Foday Sandy

Pay As You Earn (PAYE) Compliance Management in Sierra Leone.

The PAYE Tax system in Sierra Leone requires employers to deduct and remit taxes on behalf of their employees to the National Revenue Authority (NRA). The system is regulated by the Income Tax Act of 2000 and applies to all employees who earn income in Sierra Leone.

The tax deduction referred to here is commonly known as the Personal Income Tax (PIT), which falls under the umbrella of income tax, levied on salaries, wages, and other types of income of individuals.

💹 The tax rate for PAYE in Sierra Leone is based on a progressive tax system. The following tax rates apply:

🔢 First 600 - 0%
🔢 Next 600 - 15%
🔢 Next 600 - 20%
🔢 Next 600 - 25%
🔢 Above 2,400 - 30%

💼 Before the introduction of the new minimum wage, employees earning a basic salary of SLL 600 were not required to pay PAYE tax.

It's important to note that the new minimum wage in Sierra Leone has increased from SLL 600 to SLL 800. However, only the first SLL 600 of an employee's salary is exempted from PAYE tax. The remaining SLL 200 is taxed at 15% as it falls into the next tax band of SLL 600. Additionally, allowances exceeding SLL 500 will be included in the employee's taxable income and subject to PAYE tax.

📋 Employers must file monthly PAYE returns with the NRA and remit taxes deducted from their employees' salaries by the 15th day of the following month. Non-compliance with PAYE regulations may result in penalties and fines imposed by the NRA (e.g., PAYE tax deducted from May salary should be remitted on or before the 15th of June)

It's vital to stay informed of any changes that may affect PAYE tax compliance, as the provisions of the Income Tax Act of 2000 are subject to periodic revisions.

Pay As You Earn (PAYE) Compliance Management in Sierra Leone

It's not uncommon to come across the term 'Tax Evasion', but do we have a thorough comprehension of its meaning and the potential consequences if we become involved in it? In this article, we will explore the definition and what the results could be if we take part in it.

Tax evasion is the deliberate act of failing to pay or underpaying taxes that are required by law. It is a serious crime that undermines the integrity of a country's tax system and can have serious consequences for individuals and businesses that engage in it, but oftentimes, we mistake "Tax Evasion" for another similar term “Tax Avoidance”. “Tax Avoidance”, is actually a component of "Tax Planning". Let us then look at the definition of this term.

In contrast to tax evasion, tax avoidance is an acceptable practice that takes advantage of legal methods to reduce the amount of money someone or a business needs to pay in taxes. Although it is not against the law, it is generally frowned upon since it allows those who are better positioned to find ways to pay lower taxes than those who are not. This results in an unbalanced system, where certain people and businesses are able to pay less tax than they would have to, while others are not able to and have to pay more.

Now let’s dig further into tax evasion as an illegal act. In Sierra Leone, tax evasion is specifically addressed in the Income Tax Act of 2000 as amended and according to section 154 of the Act, "a person who wilfully evades or defeats or attempts to evade or defeat tax imposed by this Act either by, among other things, physically or otherwise preventing the tax officer from access to tax information or the business premises of the taxpayer during normal working hours or the payment and collection of such tax, commits an offence”

The consequences of tax evasion in Sierra Leone can be severe. Under the Act, individuals found guilty of tax evasion can receive a maximum penalty of five years in prison and/or be required to pay a fine. For businesses, the penalties can be even more severe, with companies facing fines of up to three times the amount of taxes that were evaded.

An example of how an entity or an individual might evade customs duties, as per section 24 of the “Customs Act 2011 as amended, customs duties shall be levied and collected on all goods imported into Sierra Leone and section 11 of the act requires that all goods imported or exported must be correctly declared. If someone were to file a declaration with a lower value than the actual cost of the goods, or if they were to deliberately omit important information, they would be evading customs duties. According to Section 77 of the same act, making false statements about filing a declaration is an offence punishable by a fine of between NLe100,000 and NLe200,000 and or imprisonment of not less than two (2) years. As we can see, the repercussions for attempting to evade taxes become increasingly harsher depending on the severity of the illegal act being committed.

The impact of tax evasion on the economy cannot be overstated. When some individuals and businesses evade taxes, it can lead to higher taxes for those who are honest about their payments and can also result in a reduction of the government's revenue. This can create an unfair distribution of the tax burden and have negative consequences for the economy as a whole.

In Sierra Leone for example, the National Revenue Authority (NRA) which is the government’s department responsible for the collection of taxes, has a variety of methods at its disposal for detecting tax evasion, including audits, investigation of financial records, and examination of spending habits in some cases, people or businesses may be reported to the authorities for engaging in tax evasion. If you know of someone who is dodging taxes, it's essential to notify the right authorities. In many countries including Sierra Leone, there are confidential hotlines or online reporting systems to report any tax evasion suspicions.

