GoL Requested to Levy 10% Tax on Raw Materials -LPP Says Doing so for Iron Ore, Gold Will Reduce Liberia’s Debts

MONROVIA – The Liberia People’s Party (LPP) is making a strategic proposal to the Executive and Judicial Branches of Government to levy 10% tax on iron old, gold and other valuable extractive materials, contending that doing so could help in reducing national debts.

In a September 19, 2024 letter signed by the party’s Chairman, J. Yanqui Zaza, and addressed to Speaker J. Fonati Koff and President Pro Tempore Nyongblee Karngar Lawrence, the LPP requested lawmakers to impose a 10% export tax on raw materials such as iron ore, rubber, diamonds, and gold, postulating that doing wo “can begin reducing its existing debt of USD $2.3 billion, as well as mitigate the impact of new debts from anticipated loans.

“The proposed USD $714 million investment (likely through loans) for agriculture, a projected USD $209 million loans from the International Monetary Fund (IMF), and Promised loans from China, among others,” the LPP maintained.

The oldest active registered political party in the country contends that such a tax is essential because, as per the World Bank’s 2019 study, foreign investors have been paying minimal taxes.

“For example, ArcelorMittal Steel, one of the largest investors in Liberia, has not contributed a significant share of its profits, despite earning USD $4.6 billion, USD $5 billion, and USD $4.98 billion in 2017, 2018, and 2019, respectively,” said the party some fondly call “club of iconic economists and intellectuals.

In contrast, the LPP observed, ordinary Liberians are taxed on nearly every basic good, including water, bread, nails, and most imports, arguing that “this inequality must be addressed.

As a historical perspective on export taxes in Liberia, the LPP informed the 55^th National Legislature that as per 1926 Firestone Concession Agreement, the export tax on rubber was set at 1%; for 1984 Report by Carl S. Shoup in 1983-1984, the export tax on rubber was temporarily removed but reinstated in 1984-1985 at a rate of 15-25 cents per pound, and 2000 Liberian Tax Code, Section 1706, stipulates that, where no specific value is fixed by law, a customs duty can be levied on exported goods.

“An export tax is a fee imposed on goods shipped out of a country,” the LPP simplified its arguments. “In Liberia’s case, companies such as Bridgestone (Parent of Firestone), and Averoso Resources (parent of Bea Mountain) would be responsible for paying the tax on their exported raw materials.”

The Debate Over Export Taxes

According to the LPP, the pros and cons of taxing exports are widely discussed, especially when finished goods are involved, stating that there are opponents who argue that export taxes can make goods more expensive, leading to potential job losses.

However, this argument does not apply to raw materials like rubber and iron ore, which have only one buyer.

“For example,” LPP says “Firestone exports its natural rubber exclusively to Bridgestone’s tire plants in North America and Europe, as confirmed by Bridgestone’s American Press Center (3/12/24). ArcelorMittal Steel follows a similar arrangement.”

As to whether companies can afford such a tax, the party thinks so squarely, indicating that large corporations such as Bridgestone can absorb the tax as part of their overall production costs.

The LPP continued: “For example, if Bridgestone can write off USD $100 million in advertising expenses, it can certainly manage an additional USD $11 million in export taxes without passing significant costs onto consumers. Liberians should not continue to bear the bulk of the tax burden while foreign investors enjoy tax exemptions on their raw materials.”

Expected Revenue from the 10% Export Tax

LPP further posits that a 10% tax on exports would generate an estimated USD $155 million from just three major companies, using numbers from the Central Bank of Liberia’s 2023 Annual Report, flaunting some impressive data: USD $60 million from 5 million metric tons of iron ore sold at $120 per ton; USD $85 million from 438,491 ounces of gold sold at $1,942 per ounce, and $11 million from 63,211 kilograms of latex sold at $1,765 per kilogram.

The party quotes a World Bank 2019 study that concluded, despite Liberia’s rich natural resources—especially in iron ore, rubber, gold, and diamonds—the country collects minimal public revenues from these sectors.

LPP believes revenue from the tax on export will reduce Liberia’s debts as well reduce the possibility to impose tax on rice importation as Sierra Leone is reported to be contemplating.

Taxation might appear to be an undesirable project, but it is a necessary revenue to be used in financing the social cement that binds a community together, according to Mr. Scar S. Shoup.

Amongst other things, the Liberian People’s Party called on Lawmakers to review and enact the recommendations submitted by the Liberia Revenue Authority under the leadership of his excellency George M. Weah, recalling that Domestic Revenue Mobilization Strategy (2018-2022) study recommended that Liberia should establish “…a “Precious Metals Marketing Company (PMMC) in ensuring better control and higher value for Liberia’s gold and diamonds resources.”

According to the LPP, the study included information about Ghana, which owns a 100% share of similar company.

The party also recommended that all revenue from the 10% tax on export should be used exclusively for investment in capital.