By Hassan Osman Kargbo
A new report by the Budget Advocacy Network (BAN) has revealed that tax exemptions in Sierra Leone’s industrial sector are causing substantial revenue losses, with the mining sector receiving the largest share of these exemptions.
The report, titled “Tax Exemptions in Sierra Leone’s Industry Sector: Who Wins, Who Loses,” was launched Wednesday, 26th March 2025, at the Ministry of Finance’s conference room, with funding support from Christian Aid Sierra Leone.
The findings of the report raise serious concerns about fiscal inefficiencies and the long-term impact of tax exemptions on the country’s economic health.
The report indicates that tax exemptions for the industry sector have surged dramatically, increasing from NLe 77 million in 2018 to NLe 3.5 billion in 2023, a rapid rise that is especially concerning given that the industry sector now accounts for 60 percent of the country’s total revenue forgone due to tax exemptions, up from 39 percent in 2018. This growing gap between the increase in exemptions and the slower pace of revenue growth has become a serious fiscal challenge for the country.
Abu Bakarr Kamara, the National Coordinator of the Budget Advocacy Network, emphasized that the industrial sector, which includes mining, manufacturing, energy, and construction, has been a significant driver of Sierra Leone’s economic growth. Since the 2018 rebasing of the national GDP, this sector has shown considerable expansion.
Kamara pointed out that while tax exemptions have played a role in stimulating growth and attracting foreign investment, they have also led to fiscal inefficiencies and significant revenue losses, undermining the country’s ability to generate domestic revenue.
The report notes that the growth in the industry sector’s GDP—from NLe 8.9 billion in 2018 to NLe 35.6 billion in 2023—has been driven largely by mining and quarrying. However, the sector’s growth has not been accompanied by a proportional increase in revenue collection, suggesting that tax exemptions may be benefiting these industries to an extent that is no longer sustainable. The mining sector, in particular, has disproportionately benefited from these exemptions, raising concerns about the long-term sustainability of such practices and the overreliance on extractive industries.
The findings also highlight that tax exemptions, though intended to encourage production and investment, come with significant risks. A study by the World Bank estimated that tax exemptions reduced government revenue by 2.1 percent of GDP in both 2009 and 2019, underlining the fiscal dilemma facing policymakers. The key challenge is balancing the need to attract investment and stimulate economic growth with the need to ensure fiscal sustainability and avoid excessive revenue losses.
One of the critical issues identified in the report is the lack of transparency in the process of granting tax exemptions. The report asserts that the non-transparent nature of the exemption process creates opportunities for misuse and inefficiencies. In particular, the mining sector has benefited disproportionately from tax incentives, raising concerns about the fairness and sustainability of these policies. The lack of an efficient monitoring and evaluation framework has made it difficult to track the effectiveness of these exemptions and ensure that they are being used appropriately.
Jeneba Bangura, the Commissioner General of the National Revenue Authority (NRA), was vocal in her comments on the report, emphasizing the importance of monitoring compliance with tax policies. “There is no way you can set a tax regime without the National Revenue Authority playing a key role in it,” she said, stressing that it is the NRA’s responsibility to implement and enforce tax policies effectively. She also highlighted the importance of rejecting policies that are poorly designed or inefficient.
The report suggests several reforms to address the issues identified, including the introduction of performance-based incentives and consolidating exemptions under a unified framework. These reforms would aim to create a more transparent, targeted, and performance-driven incentive structure that promotes sustainable industrial growth without compromising fiscal stability. The report also calls for better monitoring and oversight to ensure that tax exemptions are used appropriately and in a manner that aligns with the country’s long-term economic goals.
In conclusion, the report issued by the Budget Advocacy Network paints a stark picture of the fiscal challenges posed by tax exemptions in Sierra Leone’s industrial sector. While tax incentives have played a role in spurring economic growth, they have also led to substantial revenue losses, creating long-term risks for the country’s fiscal health. The report calls for urgent reform in the tax exemption framework, with a focus on transparency, performance-based incentives, and stronger compliance monitoring to ensure that the industrial sector continues to grow sustainably while contributing to the country’s revenue generation efforts.