Financial Institutions such as banks and investment companies have an obligation to inform the relevant authorities about dubious activities. This is advantageous in halting taxes from being evaded by making sure that these establishments are not being utilized to carry out unlawful acts.

Besides attempting to tackle tax evasion within its own borders, numerous countries have made agreements with each other to swap information and support one another in examining and prosecuting cases of tax evasion through Exchange of Information agreements. This cooperation can be effective in addressing instances of tax evasion that involves hiding assets or income in other countries.

In conclusion, it is essential to understand the distinction between tax evasion and tax avoidance. Tax evasion is a serious criminal offense that can have severe consequences, while tax avoidance is legal, but may be perceived as immoral. It is imperative to pay your fair share of taxes to support the necessary operations of government and uphold the integrity of the tax system. Additionally, be mindful of the methods that governments employ to detect and prevent tax evasion.

Tax Evasion, An Illegal Act

Lisha Rajwani

 – According to the European Anti-Fraud Office, fraud is considered to be ‘

a deliberate act of deception intended for personal gain or to cause a loss to another party

There are different categories of Fraud, however this article focuses on Occupational Fraud.

 is when an individual commits fraud depending on how much opportunity he has in the organisational hierarchy, it’s therefore the deception, the act of concealment, that convinces fraud examiners that the perpetrator knew his or her actions were wrong. An example of one of the most notorious occupational fraud schemes ever is the Enron scandal. Enron was a US-based energy, commodities & service company, it was extremely lucrative, overtime their revenue plummeted, and their debt kept escalating. The company’s top management concealed these facts through massive accounting fraud by window-dressing the accounts until Enron finally collapsed in 2000.

The Association of Certified Fraud Examiners (ACFE) is the world’s largest anti-fraud organisation and premier provider of anti-fraud training, education, and certification. A Certified Fraud Examiner (CFE) would have to be accredited by the ACFE. A CFE is one that focuses on the prevention, detection, and deterrence of financial and non-financial fraud, and they are often called upon to prove or disprove if fraud has occurred. 

‘Occupational Fraud 2022 A Report to The Nations’

 the number of Occupational Fraud cases in Sub-Saharan Africa comprised of 23% of the world’s total and the second highest in the world succeeding United States & Canada – 36%.

Figure 1: Reported Occupational Fraud cases by regions:

An Accidental Fraudster is seemingly honest, a good employee but due to opportunity they tend to commit fraud. This person is usually in a position of trust and believes they can defraud the organisation without being caught.

A predator fraudster on the other hand, is someone who seeks out an opportunity and commits fraud repeatedly until caught.

“The fraudster’s greatest liability is the certainty that the fraud is too clever to be detected” – Louis J Freeh

A model has been developed to understand the three factors that determine why a person may commit organisational fraud.

The Fraud Triangle is based on the premise that for an individual to commit organizational fraud, three components must exist:

this is related to a personal or external problem including financial hardship, family troubles, debt etc. Pressure is subjective to each individual and a fraud examiner would have to look at a fraudster’s personal life to understand who and why they would commit fraud.

before an individual commits fraud, there must be an oppurtunity to take advantage of the system without being caught. The perpetrator is typically well educated and a member of management as they have full authority and possess the opportunity to override controls.

 to prevent fraudsters from perceiving themselves as criminals, there is rationality. This helps a fraudster justify the crime in a way that makes it acceptable in their mind, one of the most common rationalizations is ‘they owe it to me’.

When a fraudster or any individual commits fraud all these three components must be present. There must be pressure that cannot be spoken about, there must be an opportunity available that the person believes can be used to solve the problem and the person will rationalise to justify their action.

Occupational Fraud: There are categories of occupational fraud including:

Asset Misappropriation: is the misuse or theft of the employer’s resources. Based on the ACFE Report to the Nations, this is the most common (86% of cases falling under this category) fraud but least costly adding up to a median loss of $100,000. Asset Misappropriation falls into 2 categories: cash and inventory & all other assets. Examples include theft of cash on hand, mischaracterized expenses, false refunds, larceny of asset requisitions & transfers, etc.

Forensic Accounting & Fraud Examination - Part 1

Alison George

Regulatory Framework refers to tax information, essential rules, procedures, and other important information, like laws and governing bodies that act as guides to ensure that businesses are operating by the law.

Regulatory Framework brings about ongoing confidence to the public that sustainable procedures and processes have been put in place to which they participate. It is the backbone to which the economy and the people depend on. These regulations must act or seem to act in the interest of the public (the people).

These regulations are the results of how society understands, sees, and reacts to risk and its possibility. Regulation may be defined as the set of institutions, guidelines, and penalties that produce actions consistent with stable, accountable, and transparent markets.Protecting economies against systemic hazards and protecting the public interest are two of regulation's primary goals. They are the defences of market players against unwelcome, masked, or unrecognized private hazards. This is particularly true of investors who use their savings to fuel the markets. In that light, a sound regulation system should be seen as a motivator for dependable and superior financial services.

