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DRAFT

BUSINESS AND RENT SURVEY REPORT

MONITORING, RESEARCH & PLANNING (MRP) DEPARTMENT

NATIONAL REVENUE AUTHORITY

SECTION ONE
1.0 INTRODUCTION
With the commerce and business sector booming now in Sierra Leone and the growing need to liberalize the
economy, there seems to be a paradigm shift towards more of domestic taxation and less dependence on
international trade taxes. However, a major limitation in attaining an effective and substantial revenue

mobilization through domestic taxation is the dearth of reliable and comprehensive database of business
entities and rented property countrywide.
The then Income Tax Department in 2004 conducted a Business and Property Survey covering the Western
Area. Although some credence may be given for such an exercise, the survey result cannot be considered as
being reliable due to the fact that the process of collecting the data was marred with bias and unscientific
methodology. Also, the Business and Statistics Unit of Statistics Sierra Leone conducted a Business Survey in
2005 covering the entire country. But, the data collected could hardly adequately suit the needs of NRA.
Mindful of the fact that the ultimate quality and success of many institutions around the world are borne out of
the time, resources and effort directed in research of new concepts, ideas and thoughts that are very central to
the planning process of the activities they undertake. Also, as human resource capacity largely influence the
effective and efficient functioning of every organisation, so does research on issues fundamental to the vision
of an organisation influence the quality of the strategic goals and mutually reinforcing objectives that guide
the business plan of that organisation and the development of new goals and objectives.
1.2 Objectives of the 2013 Business and Rent Survey
1.2.1 General Objective of the Business and Rent Survey
The general objective of the Business and Rent Survey is to provide NRA management with up to date data of
businesses in the major cities of Sierra Leone.
1.2.2 The Specific Objectives of the Business and Rent Survey
The specific objectives of the Business and Rent Survey are as follows:

determine the number and location of businesses nationwide

determine the category and nature of businesses in each region

determine the legal status of businesses in each region

determine the number of houses/ business premises as well as the amount of rent payable

determine the amount of withholding tax on rent payable to NRA

ascertain the tax compliance of businesses countrywide

ascertain business prospect in the different regions

determine factors affecting businesses

1.3 Structure of the Report


The report is divided into Three Parts. The first part of this report is organized into Two Sections. Section one
gives a summary background of the Business and Rent and the survey objectives. Section two covers the
sample design and coverage, questionnaire development, pre-testing and fieldwork, organization of the survey
and data collection, sample achieved and data processing and analysis.
The second part of the report (Part Two), is organized into three sections. Section One covers the business
enterprise survey- which targets all business enterprises operating in the country (businesses with fixed
location and business addresses). Section Two covers the tenant survey- which targets institutions that are
renting properties (MDAs, UN Agencies, and Non-Governmental Organizations) and Section Three deals with
the Landlord Survey-which targets Landlords of rented buildings in the country.
Part three of this report highlights the summary of the field observation and the findings from the data
analysis. This part also proposes policy recommendations based on the findings and observations.

SECTION TWO
2.0 SAMPLE DESIGN AND COVERAGE
The business and rent survey had a total sample of 8235 establishments selected both from the public and
private sectors and allocated among the four regions covered in the study. Establishments from the public
sector were selected purposively; while those from the private sector were selected using various techniques.
For example all the registered businesses including commercial banks, insurance companies, mining
companies were included in the sample; whereas selection was made for wholesale and retail trade, and other
services (tourism, transportation and communication) construction and manufacturing establishments based
on the size of employees. The TIN registration database maintained by the National Revenue Authority was
used as the main sample frame for the selection of business establishments included in the sample.

The survey was a nationwide survey, covering the regional towns of Freetown, Kono, Kailahun, Pujehun, Port
Loko, Tonkolili, Bo, Bonthe, Moyamba, Koinadugu, Kambia, Bombali and Kenema. However, the data
collection were carried out mainly in Freetown, the capital city since majority of business establishments had
their head offices based here in Freetown.

