THE IMPACT OF TAX STRATEGIES ON REVENUE MOBILIZATION IN SIERRA LEONE

Abu K. Kamara, Sheku Kamara

Abstract


As tax revenues became an essential source of funding for governments, the rulers' dependence on these funds created an incentive for them to be accountable to the taxpayers; citizens expected their governments to use tax revenues responsibly and efficiently, leading to improved governance practices and a closer alignment of state policies with the interests and needs of the population. The choices made regarding tax reform strategies have significant implications for societal priorities, income distribution, and the overall relationship between the state and its citizens. This research revealed that periodic evaluations should be carried out by tax experts to establish the performance of each tax head and identify areas of weaknesses. This becomes the basis under which various tax reforms are put in place and the mode in which they are implemented. Findings on tax reforms indicated that more emphasis was put on indirect tax reform, but direct tax heads were given negligible attention. The majority of taxpayers do not get sufficient tax education and this leads to non-compliance on the part of taxpayers. Domestic revenue mobilization is still performing poorly, a larger portion of domestic tax revenue is raised from indirect taxes, domestic revenue mobilization procedures are not effective, and collecting tax revenue from organizations is easier than from individual taxpayers. A huge tax burden rests on the few registered organizations and employees working in the formal sector. However, the general trend indicates an increase in revenue as related to the percentage growth in the GDP, which signals the strength and benefits of tax reforms, although these benefits were stunted by the Ebola and Corona pandemics, respectively. In addition, the findings of this research revealed that the National Revenue Authority needs to lower the Pay As You Earn (PAYE) threshold in order to capture the income of the majority of citizens for tax purposes. Further, there is a need to revise the list of zero-rated supplies, diplomatic privileges, and the list of institutions whose income is tax-exempt. Trade tax reform may be an important component of fiscal reform in developing countries. However, policymakers must also consider the unique challenges posed by informal economies and work to develop tailored solutions that can effectively raise revenue while preserving economic efficiency and welfare.

 

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Keywords


National Revenue Authority (NRA), Pay As You Earned (PAYE), domestic tax, extractive industry revenue, succession plan, Gross Domestic Product (GDP), Sierra Leone

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References


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DOI: http://dx.doi.org/10.46827/ejpss.v5i2.1898

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