Tax System Transparency (SL0024)
Action Plan: Sierra Leone Action Plan 2019-2021
Action Plan Cycle: 2019
Lead Institution: Ministry of Finance
Support Institution(s): Parliament, National Revenue Authority, Budget Advocacy Network, Christian Aid, Action Aid, Network Movement for Justice and Development
Policy AreasFiscal Openness, Oversight of Budget/Fiscal Policies, Publication of Budget/Fiscal Information, Sustainable Development Goals, Tax
What is the public problem that the commitment will address?
Taxes raised from companies and individuals fund
key public services needed to promote the welfare
of the population and reduce poverty. But tax
incentives granted by the government are a major
reason for Sierra Leone’s low tax revenues. The
UN estimates that Least Developed Countries need
to raise at least 20 per cent of their GDP through
taxes to meet the Millennium Development Goals
by 2015. Yet Sierra Leone is way off this target,
currently raising only around 10.9 per cent of GDP
in taxes. The major tax incentives provided by the
government include exemptions on customs duties
and payments of the Goods and Services Tax,
along with reductions in the rate of income tax
payable by corporations, which are being granted
supposedly to attract foreign investment.
In 2012, Sierra Leone lost $224 million dollars
through tax incentives – tax breaks given to
multinational corporations, mostly in the mining
sector. At the time, this equated to 59% of the
entire government budget, and more than eight
times the health budget and seven times the
education budget. Government also grants INGOs,
NGOs and other institutions duty waivers on the
bases that they will contribute in providing services
to the people of Sierra Leone. These waivers are
part of government expenditure to these sectors
and as such the citizen should know who these
waivers are grant to for monitoring purpose.
What is the commitment?
A transparent tax system supports good
governance and the accountability of policy-makers
towards the public. But the granting of special tax
incentives in opaque deals, at the discretion of
individual without public scrutiny, undermines good
governance and can increase the risk of corruption.
In Sierra Leone, parliament and the public lack
information about the tax incentives granted and
are usually not aware of the details until after they
have been agreed, and sometimes not even then.
It is currently impossible for elected parliamentarians, the media and civil society to
scrutinize and debate these deals properly to
ensure that the country optimally benefits.
How will the commitment contribute to solving the public problem?
By enabling accountability for public spending, fiscal
transparency can also reduce fiduciary risks and
improve efficiency and effectiveness of public
spending around tax incentive. Analyses have
shown that countries whose public finances are
more transparent have better fiscal discipline, a
lower perceived level of corruption around the
granting of tax incentive.
It will also increase the Sierra Leone Open Budget
Index score, hence increasing the credibility and
openness of the government at international level.
In addition, CSOs can also use the published
information to hold government and the institutions
granted the tax incentive accountable on how they
use the incentive.
Why is this commitment relevant to OGP values?
Access to information: Citizen will have access to tax incentive information
Public accountability: Government will account
for all tax incentives granted. Citizen will also use
the published information to hold government
This commitment is also linked to the Sierra Leone
National Development Plan under the following
2.5.1 Fiscal Policy medium-term measures –
Rationalizing tax and duty waivers
8.8 Potential areas for resource mobilization to
finance the MTNDP – Publish tax expenditure
Reporting- Publish estimates of revenue foregone
through each individual tax exemption scheme;
periodically review the costs and benefits of each
scheme with respect to the objectives of the
It is also linked to the SDG 16 and the target below:
16.6 Develop effective, accountable and
transparent institutions at all levels
16.10 Ensure public access to information
and protect fundamental freedoms in
accordance with national legislation and
IRM Midterm Status Summary
3. Duty and Tax Exemption
A transparent tax system supports good governance and the accountability of policy-makers towards the public. But the granting of special tax incentives in opaque deals, at the discretion of individual[s] without public scrutiny, undermines good governance and can increase the risk of corruption. In Sierra Leone, parliament and the public lack information about the tax incentives granted and are usually not aware of the details until after they have been agreed, and sometimes not even then. It is currently impossible for elected parliamentarians, the media and civil society to scrutinize and debate these deals properly to ensure that the country optimally benefits.
- Publish all tax incentives, on a half yearly basis starting 2019 in government website
- a) Tax exemptions granted from January to June 2019 are published by December 2019
- b) Tax exemptions granted from July to December 2019 are published by March 2020
- c) Tax exemptions granted from January to June 2020 are published by September 2020
- d) Tax exemptions granted from July to December 2020 are published by March 2021
- Publish in the annual budget the annual tax incentives granted:
- For 2020 budget
- For 2021 budget
Editorial Note: For the complete text of this commitment, please see Sierra Leone’s action plan at (https://bit.ly/3bPiqwh).
IRM Design Report Assessment
Access to Information
This commitment aims to increase the transparency of special tax incentives.  In Sierra Leone, revenue losses from tax exemptions has been a concern for a number of years  and part of commitments in the two previous OGP national action plans.  The award of tax exemptions has been linked to the country’s low domestic tax revenue to GDP ratio, which in 2020 stands at approximately 14 percent.  This ratio is below the average for Sub-Saharan Africa,  and falls short of the UN-advised ratio of 20 percent for achieving the Sustainable Development Goals.  The opacity of special tax incentives and lack of public scrutiny—particularly in the mining sector, but extending also to duty waivers granted to international organizations and NGOs—undermines good governance and increases the risk of corruption.
The commitment envisages enhancing tax transparency by requiring the government to publish all tax incentives on a government website every six months, and obligating the Ministry of Finance to publish the aggregated figure of annual tax incentives in the annual budget. The commitment is relevant to the OGP values of access to information as it requires proactive, open disclosure of government-held information.
At the time of designing this commitment, the law of Sierra Leone allowed for 148 forms of duty waiver or tax exemption.  General and sectoral laws, contractual agreements, presidential directives, and tax policy instruments vested wide discretion in officials to grant tax exemptions to government departments and agencies, public international organizations, NGOs, private companies and individuals, and embassies.  While the new Bio administration immediately took steps to address the impact of tax exemptions on revenue collection,  by the end of 2018 no information on tax exemptions had been published.  Further, while data on import duty and Goods and Services Tax (GST) is available,  the National Revenue Authority has not been collecting data on corporate and income tax waivers, as tax returns are not submitted regularly. 
If fully implemented as written, this commitment stands to have moderate potential impact on increasing transparency in the tax system and reducing corruption arising out of opaque exemptions. The verifiability of the commitment is, however, weakened by failing to specify the agency responsible for curating the half-yearly publication of tax incentives, the public website on which the information must be published, and the degree of aggregation of the data published in the annual budget. The commitment represents a major step forward in the policy area of tax transparency, as it is a pioneering initiative. However, it remains limited in scope due to:
- Insufficient clarity about where, how, and what information will be published.
- The lack of any mechanisms for citizens to act on the published information through, for example, a grievance procedure.
- The failure of the commitment to outline or specify measures to ensure that the information published is presented in a navigable, user-friendly way.
Going forward, government and civil society stakeholders may consider expressly including transparency provisions in a policy and Bill on Duty and Tax Exemptions, and incorporating rules, regulations, and mechanisms that call upon government actors to justify their decisions to grant exemptions, act upon criticisms, and accept responsibility for failing to improve Sierra Leone’s low domestic tax revenue to GDP ratio.
Losing Out: Sierra Leone’s Massive Revenue Losses from Tax Incentives, Budget Advocacy Network & The National Advocacy Coalition on Extractives, 2013 .