2.1 QUESTIONNAIRE DEVELOPMENT


The questionnaire was developed through a consultative process between the Monitoring Research and
Planning Department and the Domestic Tax Department, wherein staff from both departments were invited to
make meaningful input to the proposed questions designed to capture business and rent information. Some
form of pre-testing was done in order to finalize the instrument. The questionnaire captured information such
as:

Business identification
Employment and welfare
Business registration and legal status
Withholding tax information
Record keeping and filling of returns
Financial status of business
Tax status
Business prospect
Problems and solutions

2.2 PRE-TESTING AND FIELDWORK


The training program for enumerators and supervisors was followed by a one day pre-testing of the different
sections of the draft questionnaires by the supervisors in the Western Urban and parts the Western Rural Area.
The questionnaires were later amended to reflect the observations made during the pre-testing exercise.

2.3 ORGANISATION OF THE SURVEY AND DATA COLLECTION


The business and rent survey was conducted in line with the Income Tax Act 2000, which makes it mandatory
for all business establishments operating in Sierra Leone to keep proper records of their daily business
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activities. The Act further stipulates that information received would be kept confidential and used only for
tax purposes. A letter signed by the OIC Monitoring Research and Planning Department of the National
Revenue authority was sent to key business establishments to encourage business owners/executives to
provide the relevant information relating to their business and to assure them of the confidentiality of the data
collected.
Training of enumerators was conducted for two days in the Western Area from September 2013 at the Saint
Anthony Parish Hall Freetown and in the provincial cities of Bo Kenema and Makeni on October 2013. A
total number of 210 enumerators and 30 supervisors were recruited and trained for the data collection
exercise. After the training workshop, the questionnaires were distributed to the supervisors; and the Western
Area was sub-divided into ten zones. Field work commenced on September, 2013 in the Western Area and on
October, 2013 in the provinces and lasted for two weeks. The survey was designed such that the business
premises were visited several times so as to get the requested information from the businesses. The
Coordinators and the Principal Coordinators of the survey monitored the data collection exercise on a daily
basis in the Western Area as well as in the provinces through telephone and other means to assist enumerators
and supervisors to do their work effectively and diligently. Additional visits were paid to some business
establishment in the Western Area and the provinces to validate the data collected in each of these
establishments.

2.4 SAMPLE ACHIEVED


The business and rent survey targeted 10,000 establishments; out of these establishments targeted, 8,235
(82.3%) were successfully interviewed. That is, 5,599 business establishments, 1,929 tenants and 707
landlords were successfully interviewed. The non-responses (17.7%) were largely due to delay in retrieving
the questionnaires as well as outright refusal to provide the relevant information.

2.5 DATA PROCESSING AND ANALYSIS

Following the completion of the data collection exercise, the completed questionnaires were thoroughly
checked by the supervisors, for accuracy and completeness before returning them to the Monitoring Research
and Planning Department (MRP). The returned questionnaires were thoroughly screened to ensure that every
section was correctly and completely filled out and verified against the responses from the respondents. The
data entry exercise was centralized at the Statistics Sierra Leone Head Office and was done within a month.
The data entry was done using Microsoft Access program and the captured database was later exported into
Microsoft Excel and Statistical Package for Social Scientists (SPSS) software programs for analysis. The data
validation was carried out to ensure additional quality control. Frequencies and tabulations for analysis were
done using SPSS and Microsoft Excel software programs.

SECTION THREE
3.0 PRESENTATION AND ANALYSIS OF SURVEY RESULTS
3.1 INTRODUCTION
The Business and Rent Survey questionnaire contained 11 parts, 9 intended to address business enterprises
operating in the country, 1 intended to identify institutions that are renting properties and 1 intended to target
landlords of rented buildings in the country. Six of the eleven parts covered themes that together addressed
relevant tax issues on both past/current business performance and future expectations. The tenant and landlord
questionnaire were similar in scope but each modified slightly to suit the special needs of the survey.

Business Enterprise
3.2 Distribution and Socio-economic Characteristics of Respondents
Sierra Leonean Regions differ widely in terms of size and level of economic development, thus the number of
respondents per region was expected to differ accordingly. Figure 1 shows the number of respondents who
completed the business enterprise questionnaire per region. As expected, the highest number of respondents
had their businesses located in one of the three most economically developed Regions: Western Area, Eastern
and Northern Region. These account for 64, 14, and 12 percent of respondents, respectively. The lowest
number of respondents came from Southern region(10 percent of total). The results for this region are often
differing substantially from the country averages and results for other regions. Findings for Southern region
have to be interpreted with caution - due to the low number of responses, it is not necessarily clear what drives
the difference is it regional specific or lack of representativeness in the sample.

