By Amin Kef Sesay
Whilst it is apparent that Freetown City Council Mayor, Her Worship Aki Sawyerr and her Council made a mistake in not first consulting with her supervisory Ministry to explain the rationale behind the Council’s decision to raise the outdated property tax in the city, which has not been revised in the last fifty years, there is certainly every reason for the Council to, in a realistic way and manner, revise property taxes in the city, in line with growing financial needs, including her avowed mission of transforming the nation’s capital city to be attractive and pleasing to national, regional and international visitors and tourists, with tourism one of the sectors the Government has said it wants to use to boost the economy across several fronts.
Truth of the matter is that, the New Direction Government, since it came to power in 2018, has increased many taxes in order to raise revenue to meet its obligations to the people, on the understanding that to foster economic growth, Governments need sustainable sources of funding for social programs and public investments.
Generally, taxes are a necessary evil that no Government can do without. Programs providing health, education, infrastructure and other services are important to achieve the common goal of a prosperous, functional and orderly society. And they require that Governments raise revenues.
Taxation not only pays for public goods and services; it is also a key ingredient in the social contract between citizens and the government. How taxes are raised and spent can determine a Government’s very legitimacy. Holding Governments accountable encourages the effective administration of tax revenues and more widely, good public financial management.
As such, all Governments need revenue, but the challenge is to carefully choose not only the level of tax rates, but also the tax base. Governments also need to design a tax compliance system that will not discourage taxpayers from participating.
Companies consider high tax rates to be among the top five constraints to their operations. The amount of the tax cost for businesses matters for investment and growth. Where taxes are high, businesses are more inclined to opt out of the formal sector. A study shows that higher tax rates are associated with fewer formal businesses and lower private investment.
Compliance with tax laws is important to keep the system working for all and supporting the programs and services that improve lives. One way to encourage compliance is to keep the rules as clear and simple as possible. Overly complicated tax systems are associated with high tax evasion.
Thus keeping tax rates at a reasonable level can encourage the development of the private sector and the formalization of businesses. Modest tax rates are particularly important to small and medium-size enterprises, which contribute to economic growth and employment, but do not add significantly to tax revenue.
Businesses care about what they get for their taxes. Quality infrastructure is critical for the sound functioning of an economy because it plays a central role in determining the location of economic activity and the kinds of sectors that can develop.
On the side of Government, a healthy workforce is vital to an economy’s competitiveness and productivity—investing in the provision of health services is essential for both economic and moral reasons. Basic education increases the efficiency of each worker, and good-quality higher education and training allow economies to move up the value chain beyond simple production processes and products.
Thus, whichever way we look at it, citizens and businesses are obligated to pay taxes and for those monies to be properly accounted for and judiciously utilized to provide the social goods and services society need to live decently and happily.