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Caritas Sierra Leone Calls for Transparent Tax System to Block Foreign Evaders

Participants in the conversation on the Oxfam Australia report dubbed 'Buried Treasure' in Freetown, Sierra Leone. Credit: Fr. Peter Konteh/ Caritas Sierra Leone

The Catholic Church in Sierra Leone, through her charity arm, is demanding accountability in the way the West African country collects and spends taxes on its vast minerals.

The Director of Caritas Sierra, Fr. Peter Konteh observes that lack of transparency in the country’s mining sector is opening up avenues for graft and allowing multinational mining companies to evade payment of taxes.

“A lack of transparency surrounding management of the extractive industries in Sierra Leone renders corruption a less risky and more attractive option for government officials and investors,” Fr. Konteh who also serves as the Director of Caritas Freetown said at an event that was hosted by Women on Mining and Extractive Sierra Leone.

Participants in the Tuesday, July 27 event held a conversation on Oxfam Australia Buried Treasure report titled, “Buried Treasure-The Wealth Mining Companies Hide Around the World.”

In his deliberation on the title of the conversation, Fr. Konteh said, “The term buried treasure simply means tax avoidance as a global problem in which no country is immune. Closing tax loopholes that allow multinationals to get away with not paying their fair share of taxes has a real, tangible impact on people’s lives.”

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The Sierra Leonean Priest made reference to an Oxfam report, which shows that globally, US$8 trillion in financial wealth was hidden in tax secrecy jurisdictions at the end of 2013, meaning US$190 billion a year in tax revenues were lost to governments around the world.

Of this, US$15 billion in tax revenues a year was ripped out of the African continent, the report indicates.

The report further shows that a US$40 million estimated tax lost to Sierra Leone from 2009-2016 is enough to cover the health care of over 67,000 Sierra Leonean women and children for one year under the country’s Free Health Care Initiative.

“The report shows that Iluka Resources operating in Sierra Leone holds about US$500 million in rolling tax offsets, which means the company can use this to deduct huge amounts of tax payable to the government of Sierra Leone, with no end date,” Fr. Konteh says.

He finds it regrettable that Sierra Rutile mine in Sierra Leone, which he says was acquired by Iluka Resources, has paid on average 0.4 percent of total revenues in tax in Sierra Leone since 2009. The mine, he adds, has been operating since the early 1990s.

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Fr. Konteh calls for transparency in the tax systems in the country’s mining sector, noting that it is the only way to restore the people’s confidence in their government.

“Transparency is vital to effective natural resource management because it constitutes the first line of defense against graft and mismanagement and bolsters public confidence in government decision making,” he says.

However, he adds, “in many resource-rich states like ours, licensing and contracting processes often take place behind closed doors, and most mining contracts contain confidentiality clauses that prevent the public from accessing crucial information about the deals.”

“Our brothers and sisters neither have access to the amount of royalties collected by the government nor information about how this revenue is ultimately spent,” the award-winning Priest notable for charity projects in Freetown says.

“When the public is well informed about the tax system, including how much revenue is collected and the laws governing how it should be used, when the media and organized members of civil society can help to organize widespread public concerns into organized and specific demands on government, then we will be better positioned to uproot our God given treasure that mining companies normally hide from us as Sierra Leoneans,” the Priest asserts.

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He notes that the COVID-19 pandemic has brought a lot of challenges to economies, notably the difficulty in tax recoveries by governments.

“The unprecedented COVID-19 pandemic continues to pose a devastating situation for health systems and national incomes globally,” the Sierra Leonean Priest says.

He adds, “Governments continue to strain their fiscal revenues as they implement emergency measures and recovery plans to sustain economies. This also has a significant negative effect on tax revenues, which provides a substantial source of revenue for most nations. Here in Sierra Leone, the pandemic has exacerbated an already dire tax revenue situation.”

The Caritas Freetown Director notes that building an effective tax system is among the most pressing challenges facing many states of the world.

According to the Priest, taxation provides the resources necessary to finance government activities and has equally important implications for economic growth, inequality and governance.

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“Despite this reality, tax debates have tended to remain the preserve of a narrow, technocratic elite, while broader, popular engagement has remained very limited,” Fr. Konteh says.

He says that debate about tax issues has tended to focus on generating additional revenue “in a way that is also supportive of economic growth.”

“This is a hugely important goal, but it is equally important to focus on building tax systems that are fair, transparent and inclusive,” he says, and adds, “These goals are important in order to encourage broader development gains, and because they are essential to enhancing tax compliance and the legitimacy of the tax system.”

The Priest regrets that African countries endowed with a large amount of natural resources are among those with the highest poverty levels, a situation he refers to as “the paradox of plenty.”

“Natural wealth in highly-valued raw materials such as iron ore, gold, diamonds, rutile, copper, or bauxite, which should boost economic development and reduce poverty, has in fact in many countries given rise to poverty, inequality, weakened public services, and stunted economic growth,” he says.

“This is known as the ‘resource curse’ or the ‘paradox of plenty’. The phenomenon cannot be explained solely by the abundance of natural resources. It is essentially due to the links between excessive economic dependence and the policies related to the sharing of profits, and the social and environmental costs involved in the exploitation of such resources,” Fr. Konteh explains.

He reiterates Oxfam’s suggestions for improving the opportunities offered by revenues from extractive industries.

The opportunities include upgrading legal and fiscal frameworks in poor countries with natural resources, renegotiating contracts with big extractive companies, and putting in place or reinforcing public financial management systems.

“These systems should prioritize the use of extractive revenues for social spending, as well as for setting the foundations for the diversification of production, for job creation, and to mitigate the social and environmental impacts of exploitation,” the Director of Caritas Sierra Leone asserts.