A recent report on tax exemptions in Sierra Leone’s industrial sector has brought to light a significant rise in revenue losses, raising concerns about the long-term sustainability of the country’s tax incentive policies.
The report, launched by Budget Advocacy Network (BAN) in partnership with the National Revenue Authority (NRA) and the Ministry of Finance on Wednesday, 26th March 2025, revealed that tax exemptions now account for a shocking 60% of domestic revenue losses.
According to the report, between 2018 and 2023, tax exemptions in the industrial sector surged from NLe 177 million to NLe 3.5 billion—a nearly 20-fold increase. Over the same period, the sector’s GDP contribution grew from NLe 8.9 billion to NLe 35.6 billion, with the mining sector being the primary driver of this expansion.
However, despite this economic growth, the rising volume of tax exemptions has significantly impacted the government’s ability to mobilize domestic revenue for essential public services and infrastructure development.
The report warns that poorly structured incentives could lead to revenue leakages, administrative inefficiencies, and economic imbalances. It recommends a shift towards a performance-based tax exemption framework, ensuring that incentives are granted based on measurable economic contributions rather than broad-based tax holidays.
Drawing comparisons with Kenya, Ghana, Rwanda, and the Philippines, the report highlights best practices that could improve Sierra Leone’s tax policies. Countries such as Ghana and the Philippines have introduced stricter oversight, automated exemption approvals, and periodic performance evaluations to enhance transparency and accountability. The report suggests similar measures for Sierra Leone, including public disclosure of tax exemptions, the establishment of a centralized oversight body, and the introduction of time-bound, sector-specific incentives.
The report also mentioned that while tax exemptions have played a role in industrial growth, their unchecked expansion has resulted in significant fiscal losses. It calls for urgent reforms to balance investment incentives with sustainable revenue collection, ensuring that tax policies support long-term economic development without undermining national finances.
During the launching of the report, NRA Commissioner-General Jeneba J. Bangura acknowledged the role of tax incentives in attracting foreign investment and stimulating industrial growth but cautioned against their growing fiscal burden. She noted that exemptions in the mining subsector alone escalated from NLe 137 million in 2019 to NLe 2.45 billion in 2023, with tax reliefs on petroleum excise and the Goods and Services Tax (GST) contributing heavily to the forgone revenue.
Alarmingly, the report highlights that in recent years, the revenue forgone from mining exemptions has surpassed the actual revenue collected from the sector.
The manufacturing and construction subsectors have also benefited from tax exemptions, yet their contributions to domestic revenue remain extremely low. In several instances, the revenue forgone in these sectors exceeded the actual tax revenue collected, raising questions about the effectiveness of current tax policies.
In response to these challenges, the Government of Sierra Leone has initiated reforms aimed at improving the transparency and management of tax exemptions. The Tax and Duty Exemption Act of 2023 seeks to streamline exemptions by introducing clearer eligibility criteria and performance-based incentives. The report further recommends periodic impact assessments, enhanced public disclosure of beneficiaries, and a more targeted approach to tax incentives that prioritizes job creation and technology transfer.
Bangura reaffirmed the NRA’s commitment to collaborating with stakeholders to refine tax policies that balance industrial growth with fiscal sustainability. She emphasized the need for collective efforts to implement the report’s recommendations, ensuring that tax incentives serve as a tool for sustainable development rather than a growing liability.