When being discussed, a good regulatory framework must have the following criteria before being developed:

It is also important to develop an effective regulatory framework in which the following must be considered:

Recognises the advantages of a steady regulatory environment

It also recognises that statutory regulation is not always needed or even the best approach and that deferral to and support of relevant and recognised self-regulatory entities may be the best way to address certain issues.

Helps to build efficient, objective, and transparent markets

Uses underlying principles of regulation and enforcement that are consistent for similar transactions and activities

Hires regulators with the requisite experience and in-depth knowledge of capital markets and the roles and activities of market participants

Incorporates sufficient flexibility to respond rapidly and efficiently to changes

Maintains sensitivity to the needs of investors when adopting and implementing policies that reduce regulations for certain types of issuers of investment products

Keeps cost — in terms of fees, compliance costs, and other burdens imposed on registrants, issuers, and investors — to a minimum

Maintains objectivity and accountability with respect to market participants and policymakers

In conclusion a good and effective regulatory framework shapes society towards compliance and provides a certain level of dependency on the system. The culture of adhering to these guides and accepting these guides ensures implementation and sustainability.

Why we need an Effective Regulatory Framework

Alfred Akibo-Betts

Domestic resource mobilisation remains challenging for many governments and local authorities across Africa. In 35 African countries, the tax-to-GDP ratio in 2020 was 14.84%, compared with 33.5% in OECD countries. It was a revenue performance made worse by the pandemic.

As a result of limited resources, African governments are unable to invest in programmes and infrastructure that are vital to the growth of their economies. The continent has a yearly financing gap of US$66bn for health, US$39bn for inclusive education, and up to US$170bn for infrastructure.

To boost domestic resource mobilisation, both tax policy and tax administration have to be addressed. Initiatives are needed to make it easier for taxpayers to comply, curb tax avoidance and evasion, and to build transparent and accountable tax systems.

TADAT assessments are like health checks of tax administrations

One current initiative is the collaboration between the African Union Commission (AUC) and the African Tax Administration Forum to ensure that the AUC directs tax policy on the continent with inclusive input from the continent’s eight regional economic communities.

In 2015, the International Monetary Fund (IMF) created a diagnostic tool for tax administration. Known as TADAT (tax administration diagnostic assessment tool), it aims to provide a standardised means of assessing the health of key components of a country’s tax administration and gauging its level of maturity in the context of international good practice.

TADAT focuses on nine key performance outcome areas, covering the most critical tax administration functions, processes and institutions. It assesses countries on the basis of 32 high-level indicators through 55 measurement dimensions.

The critical goals of the nine performance outcome areas are:

Integrity of the registered taxpayer base. All taxable individuals, businesses and organisations are included in a registration database that is complete, accurate and up to date.

Effective risk management. Risks to revenue and tax administration operations are identified and managed effectively.

Voluntary compliance. Taxpayers have the necessary information and support to voluntarily comply at reasonable cost to themselves.

Accuracy of information reported in declarations. Taxpayers report accurate and complete information in their tax declarations.

Adequacy of dispute resolution processes. The tax dispute resolution process is fair and independent, accessible to taxpayers, and effectively resolves disputes promptly.

Efficient revenue management. Tax revenue collections are fully accounted for, monitored against expectations, and analysed to inform government revenue forecasting.

Accountability and transparency. Tax administrations are transparent in the conduct of their activities and accountable to the government and community.

To date, 118 TADAT assessments (including 22 at local authority level) have been undertaken worldwide by trained assessors. African countries in particular have embraced these assessments to inform their tax administration reform agenda at national and local levels.

As a playbook for improving tax systems, the tool has enabled African countries to enhance their operating procedures, roll out better customer services, introduce more effective risk strategies, boost taxpayer compliance, and become more accountable and transparent to citizens.

From my own prior involvement in TADAT assessments (see box) and leadership of three TADAT engagements this year – TADAT training in Zambia, and TADAT assessments of the Kampala Capital City Authority in Uganda and Nairobi City County in Kenya – I have learnt these key lessons:

Leadership from the TADAT secretariat is critical in ensuring the tool is used worldwide as intended. The secretariat has built a community with the experience, expertise and motivation to conduct professional assessments that impact domestic resource mobilisation in Africa.

The accounting and auditing features of TADAT can be applied in many disciplines. TADAT assesses tax administration on the basis of the accounting systems used to collect and account for tax revenue. It also includes issues relating to statutory audits conducted by a country’s supreme audit body, ensuring that tax administrations apply IFRS Standards.

As a tax accountant, I have used TADAT to expand my own tax, accounting and leadership experience, enabling me to provide quality services to my clients. Also, the assessments have enabled me to interact with state officials and lead teams from diverse backgrounds, making me more responsible, organised and accountable to the goals I set in my professional and personal life.