14%

64%

12%

East

10%

North
South
Western Area

2%

6%

8%

4%

1%
1%
2%
2%
1%
1%
10% 1%7%

54%

Respondents businesses also differ substantially among the provincial towns in terms of their location (Figure
2). The provincial percentages range from 1 in Pujehun to 54 in the Western Area Urban.
Sex
Out of a total of 5,518 valid respondents for the business enterprise, 4,263 (about 77 percent) were male and
1,255 (23 percent) were female. This shows, however, and supports the fact that businesses in Sierra Leone
are largely owned by men. Female ownership and control is very minimal as shown in Table 1.
Table 1: Respondents Sex
Percent
Percent

of

Percent

Region
West
South
East
North
Grand

Male of Male
Female Female
Total of Total
2667
62.5
887
70.5
3554
64.4
418
9.8
123
9.5
541
9.8
649
15.2
117
9.2
766
13.9
529
12.5
128
10.8
657
11.9

Total

4263

100.0%

1255

100.0%

5518

100%

Table 1 showed that the number of males interviewed throughout the country more than four times greater
than female.

Educational Level
The level of education of business owners is significant in the area of administration, management and control
of operation and personnel and also relevant in the areas of record keeping, finance and accounting and in
determining the tax liability at the end of the tax period.

The study showed more than three-quarter of the taxpayers interviewed could read and write. See Figure 3
below:

12%

2%
35%

11%

33%

7%

That is, about 33 percent of them completed secondary education and 12 percent completed university
education, 11 percent completed technical education, 7 percent only completed primary education and 2

percent completed other form of education. However, 35 percent could not adequately read or write simply
because they never attended school.

Business Identification
Distribution of businesses by industry
Figure 4 shows the distribution of businesses by industry. The result shows that trades account for the highest
percentages (84%) of business establishment canvassed, this is followed by other services (4%). The share of
manufacturing is 2 percent, which fell below other services and hotel and restaurant with a share of 4 percent
and 3 percent respectively.
90%

84%

80%
70%
60%
50%
40%
30%
20%
1%

3%

4%

1%

1%

2%

Co
ns
tr
uc
tio
n

un
ic
at
io
n
m
Co
m

M
an
uf
ac
tu
rin
g

0%

1%

Se
rv
ic
es

1%

O
th
er

2%

In
su
ra
nc
e

10%

The high proportion of business enterprises operating in the trade industry could be attributed to the highly
selective sampling technique which was skewed towards capturing small and medium enterprises. Also,
amongst the business enterprises that are engaged in trade activities; significant proportion engaged in retail

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trade (82 percent) where as 5 percent and 13 percent engaged in wholesale and both retail and wholesale trade
activities respectively. This is shown in Figure 5.

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

82%

5%
Retail

Wholesale

13%

Both

The analysis according to activity as set out in Figure 6 below, reveals that the majority of the respondents
operate in sole proprietorship. This is closely followed by partnership business. Companies have the least
representation; however, as this is a specialized area in taxation, this should not affect the representativeness
of the responses received. Overall, all business activities in the Sierra Leonean economy are represented in the
results received, once again ensuring no significant bias regarding area of activity.

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90%

82%

80%
70%
60%
50%
40%
30%

13%

20%

5%

10%
0%
Sole Proprietorship

Partnership

Company

Employment and Welfare


Business Registration and Legal Status
The first step in tax compliance for businesses is registration for taxes. Essentially, all business enterprises
must register for income tax; sole proprietors and the members of partnerships must register separately for
income tax (while companies are automatically registered for cooperate tax along with income tax). Business
enterprises with a turnover over Le are required to register for GST and firms with employees must
normally register for PAYE and Payroll tax.
Overall 52 percent of the respondents reported that they have registered their businesses with OARG before
operating. When respondents were asked if their businesses are registered with NRA, 53 percent of valid
responses reported that they have registered their businesses with NRA. On the other hand, 48 and 47 percent
of the valid respondents did not register their business with OARG neither NRA respectively but they will at
least to some extent likely to register their businesses. This is shown in Figures 7and 8 below.

