A renowned Liberian financial expert, Mr. J. Yanqui Zaza has bemoaned the loss of export revenue by the country which he attributed to the country’s membership of the World Trade Organization (WTO) whose regulations require its members to apply either duty-free or very reduced export taxation.
Mr. Zaza made the assertion in an open letter addressed to the political leaders and other prominent citizens in country under the heading, “Liberians Pay $182m tax on import, but foreigners pay $414k tax”, copy of which was sent to The Analyst and noted that with an appropriate taxation policy to grow the economy, Liberia would have generated $87M revenue from exported goods than the $0.414M reported in 2020/21, if it had levied 10% tax on three types of goods exported in 2020.
He said the 4,458,029 metric tons sold at $108 per ton would have generated $48 M, which is 10% levied at 4,458,029 multiplied by $108 while the 167,640 oz of gold sold at $1,770 would have brought in $28M being a levy of 10% on the gold multiplied by $1,770 and $11 M would have been raked in from the 63,734 KG of latex which was sold at $1.73 per kg multiplied by $1.73.
“What would have been Liberia’s cash position if it did not join the World Trade Organization such as Sierra Leone, Chile, Argentina, Ecuador, Peru, etc.? Alternatively, what if it had joined the WTO, but continues to tax exports as Guinea and Ivory Coast continue to do even though both countries joined the WTO in 1995? In fact, in July of 2016, Reuters reported that Ivory Coast reduced export taxes: 1) tax on Cocoa butter fell to 11 percent from 14.6 percent; cocoa mass tax dropped to 13.2 percent from 14.6 percent; and cocoa powder tax fell to 9.6 percent from 14.6 percent. In Indonesia, I guess following the advice of Mr. Charles Lclure, the government imposed a 20% percent tax on metal ore exports and prohibited shipments of raw materials unless miners submitted plans to build smelters”, he said.
In the letter in which he raised a debate whether Liberia could increase government revenue and reduce tax burden on taxpayers, Mr. Zaza who have written extensively on topical national issues that border on finance and development said that proponents of the WTO among other things listed three benefits that companies can obtain if an exporting country joins the WTO which includes the assumption that when a country joins WTO, for example Liberia, the Liberia Firestone Rubber Plantation will have easy to the markets of members of WTO and by extension sell more goods and services, that when a country eliminates/reduces a tax rate on export, citing the Liberia Firestone Rubber Plantation again, will be prevented from gaining advantages within the Liberian markets, thereby promoting competition and thirdly it is assumed the Liberia’s membership in WTO would allow companies to easily resolve any disputes.
“Why did our international partners encourage Liberia to join the WTO if there were limited benefits, if any? Yes, it is difficult to prove, but money-lenders such as the World Bank do benefit from Liberia’s membership within the WTO. As evidenced by Liberia’s economic documents, the country usually borrows money to make up its revenue shortfall. Other organizations that usually benefit when a poor country receives minuscule revenue are nongovernmental agencies (NGOs). During 2012/13 through 2018/19, on behalf of Liberia, NOGS received $5B from donors to finance programs, according to Liberian Citizens’ Budgetary documents”, he queried.
The New York State Certified Public Accountant being disturbed about the disparity that exists between what Liberians pay on imported goods and what foreign companies paid as export tax citing figures in the 2020/21 fiscal year said, “Should Liberians continue to pay more money for imported goods, for example, the USD $182M paid in 2020/21, while Chinese, Europeans, Americans, etc. pay USD $414K on exported goods? Or should Liberia levy a higher tax rate on exports? This debate is about whether a business should increase its profits by paying a lower tax rate on export, which reduces Liberia’s tax revenue”.
Going further with his argument, he said, “Now, let us compare how much taxes outsiders paid for export (goods transported from Liberia) and taxes Liberians paid on import (goods brought into Liberia) in fiscal period 2020/21. The combined revenue ($182M) from import and export was 48% ($182M/$377M) of the total tax revenue ($377M). How much of the $182M was export revenue? It was less than 1% ($0.414M/$182M) of the total import/export revenue”.