TADAT assessments provide an opportunity for African governments at the central and local levels to improve their tax systems, which will generate more resources for closing the financing gap required to deliver services to their citizens and invest in their economies.

As a tax accountant, I continue to pay particular attention to business processes in tax administrations that uphold integrity and transparency, which is key to building trust between citizens and the tax authority. The social contract between tax administrations and citizens is that the tax revenue collected will be channelled directly into government coffers. Once there is high trust, taxpayers are mostly willing to pay their taxes.

A Sharper Tax Tool

Theodore Lumpkin

There has always been a misunderstanding of the classification of employees in Sierra Leone, and it is having a significant effect on tax compliance and government revenue.

This blog highlights the tax legislation differences between employees and independent contractors. Furthermore, we explore the tax implications and impact on organisations, employees’ wages, and government revenue if workers are misclassified.

Hiring an independent contractor is appealing, as this option can be significantly cheaper since organisations do not have to provide a contractor with end-of-service benefits, health insurance, expensive training, and other lucrative allowances or equipment. It also gives the employer the leverage to scale up or down the service hours. Nevertheless, organisations should be aware that although they classify some workers on “contracts” as independent contractors, the National Revenue Authority (NRA) can classify them as employees in accordance with the tax law.

The key tax difference is that for independent contractors (except individual professionals), the withholding tax rates in line with Section 117 of the Income Tax Act 2000 as amended and Section 36 of Finance Act 2016 (National Health Insurance Levy) are 5.5% (residents) and 10.5% (non-residents), as opposed to Pay As You Earn (PAYE) tax rates with a maximum of 30%. Therefore, workers will receive more money if they are classified as independent contractors.

Policymakers understand the financial incentives to use independent contractors and the enticement to classify workers as independent contractors when organisations truly view and treat them as employees. The government is wary of the revenue loss they will incur if workers are misclassified. Therefore, through the Income Tax legislation and a 

, they have explicitly distinguished between an employee and an independent contractor. Employees offer a “Contract 

 Service”, and independent contractors offer a “Contract 

Section 2 of the Income Tax Act 2000 defines an employee as “an individual who receives employment income and includes any individual engaged for short-term or part-time work other than an individual acting as an agent”. Employees receive employment income as a payment or benefit arising from past, present or prospective employment and taxed under Section 23 of the Income Tax Act 2000.

An independent contractor is a person, business, or corporation that provides goods or services to another entity under terms specified in a contract or a verbal agreement.

Unlike an employee, an independent contractor does not regularly work for an employer but works as and when required, during which time they may be subject to the law of the agency. Independent contractors are usually paid on a freelance basis. Contractors often work through a limited company or franchise, which they own, or may work through an umbrella company. People such as carpenters, builders, air conditioner technicians, and painters in an independent trade, business, or profession in which they offer their services to the general public are generally referred to as independent contractors.

Considering this, organisations should be mindful of the classification of workers, not on the business relationship with them, but specifically on laws and policies. If workers are not classified according to the tax legislation, organisations could expose themselves to penalties from the NRA. Therefore, it is imperative organisations have a good understanding of the law.

In conclusion, organisations should understand the aspect of behavioral and financial control of workers according to tax legislation to classify workers appropriately.

Classifying Workers For Tax Purposes in Sierra Leone (Employee versus Independent Contractor)

The Betts Firm

In October 2020, our Chief Executive Officer, Alfred Akibo-Betts chaired a session on Country Experiences on Tax Incentives at the West African Tax Administration Forum (WATAF) Virtual High-Level Policy Dialogue on “Promoting Transparency in the Governance of Tax Incentives in West Africa”. In a follow-up to the meeting, the ACCA’s Accounting and Business published an article on the issues highlighted in the session.

Calls are growing to unify tax policy and legislation in West Africa in a bid to avoid a 'race to the bottom' in tax incentives for foreign investors...

You can read more of the article 

Time to halt incentive bonanza

Since November 2020, there has been a shortage of Leones as citizens are challenged in withdrawing the amount of cash they need from commercial banks. This cash shortage affected Sierra Leoneans as, traditionally, Christmas is when we splurge the cash to prepare for weddings, parties and family celebrations. At the peak of the crisis in late December 2020, most bank customers could not withdraw any money or were given limited amounts over a few days.

However, things are much better since the turn of the year, since people spend less money in the “adop” January period. We have had reassurances from the Central Bank that by February 2021, there will be adequate cash in the market as the printing of notes, which was affected by the COVID-19 pandemic, has started. As we are all hopeful that we can freely get cash to care for our families, run our affairs and transact business, we must ask ourselves one fundamental question – 

WHY SHOULD WE RELY ON CASH IN THIS MODERNISED WORLD?

With the advancement of technology in digital payments, we have an opportunity to explore other means of transacting instead of using cash. India even went further by removing 86% of its cash in circulation in 2016, although mainly to tackle tax evasion. The move was only possible as India had made tremendous progress towards digital payments with Fintechs innovating continuously. By 2020, the value of digital payment transactions through mobile banking was over US$ 404 Billion.

