By Amin Kef (Ranger)
It is no gainsaying that the current SLPP Led Government, headed by President Julius Maada Bio, is keen on revamping the Local Manufacturing sector in Sierra Leone with the strong objective of boosting economic development.
There is indeed no doubt that local or indigenous manufacturers have a crucial role to play in Sierra Leone’s economic development within the ambits of providing jobs, boosting local production and contributing, in major ways, to the overall growth of the nation.
However, they face a significant challenge in the form of high and multiple taxes, which make them vulnerable to economic instability and hinder their growth prospects.
Unfortunately, Local manufacturers are subjected to a complex and often overwhelming tax system. Finding themselves in this quagmire, they have to navigate these multiple taxes and levies including import duties, excise taxes and value added tax (VAT), income tax and local council rates. Undoubtedly, these various taxes create a significant financial burden for local manufacturers, reducing their ability to invest in other areas such as innovation, expansion and job creation.
In terms of import duties, they are imposed on raw materials and machinery necessary for production. Invariably, high import duties increase the cost of these inputs making it more expensive for manufacturers to produce goods. This, in turn, leads to higher prices for locally produced goods, which can discourage domestic consumption and make imported products more attractive.
With regards excise taxes they are imposed on specific goods, including alcohol, some of which are also used in the production chain and such can significantly increase production costs.
When a Value-Added Tax (VAT) is in place it is levied on the final price of goods and services. In this case, local manufacturers are required to charge VAT on their products and burden of the tax is ultimately borne by consumers. High VAT rates can reduce the competitiveness of locally produced goods in the market.
Lamentably, high and multiple taxes increase the cost of production and as a result, locally produced goods often have higher price tags than imported alternative goods making it very difficult for manufacturers to compete in both domestic and international markets.
To meet tax obligations places significant financial strain on local manufacturers as they struggle to fulfill tax liabilities while at the same time trying to maintain or expand their businesses. Such limit manufacturers’ ability to invest in latest technology, increase productivity and offer more job opportunities.
Expansion of businesses cannot successfully take place where multiple and burdensome taxes exist. The potential of indigenous manufacturers to positively contribute to the nation’s economic development cannot be fully utilized or maybe somehow impossible.
There is a danger that in situations where taxes are too much local manufacturers could resort to operate in the informal economy and try as much as possible to evade those taxes which could deprive the Government of much revenue and as well undermine the sustainable continuation of the manufacturing sector.
What is now needed is for Government to simplify the tax system by streamlining it in order to make it easier to understand and comply in honouring their tax obligations.
Incentives must be provided where necessary by reducing import duties on essential machinery and raw materials which will lower production costs and thereby encourage investments.
Support can be provided by the government in the form of access to finance and technical assistance.
In order to unlock the potential of the local manufacturing sector and thereby support economic development, it is imperative for the Government, under the dynamic leadership of President Julius Maada Bio, to address tax challenges by putting in place simplified, supportive and business-friendly tax regimes. It is only when such actions are taken that Government will promote a thriving local manufacturing sector that will significantly contribute to more employment opportunities, innovation and overall economic growth.
