The National Revenue Authority (NRA) has raised grave concerns over a press release issued by the Financial Secretary stating that the revenue entity is hugely indebted to the government. The release states that based on self assessment, NRA owes the government Le 16.0 Billion in respect of Pay As You Earn (PAYE) and Withholding taxes on rents, works and services cumulative outstanding over the last five years.
In response to the release, senior officials of NRA have authoritatively stated that the Ministry of Finance owes the National Revenue Authority over 80 billion Leones on several tax issues. A meeting was summoned between NRA and officials of the ministry in which an agreement was reached by the Ministry of Finance agreeing that NRA should withhold their payment to the Ministry of Finance as they owed NRA a cumulative sum of of Eighty-Two billion Leones in the last five years.This is the reason why NRA stopped to honor their tax obligation to Ministry of Finance.
NRA is charged with the responsibility to collect revenue for Government including PAYE (income tax) and Withholding Taxes but cannot touch a single penny of what it collects. It all goes to Consolidated Revenue Fund. NRA itself is run administratively from monies allocated to it by the Finance Ministry. It is from such allocations it pays salaries and other obligations and services such as Rent.
How does Finance Ministry calculate how much to give NRA for NRA to run its operations? By Law, it is by commission. A certain percentage of whatever is collected by NRA is given back to it to conduct its operations as a national revenue collector. This is what the Law says.
All NRA staff are paid Salaries and by Law, all staff should have deductions done as PAYE (income tax) so what gets paid is actually the Take Home After Deductions whilst the deducted amount gets paid back to government as PAYE Income tax.
All suppliers of services and rent also should get deductions done from amounts due them which are then paid to NRA as Withholding Taxes which they can claim later from Government when filing their taxes. Government has been extremely cash-strapped and struggling since Ebola ended. On that note, government has not been able to give the required amounts due to run NRA including payment of full salaries including obligations and services. The government has basically been owing itself by having NRA calculate the outstanding PAYE and Withholding Taxes and mark it down as cash due to be paid to Government. That is why you can see the letter from the Financial Secretary requesting payment says NRA itself did the assessment of what it owes.
The new Government wants to do reconciliation. They asked NRA to state how much Government (Finance Ministry) now owes NRA. NRA says Government owes it 82 Billion Leones which was calculated as the outstanding amount owed from calculated commission due NRA.
Finance Ministry denies and says the money owed is far less than 82 Billion Leones. The Finance Ministry acknowledge that indeed NRA is owed a hefty chunk because Government was running a cash-strapped economy in period of post-Ebola, and post-Iron Ore bust but the Finance officials say though the Debt is theirs but not up to 82 Billion Leones.
The past few weeks have been spent in back and forth calculations of what Government actually owes NRA. Finance Ministry does not want to accept it is 82 Billion Leones so they are now saying they want to do recalculations of all amounts which NRA says it has been raising as revenue paid into the Consolidated Fund. This is why the second part of the letter is requesting the cash flow and bank statements for two of the key revenue areas; namely ASYCUDA (Customs duties) and Admin Fees for processing Duty waivers.
NRA was set up by the former President Ahmad Tejan Kabbah led SLPP Government that ruled the country from 1996 to 2007. After the eleven years rebel war was declared officially over in 2002, the biggest challenge facing the government was how to raise revenue from domestic sources, enough to pay salaries and meet government’s other basic financial commitments.
Since its inception, NRA has played an invaluable role in raising much needed revenue. Commendable is the fact that ever since it started operations, NRA has year after year exceeded the annual targets set by World Bank, IMF and the Ministry of Finance for revenue collection.