Over the past decade, there has been tremendous progress in various technologies facilitating digital payments, increasing financial inclusion globally to record levels. In Africa, particularly East Africa, transactions are mainly facilitated through mobile money payments. In Kenya, at the start of 2020, the value of mobile money transactions through Safaricom’s M-Pesa stood at more than US$ 22 Billion. All across Africa, there is the increased use of other means of digital payments, including debit and credit cards and mobile apps to pay for goods and services.

Traditionally, in Sierra Leone, we have used cash and cheques to conduct our affairs, resulting in enormous pressure on cash reserves in banks and delays in undertaking business. We are so use to these old ways of transacting that we don't use them even when we have other means such as mobile money transfers. However, although it is only natural that we use what we are au fait with, even when given different options, we must recognise that a drive for change must be championed by the key financial regulator in Sierra Leone – the Bank of Sierra Leone.

Therefore, considering that we do not want to have this problem in the future and also factoring in the risks of handling cash during the COVID-19 pandemic that the country is battling, we must explore new means of transacting digitally.

In recent years, through various projects supported by organisations such as the United Nations Capital Development Fund (UNCDF), the Bank of Sierra Leone (BSL) has made some progress in increasing financial inclusion through digital payments. One notable step is creating a Sandbox at BSL used as a testing environment, enabling Fintechs to experiment and iterate their solutions. However, more needs to be done to push the digital payments agenda in Sierra Leone. Making these advancements will solve our cash crisis and positively impact the economy as transactions will be done faster. Small businesses will be able to sell more as their customers can pay immediately for goods advertised through a website, creating more jobs through money agents.

5 Steps the Central Bank can take to promote digital payments:

  In the past decade, Sierra Leone has tried to build a National Payments Switch that enables the payment of goods and services using debit and credit cards. This project should be fast-tracked to facilitate digital payments.                                                                             

: There are no regulations regarding digital payments as the Banking Act 2019 deals with banks' licensing, regulation, and supervision. If we are to progress in digital payments through Fintechs, we should follow countries like Rwanda that allowed Fintechs to grow instead of limiting their growth through stringent laws.

Fintech Sandbox and Support Techpreneurs: 

BSL should continue supporting Fintechs. However, more resources should be devoted to encouraging more Techpreneurs to build innovative solutions to increase the use of digital payments.

Encouraging Commercial Banks to promote digital banking:

 Some commercial banks, such as Ecobank and UBA, have digital banking solutions that facilitate digital payments and make it easier for their customers to transact business. BSL should encourage all banks to introduce digital banking solutions by working with the Sierra Leone Association of Commercial Banks.

Work with NATCOM to issue USSDs to Fintechs:

 Although smartphones are now common, to deliver digital payment solutions to rural areas and citizens who cannot afford smartphones, Fintechs may have to build mobile payment solutions using Unstructured Supplementary Service Data (USSD). To make this possible, BSL will have to work with the National Telecommunications Commission (NATCOM) and mobile operators to use USSDs.

3 Things Citizens can do to increase the use of digital payments:

 For over a decade, citizens have been able to use mobile money solutions through Afrimoney and Orange Money. Although mobile money usage has increased, only 16% of the 7 Million plus mobile subscribers are active mobile money users. Some banks have also integrated with mobile money, making it easier for customers to transfer money from bank accounts to mobile wallets. What are you waiting for? Go and sign up for mobile money and stop queuing at the bank.                                                                                                                               

Use of digital money solutions by businesses:

 Businesses and organisations should use digital banking and mobile money solutions to receive money from customers. In promoting this, customers can be given all the payment options. This move can also be good for businesses as it will increase sales.

Pay for goods and services through mobile money and digital banking: 

Citizens should make it a habit to pay for goods and services through digital means. If you have to pay for something, ask the vendor whether they can receive mobile money or a transfer through your mobile banking app.

As we prepare for a post-COVID-19 world, which has seen a significant increase in digital solutions, especially digital payments, Sierra Leone should take critical steps to ensure citizens transact more digitally. The increase in the use of digital solutions through mobile money, mobile apps, debit and credit cards, and digital banking solutions will solve Sierra Leone’s cash crisis and progress its economic development as transactions will be done faster, positively impacting our GDP. Digital payments will also improve accountability in money transactions, empowering small businesses to expand their reach and reducing inequalities.

Sierra Leone’s Cash Crisis: An Opportunity to Promote Digital Payments 

At the end of 2019, I resigned from my job as a Deputy Commissioner at Sierra Leone’s National Revenue Authority (NRA). I consider this singular action a pivotal moment in my professional life. As I started reflecting on some of the critical moments that transformed my life from a young graduate joining the NRA as a Collector (Junior Supervisor) to leaving as a Deputy Commissioner with a wealth of experience in the sixteen (16) years I was at the authority, I decided to narrate the GST implementation story. I am quite sure that telling this story would not only help finetune my next steps but will also serve as a lesson for the young generation of professionals and our country.

