECOWAS CET as well as what is obtaining in other jurisdictions relative to the health consequences of tobacco. This measure is estimated to add US$1.1 million to the current budget.
The proposal to increase the excise tax on alcoholic beverages from 35% to 45% is based on similar health concerns as well as what is obtaining in other jurisdictions. And this measure is estimated to add U$3.3 million to the National Budget.
The proposal to institute a U$0.01 (one cent) per minute excise tax on phone calls is intended to recapture some of the revenues being lost as a result of on-going free calls promotions by mobile telecommunications operators. This excise tax will still make Liberia the cheapest mobile GSM location in the sub-region and would have raised US$5.7 million for the government.
Back to Committee Room
The Liberia Amendment Act of 2016 amending the Liberia Revenue Code of 2011 was sent to the Committee room after it was vetoed by the President. It is expected to be passed by Tuesday, September 27, according to reports.
The Ways, Means, Finance and Development Planning Committee, chaired by Prince Moye is expected to have closed and open consultations with the Finance and Development Planning Minister, Boima Kamara, to ascertain all necessary information that would lead to the passage of the proposed amendments.