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53%

52%

53%

52%

52%

51%

51%

50%

50%

49%

49%
48%

47%

47%

48%

48%
47%

46%
45%

46%

44%

45%
Yes

No

Yes

No

Tables 2 and 3 below focus on the data by region. It appears that businesses in the Western Area and the
Southern Region are the ones most oriented toward the registering their businesses with OARG or NRA:
Almost 58 percent of the respondents in the Western Area reported they have registered with OARG or NRA,
while only 42 percent of the respondents reported they had never registered with OARG or NRA. By contrast,
in the Eastern region (which, like the previous two mentioned, is a relatively urbanized region), only
51percent of respondents say they had registered their business with NRA and 48 percent reported they had
never registered their businesses. Northern region has low number of registered businesses with both OARG
and NRA but roughly 70 percent of respondents reported that they had never registered their businesses.

Table2: Is your business registered


with the OARG?
Region
Percent
Yes
West
58.5
South
47.1
East
43.5
North
26.5
Average
43.9

No
41.5
52.9
56.5
73.5
56.1

Table3: Is this business registered


with the NRA?
Region
Percent
Figure 9 below provide a picture of Yes
business sectors
Noregistered
West
57.2
42.8
with either OARG or NRA. Among respondents in the four
South
53.2
46.8
East
51.8
48.2
regions, the highest registered business enterprises are those in
North
31.4
68.6
Average
48.4 that is 57,51.6
retail trade, wholesale
and hotel and restaurant
31 and

3 percent respectively. Similarly, only 1 percent of respondents in each of the other sectors reported to have
registered with either OARG or NRA.

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57%

60%
50%
40%

31%

30%
20%
10%

1%

1%

1%

3%

1%

1%

1%

1%

1%

1%

M
an
uf
ac
tu
rin
g

Co
ns
tr
uc
tio
n

Se
rv
ic
es
O
th
er

In
su
ra
nc
e

un
ic
at
io
n
m

Co
m

W
ho
le
sa
le

0%

Figures 10 and 11 focus on employment. As might be expected, among business enterprises, those with
permanent employees are relatively more likely to report registering their businesses with OARG or NRA for
tax purposes than those with temporary employees. Similarly, among business enterprises, those with below
100 employees were the least likely to report they had registered with OARG or NRA for tax purposes than
those with over 100 employees.

14

500+

6%

101 to 500

13%

1 to 100

38%

No Employee

0%

500+

43%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

5%

101 to 500

11%

1 to 100

40%

No Employee

44%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Making profits in 2011

15

With good and prudent financial management system, accommodating business environment, right type of
customers and the correct human resource management, businesses are expected to make profit year in year
out. However some businesses may fall short of expectation due to unfavourable circumstances and still
continue to be in operation even though they would not be making profit. Normally, business people are very
conservative about revealing the profitability of their business especially businesses that do not keep proper
records.

54%

46%

The survey tried to bring out whether the established businesses interviewed were able to make any profit in
2011. It is observed in Figure.M12....that a very huge number (54%) did not make any profit in 2011. This
implies that 44% of the businesses made some form of profit in 2011.
Factors responsible for the profit/loss in 2011
At the end of each business year, businesses can either make profit, loss or get at break-even point. For each
of these situations, there are varying factors to be taken into consideration. The survey critically examined
different factors that face the profitability of businesses throughout the country. A whole lot of factors were
highlighted by the 8,235 respondents ranging from high price of products produced/sold to low inflation.
From the alternatives given to the respondents in the interview, it can be observed from Figure..M11....that
42% did not attribute the profit/loss of their business to any of high price for product produced/sold, lower
cost of inputs, stable exchange rate and low inflation but rather to other factors that were not specified. High
16

price for product produced/sold and lower cost of inputs accounted for 28% and 16% respectively. The factor
that was least considered by the business owners is low inflation with 4%.

Other

low inflation

Stable exchange rate

Lower cost of inputs

42%

4%

10%

16%

High Price for product produced/sold

0%

28%

10% 20% 30% 40% 50%

Making profit in 2012


Figure.M10....illustrates the amount of businesses that made profits in 2012. Similar questions on profit
making were asked for 2011 but responses for the two periods vary considerably. In 2011, less than 50% of
the businesses reported that they did not make any profit. However, 2012 shows a different situation in which
54% accepted making profit whilst 46% did not make profit at all. This figure shows that some of the
businesses that did not make profit in 2011 undertook some improvement measures in 2012.