As we moved into the new decade in 2010, Sierra Leone had another opportunity to re-engineer its drive towards economic transformation, which was geared towards improving the lives of its citizens. One of the few reforms adopted at the time was the introduction of the Goods and Services Tax. Amongst a pool of very bright and vibrant young graduates, I was fortunate to have been chosen to lead this vital reform. Today, the overall impact of this tax system since its introduction in 2010 cannot be overemphasised. Interestingly, the implementation of GST in 2010, which I led, coincided with a boom in the economy as a result of the growth of the mining sector from 2010-2013. As we march into the 2020s, we as a country need to think about how we can capitalise better on the next big windfall whether it is investments in non-mining sectors, extractives, taxes or another event.

As a young professional, I led a significant revenue mobilisation project that changed tax administration in Sierra Leone, and no doubt has provided for the government billions of Leones used to improve the economy and the lives of Sierra Leoneans. For context, GST collections have grown from Le 246 Billion in 2010 to Le 1.03 Trillion in 2019 and is the second-largest revenue source for the government after Income Taxes. These taxes contribute to, amongst other things, infrastructural development, education and healthcare initiatives in the country. Leading the implementation of Goods and Services Tax (GST) stands out as the most exceptional service I have provided to my country and, I am incredibly proud of this contribution.

This story reflects on my involvement in the introduction of GST, vital moments during the implementation, GST's contribution in terms of revenue, and critical policy considerations of the tax.

I still remember how my GST journey started like it was yesterday. I had just passed my final ACCA exams to become a Chartered Accountant when on a hot March afternoon in 2006 the then Deputy Commissioner-General (DCG) of the National Revenue Authority (NRA), Ousman Barrie called me to his office to discuss my future. The NRA was a new organisation the government had formed in 2003 to reform tax administration. NRA took over from the ineffective and inefficient stand-alone institutions of revenue generation, and I was fortunate to be part of the first intake of young graduates recruited. The organisation at the time was implementing its first big reform project supported by the United Kingdom's Department for International Development (DfID) and wanted younger, fresh thinking, and innovative staff to lead the various projects that were being implemented. In hindsight, I believe his choice of me cannot also be unconnected with the leading role I had played at the time when the NRA took over the collection of Non-Tax Revenues from Government Ministries, Departments and Agencies (MDAs). As a 26-year-old that had just finished a professional course and had already been part of a project at the authority, I guess I fitted the bill.

During our discussion, Ousman Barrie sketched on a piece of paper (I wish now I had kept that piece of paper as it was a significant part of my career journey) two different career routes for me - taking charge of the implementation of Value Added Tax (VAT) - same as GST, or leading the new Capital Gains Tax/Rent Project. I jumped at the VAT Project for four reasons:

2) I was excited about the prospect of learning a new concept;

3) The challenge of successfully implementing a tax project; and

4) Being part of VAT history, as I would be a member of a unique club of persons that had been in charge of implementing the tax worldwide.

A week later, I was transferred to lead the VAT project and to work closely with Crown Agents, an international consultancy firm that was chosen by DfID to assist the NRA on its reform agenda. I worked directly with Crown Agents' Team Leader, George Blankson (who would later become Ghana Revenue Authority's first Commissioner-General) on the project. George later became my mentor and had the most significant impact on my career. In the early days, I didn't have an office and had to work in the conference room at the NRA Head Office, and on numerous occasions had to move to the hallway to work when meetings were taking place.

GST was replacing seven taxes - Restaurant & Food Tax, Entertainment Tax, Domestic Sales Tax, Professional Services Tax, Hotel Accommodation Tax, Import Sales Tax and Messages Tax. Working with Crown Agents (CA) in the first few months of the project, we had a few priority issues to address. Firstly, we needed to form an implementation team to work with all the short and long term CA consultants, build a governance structure that will oversee the implementation of the project, and design an implementation plan that will guide the implementation process. The aim was to keep the implementation team as small as possible, and when we recruited internally, we were lucky to have two great people to work with us on the project - James Tengbeh, now the Assistant Commissioner of Audit at NRA and Kenei Kangbai who now leads the Tax Audit Unit at the Large Taxpayers Office. James was the first person to join the team and, throughout the implementation, both of us worked closely with CA consultants, sometimes till late in the evenings working on building systems, designing tax policy, drafting the GST law, designing the publicity plan and engaging stakeholders.

