Sierra Leone: Struggles To Tax Alcohol
As President and Parliament agreed the Finance Act 2017, levels of taxation for imported alcohol products are set to decrease. This decrease comes just one year after a hike in alcohol taxation. With the changes, alcohol will become cheaper again, but remain more expansive than before the initial tax reform in 2016.
The purpose of the Finance Act 2017 was to “continue to improve on tax and other domestic revenue collection …,” according to the Chairman of the Committee on Finance, Hon. Hassan Sheriff.
In 2016, the government had adopted significant hikes on the tax rate for imported alcohol – a policy to increase revenue and promote domestic farmers and Sierra Leone Brewery Limited (SLBL), a subsidiary of the world’s second largest beer producer Heineken. The 2016 Finance Act was seen to give tax concession to SLBL, effectively creating a monopoly in the alcohol market.
Struggling to find proper level of taxation
Only in 2016, Parliament in Sierra Leone ratified a tax on imported alcoholic beverages. Alcoholic beverages with 10% alcohol content and below were taxed at $4.00 USD per liter. Alcohol above 10% were taxed at $6.00 USD per liter.
According to the Commissioner of the Domestic Tax Department, Ibrahim Sorie Kamara, the government faced severe challenges with the implementation of the taxes levied on alcoholic beverages. Mr Kamara explained that setting up and configuration of the software system at Customs and adapt to the were major difficulties.
Commissioner Kamara also disclosed that less, not more, revenue had been collected since the 2016 Finance Act came into force. During the implementation period, people were smuggling products into the country to avoid the tax system.
The 2016 provision has now been repealed by Parliament.
Before August 2016, excise duty on alcoholic beverages was 30%. But Parliament changed it to 40% for beverages below 10% and 45% for those above 10% alcohol content,” Commissioner Kamara explained.
There is still an increase on the excise tax but not like the one made in 2016.
With the Finance Act 2017, alcohol prices will drop.”
Technical knowledge needed for effective alcohol taxation
This back and forth shows the difficulty of finding the proper levels of alcohol taxation and the need to pursue alcohol taxation, not for primarily collecting revenue, but for improving public health and socio-economic development through reducing alcohol consumption and related harm.