NEWS Transition Report Exposes Poor Management and Wasteful Spending at NRA Posted by on Jul 16, 2008, 13:57

The National Revenue Authority was enacted under the National Revenue Act 2002, and is mandated to collect both direct and indirect tax.  This was extended to the collection of non-tax revenues in 2004.

The two main departments of the NRA in the discharge of its functions are: the Income tax department which covers all income, entertainment and travel taxes and the Customs and Excise department. The organizational structure of NRA comprises the Board of Directors followed by the Commissioner General and his deputy supported by directors and commissioners.  The Income Tax department comprises the large tax payers section for companies, partnerships and sole proprietors with a turnover of over Le 20m and 3 income tax districts for sole proprietors with a turnover of less than Le 20m.

The Customs ands Excise department comprises 12 out stations, 1 long room and outdoor departments

a.      Funding

NRA funds its operations from 3% of dues collected for the government and also from financial assistance from donors.  In 2004 the World Bank donated vehicles to the tune of $33,995 for Capacity Building under PMSMII.  In 2005 and 2006 it received IT equipments for Customs department from Intertek to the tune of Le 78,171,995 and $43,340 respectively.  In 2007 the Commonwealth Secretariat funded workshops to review the draft consolidated customs law for £6,000.  Also in 2007 the DFID provided $23,062 for the Financing of Maritime Flexible Anti-Smuggling Team (FAST) activities

b.      Operations

A five-year agreement was entered into between Intertek and NRA for the provision of Pre-Shipment and Destination Inspection.  This agreement is subject to renewal on the basis of six-month evaluation of the services of Intertek by NRA.

In 2002, it was decided that all countries must meet the International Shipping and Port Facility Code (ISPF Code) otherwise no ship would be allowed to go to affected countries.  In that respect the Sierra Leone Government and the Sierra Leone Ports Authority signed a contract with Intertek International Limited to effect the scanning requirement.  The equipment are owned by Intertek.  Within this agreement charges are levied based on the size of containers as follows:

20ft Container                       US$100

40ft Container                       US$200

According to the Agreement, the proceeds from scanning fees are distributed as follows:  NRA 7.5%, Sierra Leone Maritime administration 2% and Intertek 90%.  The 7.5% of the scanning fees should be paid into the Consolidated Revenue Account at the Bank of Sierra Leone.

Ship Registration is governed by the Merchant Act and the SLMA started registering ships in 2005. Currently over 400 ships are registered with the SLMA and Ship Registration Fees are based on tonnage of ships which are paid into the General Revenue Account at the Bank of Sierra Leone.

Non-Tax Revenues include all licenses, administrative fees, work permits, passport fees, Administrator’s General Office (AG) and other fees collectible by Ministries, Departments and Agencies of Government (MDA) not covered in the Income Tax Act or the Customs Act. NRA officials stationed in the MDAs collect such revenues and the amounts are paid into the Consolidated Revenue Fund at the Bank of Sierra Leone.

VISA Stickers were introduced in 2005 and distributed to the various missions.  The monies collected on these stickers on issue are remitted to the Consolidated Revenue Fund at the Bank of Sierra Leone. NRA charges 3% royalty on Gold, Diamonds and other minerals and this royalty is distributed as follows: Mines Monitoring Officers – 10%, Mining Community Development Fund-25%, GDDO – 25%, Independent Valuers – 15%, Consolidated Revenue Fund – 25%. The Preventive and Special Service Division (PSSD0 was introduced to discourage smuggling of goods.  On apprehension of smugglers, in addition to the normal duties, they are required to pay a fine that is equivalent to six (6) times the normal duties.  As an incentive, 25% of such fine is given to informant and this is payable from an Anti-Smuggling A/C to which 50% of the total fines are lodged.  The normal duty plus 50% of the fines are paid directly to the Revenue Account.

The Duty Free Import in respect of NGOs and Embassies is authorized by the Commissioner General.

The NRA based on an agreement, would allow established and reputable organizations to clear their goods upon payment of a percentage of the total due (say 40%) with an agreement that the balance fees due would be paid at an agreed date.

The Customs Department collects Road User Fund on petroleum products on behalf of the Sierra Leone Roads Authority (SLRA).  Monthly transfers are made to the Road User Funds Account maintained at SLRA.

c.Financial Status

The Bank Balances as at August 2007 was Le 869,813,000 and cash in hand was Le 71m.  The authority had no Investments (Treasury Bills and Bond) for the same period. Receivables were Le 1,52m.  Total liabilities were Le 649m.

d.Human Resource

There were a total of 497 employees

e.Fixed Assets

NRA does not own any building of its own.  Most of its premises are on lease and cost on the building is mostly rehabilitation and refurbishment.

f.Issues and Recommendations

The Transition Team noted that there are too many departments.  There should be an organizational review and restructuring of NRA.  Certain departments could be combined (e.g. Corporate Secretariat and Legal Affairs; Modernization Programme Office and Monitoring. Research and Planning; the Information Technology should be a unit within the Finance Department)

There is also a weak internal control over general revenue collection.  The responsibility for the prevention, detection and correction of errors, fraud and irregularities rest on management.  A detailed system review (operational and accounting) should be conducted to ascertain the adequacy of the present system.  There are a lot of leakages in the system.  Having a sound system of accounting and internal control would at worst minimize the incidence of improprieties.

The team further noted that there are too many vehicles. Vehicles should be purchased on a need assessment basis (There should be an approved Annual Procurement Planned and capital Expenditure Budget and all purchases should be within the bounds of the approved budget).  Further, there is a need to carry out a comprehensive physical inventory of key assets (e.g. Motor Vehicles and Plant and Machineries) in order to ascertain their existence and condition. Too much money is being spent on rent.  The Authority should consider building its own structure and renovate existing customs and excise buildings. The tendency of employees being posted based on political connection rather than merit.  There is need for staff appraisal especially for senior and middle management team. Tax rate are the highest in the West African Region.  Government should review the tax rate and increase the tax net (a lot of people/ business in the informal sector are not paying/or are evading tax). The Team noted that Management intends to build a Revenue Training Centre.  It is the view of the team that existing educational structures (internal and external) should be explored to meet the training needs of staff of NRA.

The team realized that the area of tax/duties exemptions and waivers is a grey one and could be a recipe for loss of revenue.  We recommend that a comprehensive list of approved organizations should be compiled and reviewed on a regular/annual basis.  Furthermore supervisory controls should be instituted to ensure full compliance. The team discovered a lot of tax evasion spanning from Parastatals (most of these are not paying PAYE, Withholding tax, Corporate Tax); Donor-sponsored projects (not paying PAYE and Withholding Tax) but fail to pay over obligations/liabilities to NRA (Income Tax).  We advise that Management of parastatals should be summoned to special meetings on these issues (backed by formal letter to ensure full compliance to the relevant legislation/Acts).  A detailed debt management team should be constituted to look into the indebtedness of Parastatals and MDA in terms of their obligations to NRA.The last audited statement of accounts was in 2004. The 2005 audit though done is yet to be finalized as the draft is with the management for comments.  The 2006 statements have been submitted to the Auditor General for appointment of Auditors.  The team recommends that the audit be accelerated as the last opinion given by the auditors in the 2004 accounts qualified the opinion due to incompleteness of revenue collection.