Regarding the governance structure, the project team decided to form a Project VAT Oversight Committee later renamed Project GST Oversight Committee (PGOC) to oversee the project. About that name change. At the start of the project, the tax was called Value Added Tax (VAT) but was later changed to Goods and Services Tax when the then Minister of Finance, John Benjamin suggested we rename the tax GST as it was easier for citizens to understand the new tax and aid communication in our local languages while removing the negative connotation (false) perception of VAT, as being a tax that would excessively increase pricing. The PGOC had five (5) thematic areas: Policy; Legislation; Publicity & Tax Education; Information, Communication & Technology; and Human Resource Management. The PGOC was chaired by the Commissioner-General Dr John Karimu and Co-Chaired by Ousman Barrie, the DCG and the Crown Agents Team Leader, George Blankson. The plan was to make the PGOC very inclusive as we recognised the importance of the private sector. Therefore, private sector players including the Chamber of Commerce, Sierra Leone Indigenous Business Association and the Institute of Chartered Accountants of Sierra Leone were members, and the public sector was represented by NRA, Ministry of Finance and Ministry of Trade. The PGOC's thematic areas reported to the main PGOC and were first tasked with designing an implementation plan for the project. With the governance structure, implementation plan and project team in place, we were primed to move things forward. In subsequent years, the project engaged in the following activities:

. A vital step in implementing a new tax is to get the policy decisions right. The policy decisions determine how the tax is structured and the impact the tax will have on citizens, businesses, the economy and tax revenue. The policy options eventually feed into the tax law. In the first few months of the GST Implementation Project, the PGOC had to decide on various aspects of the new tax, e.g. the tax rate, the type of exemptions, the GST threshold, the appeals process, the penalty structure etc. The PGOC decided to use a rigorous process of analysing each policy option in terms of its impact on the economy, the revenue yield, and its application in other African countries. The project team worked with the Revenue and Tax Policy Division of the Ministry of Finance to develop three policy papers for the Minister of Finance, which formed the basis of the Draft GST Bill.

The new tax needed a home as the PGOC decided that it would be a separate unit until the tax stabilised. Since GST was a new tax, we followed international trends in structuring the new unit. The new GST Administration Unit was structured along operational functional lines of Tax Registration & Services, Returns & Payments Processing, Audit and Enforcement; with a separate policy unit. The two other tax departments of Income Tax and Customs & Excise were structured differently along tax types lines but eventually changed to functional lines to reflect international best practice.

After getting Board approval to form the GST Administration Unit, we then proceeded to recruit a brilliant group of staff that continue to make a positive impact on the organisation. We trained these staff in collaboration with Crown Agents.

. Lessons learnt from other countries that had implemented VAT/GST including Ghana, made it imperative to execute a very robust publicity campaign to ensure that all the relevant stakeholders including the government, private sector and citizens understood the complexities of the new tax. As we embarked on the nationwide publicity exercise, we made presentations to the cabinet with the President, Dr Ernest Bai Koroma present, Parliamentarians, Government MDAs and Local Councils. We also organised workshops for universities and colleges, holding engaging discussions on the campuses of Njala University, Fourah Bay College and the Institute of Public Administration and Management.

VAT/ GST had been implemented in over one hundred countries before Sierra Leone. We understood that implementations had failed when the education of taxpayers was not made a priority; therefore, we were determined not to make similar mistakes. Registered taxpayers were classified as critical stakeholders in the GST administration process as they charge the tax on behalf of the government and remit monthly. To ensure businesses were ready for the tax, we adopted two approaches – workshops with business groups and one-on-one education of all taxpayers that we registered for the tax. Those interactions were exciting as it was the first time the tax authority had actively engaged taxpayers for a tax handle. I still remember an interaction with a business group up in a high building at their headquarter in the central business district of Freetown where the discussions got so heated that James Tengbeh and I joked after that we thought they were about to throw us off the roof. Experiences of such however prepared us for future engagements when we actively administered the tax.

In addition to the interactions with all the relevant players, we were actively present in the media having discussions on radio and TV, and to this day, I cherish memories of those discussions, which were sometimes held at night to capture a wider audience. We also designed and distributed tax information leaflets and brochures, erected billboards and regularly engaged taxpayers at roadside tax clinics in business districts.

The story of enacting the GST Bill into law is one of the most excellent shows of political harmony I have seen in Sierra Leone. The GST implementation process started in 2006, under the administration of the late President Dr Ahmad Tejan-Kabbah, but was fully implemented by the new government in 2010. When Parliament was debating the GST Bill, in 2009, both sides of the political aisle were very supportive of the new tax law. During informal interactions with Members of Parliament, I found it very encouraging that MPs interacted very well while we had lunch in some instances, with most of them being excited about the impact the tax will have on the country as a whole. I still crave to see such a great example of political harmony amongst politicians for national development. Of particular note at the time was the Honourable Chernor Bah, who then was the Head of the Legislative Committee; he was very instrumental in assisting the implementation team in navigating the legislative process in Parliament.

. For the tax to operate appropriately, we had to register businesses that had met the GST registration threshold of Le200 Million (approximately US$50,000 at the time). We deployed teams nationwide to undertake the registration of taxpayers. I still remember that we had to revise our strategy several times to tackle the challenges we were faced with during the registration exercise.

