By Festus Poquie
From 2014 to 2016, Liberia experienced consecutive budget shortfalls. Then Finance Minister Amara Mohammed Konneh and his team predicted a $70 million shortfall in a budget of $622 million for the 2015-16 fiscal year, prompting drastic austerity measures.
In February 2015, the International Monetary Fund (IMF) reported $200 million in revenue losses and expenditure needs. It was during this same period that nearly $40 million went missing from the government’s revenue account held at the Central Bank of Liberia.
Many theories emerged about the cause of the hole in Liberia’s finances, including the impact of the Ebola crisis, the drawdown of 15,000 United Nations peacekeepers, and the country’s dependence on export commodities. However, the IMF was clear in its assessment: poor tax administration and control.
“Enhanced efforts to strengthen tax administration and controls, and a determined push to collect contributions from public entities will be needed to realize domestic revenue objectives,” the IMF stated.
Seven years later, in 2017, an audit conducted by the General Auditing Commission (GAC) revealed the leakages associated with the country’s revenue inflow, attributing them to an organized scheme that deprived Liberians of much-needed resources.
The audit, led by then Auditor General Yusador Gaye and completed in February 2017, focused on the Government of Liberia’s Consolidated Financial Statements for the fiscal period ended June 30, 2016.
The GAC’s findings cast doubt over the accuracy and reliability of $381,767,000 in reported revenue by the Liberia Revenue Authority and the Ministry of Finance and Development Planning between 2014 and 2015.
The audit suggested that the reported revenue figures may have been deceptive or understated, potentially depriving the government and the Liberian people of crucial resources.
The GAC observed that the tax authorities failed to provide supporting documents, such as Billing Forms, Bank Payment Slips, and copies of receipts, to authenticate the reported amounts.
Specifically, the auditors found discrepancies in the following revenue categories:
– Taxes on Income and Profits: $146,789,000
– Property Taxes: $4,357,000
– Taxes on Goods and Services: $50,116,000
– Taxes on International Trade: $167,753,000
– Other Taxes: $12,752,000
The then management of the Liberia Revenue Authority acknowledged challenges with record-keeping and the self-declaration regime.
The Auditor General emphasized that while the reliance on importers and exporters to declare and pay taxes cannot be questioned, the auditors needed access to the source documents to independently verify the accuracy and completeness of the taxes paid.
Revenue receipts as reported by the Auditor General
The budgeted revenue as legislated for fiscal year 2014/15 was US$635.23 million comprising a core envelope of US$511.09 million and borrowing of $108.63 million. During the budgetary period core revenue was revised to US$489.93 million due to risks attached to their collectability and the Ebola epidemic. The assessed risk amounted to US$21.1 million.
The assessed risk indicators were tax revenue in the amount of US$25.2 million of which US$10.9 million was on account of taxes on income and profits. Non tax revenue experienced a shortfall of US$1.3 million and US$15.7 million was on account of property tax, positive US$2.90 million administrative fees and negative US$1.3 million fees and interest.
The revelation of this $380 million revenue discrepancy provides a plausible explanation for the budget shortfalls that Liberia has experienced in recent years.
Addressing the weaknesses in the revenue collection system and implementing robust internal controls will be crucial in ensuring that the government can reliably meet its fiscal obligations and deliver essential services to the Liberian people.