In addition to registering taxpayers, GST staff also verified the stock of goods for all goods re-sellers. The objective of the stocktake was to determine the amount of tax credit taxpayers were eligible for when the tax became operational. It was a big selling point for businesses to accept the tax.

Tax administration in Sierra Leone had purely been manual, as the tax authority kept taxpayers’ information in files and cabinets. We wanted to change that as the tax world was moving digitally. To support this initiative, Crown Agents allowed us to use the VAT Information Processing System (VIPS) they had developed and used in several African countries. VIPS, which is still in use, enables the tax authority to record tax return and payment information.

The start date for the tax was slated for 1st September 2009. However, in July 2009, the business community complained to the government that they had not set up the administrative structures within their businesses to administer the tax. As such, they indicated their unreadiness. The government heeded to their request; with the President requesting the NRA to work closely with the business community for further education and support. In collaboration with the business community, a new date of 1st January 2010 was then slated as the start date to administer the tax.

By November 2009, we were thick into the implementation of the tax and the rigours of the job was having a toll on my health. I had to be admitted to the hospital for a week as I was drained from all the travelling nationwide, engagement with the business community and managing the whole project. The lesson learnt from that episode was that no matter how challenging the job is, you must find time to rest, unwind and take care of your health.

In the first weekend of 2010, we were thick into the Christmas and New Year celebrations which are usually very entertaining and hectic in Sierra Leone, when we were summoned to the house of the then Financial Secretary - Edmund Koroma, to discuss the imminent start of the tax on the 4th of January 2010 (the first working day of the year). There were rumours that the business community would strike and prices for goods and services will increase by 15% (the GST rate). We needed a strategy as the government was determined for the tax implementation to be successful.

It was Monday 4th January 2010, and there was chaos on the streets of Freetown as the business community closed their shops and business houses were protesting the new tax. Most businesses had increased their prices by 15% as rumoured, and unfortunately, this wasn't envisaged, more so after the delay from the initial start date.

Another issue of concern was that of the stocktake, to determine the amount of credit businesses could record in their books for reclaim from future sales. In the transitional provisions of the new GST Act 2009, businesses could claim Sales Tax on all the goods they had in stock (the reason for the stocktake). The problem was that businesses hadn't paid Sales Tax for most of the goods they had in stock, and some of the businesses never provided supporting documents for the goods they had in stock. With NRA refusing to accept all of these unsupported claims, the businesses felt hard done and were protesting against the authority's position on the matter. We needed to find a solution and had to involve higher-level government. The President, Dr Ernest Bai Koroma was out of town; therefore, the Vice President, Chief Samuel Sam-Sumana, had to intervene. The message from the President was explicit, and that was the tax implementation should proceed as planned. By the end of that first day of GST implementation, the 4th January 2010, the Vice President had convened a meeting with government officials including the then Minister of Finance, Dr Samura Kamara and business community leaders to give them the message that there is political will for the new tax and the tax would be implemented. To ensure that prices were not increased by 15%, businesses were allowed to claim Sales Tax on all the goods they had in stock. A settlement was reached, and GST was ready for take-off.

In the next few weeks after implementation, the GST team continued to actively engage businesses to ensure they understood how to calculate the tax, the records that should be maintained and how to complete a GST return.

Over the years, the GST Act 2009 has been amended several times by various Finance Acts to reflect current business trends, shore up revenue for the government and clarify provisions for taxpayers. However, to improve the operation of GST in Sierra Leone and help businesses grow, the various policy considerations should be considered to help improve the operation of the tax which will enhance the business climate and also ensure our GST legislation is in line with global trends in taxation.

The GST threshold determines the businesses that are registered to administer the tax, as taxpayers that have a turnover equal or above the GST threshold should register for GST. The current GST threshold is Le 350 Million (approximately US$ 35,000), which is much lower (in US Dollar terms) than the GST threshold set in 2010 of Le 200 Million (about US$ 50,000 at that time). The primary purpose of placing a relatively high GST threshold is only to register businesses that can properly administer the tax. GST thresholds are usually revised or set high to reduce the compliance cost of SMEs in accounting for the tax in terms of record-keeping, return filing and other legal requirements. Accounting for GST limits the productivity and growth of SMEs, as they could spend the money used to account for these taxes to grow their businesses, leading to an improvement in the overall business climate. A high GST threshold is also beneficial to the tax authority as administrative and overhead costs are reduced in dealing with a relatively high number of taxpayers that pay little or no GST. This would assist the NRA to concentrate on improving the tax efficiency for GST and other taxes. There will be fears that a high GST threshold will encourage businesses to suppress their sales to stay out of the GST net, however, NRA can improve compliance with the GST threshold when their Integrated Tax Administration System (ITAS) is introduced.

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