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46%

54%

Yes
No

Factors responsible for the profit/loss in 2012


Like in 2011, a greater percentage (37%) of the respondents reported that their profits/loss are not certainly
linked to high price for products produced/sold, lower cost of inputs, stable exchange rate and low inflation
but are greatly influenced by other unspecified factors. In a similar sequence, high price for product
produced/sold (32%) is another outstanding factor responsible for the level of profit/loss incurred in 2012.
This was similar to that of 2011 in which high price for products produced/sold was the second prominent
factor. Stable exchange rate (11%) and low inflation (5%) were considered least among all the factors
responsible for the profit/loss in 2012.

Other

low inflation

Stable exchange rate

37%

5%

11%

Lower cost of inputs

15%

High Price for product produced/sold


0%

32%
10%

20%

18

30%

40%

Increasing the capital of the business


Surely, increasing the capital of existing business should be among the priorities of any business owner. In
essence, increasing the capital has direct link to business expansion and ultimately resulting to the creation of
more profit. In line with this, respondents were required to reveal their intentions of increasing their capital.
Figure.M9.. gives an outline of whether business owners would want to increase their capital. It was
discovered that 88% were interested in increasing the capital of their businesses with only 12% having no
intention of increasing their capital.

88%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

12%

Yes

No

Means of increasing the capital of businesses


Figure.M7... gives details of some of the means exposed to business owners for increasing the capital of their
businesses. In the previous question about whether entrepreneurs are interested in increasing their capital,
88% reported having such intentions. As presented in Figure..M7..41% of the respondents were interested in
ploughing back profit into the business, 39% would want to take loans to expand their capital and 20% was
willing to take loan and plough back profit into the business.

19

Loans and Ploughing back profit

20%

Ploughing back profit

41%

Loans

0%

39%

10%

20%

30%

40%

50%

Increasing profit
Except charitable organisations and few other businesses that are not established for profit making, but all
business owners aim at making and increasing profits. The more profit a business makes the better it is
expected to take care of its overhead costs and stays in operation. The survey therefore investigated whether
the established businesses interviewed have aim of increasing their profits. Figure.M6....... shows that 88% of
the respondents accepted getting the aim of increasing their profits whilst 12% do not in any way want to
increase the profits of their business.

20

88%
90%
80%
70%
60%
50%
40%
30%

12%

20%
10%
0%
Yes

No

Expanding the business


Except in the case wherein some business owners want to close down business for some other reasons but all
business owners may want to expand their businesses to either other branches or other sectors. The survey
therefore required finding out whether the respondents may actually want to expand their businesses to other
sectors or other branches in the country.

Not at all

Other sectors

32%

10%

Other branches

0%

58%

10%

20%

30%

40%

50%

60%

70%

As observed in Figure.M5...., 58% of the respondents have hope of expanding their businesses to other
branches in the country whilst only 10% want to expand to other sectors. Its a little bit ridiculous to see a

21

reasonably number of entrepreneurs who do not want to expand their businesses at all either to other sectors
or other branches. This group accounted for 32% of the respondents.
Problems affecting businesses in expanding their capital
Figure M13a gives an overview of the main problems affecting expanding business capital in the country. A
countrywide response shows that lack of loan facilities is the most awesome problem facing business owners
in expanding business capital the country. This problem accounted for 30%. High interest rate on loans was
another factor highly reported by27% of the respondents. High taxes (11%) and inability to float shares in
capital market (4%) were factors militating against the expansion of business capital in the country. A
considerable number (28%) of the respondents attributed their inability to expand their capital to other
unexplained factors.
Other

28%

High taxes
Inability to float shares in capital markets

11%
4%

Lack of loan facilities

30%

High interest rates on loans

27%

0% 10% 20% 30% 40%

Problems affecting businesses in maintaining their profits


The problems of maintaining profits are discussed from two fronts; countrywide and regional basis. On
regional front, South, East and North reported declining domestic demand as the most serious problem
affecting their businesses in maintaining profits whilst business owners in the West were very particular of
other factors not specified in the interview. On countrywide assessment as in Figure M14a, 34% of the
respondents reported that fluctuating international price is the most outstanding problems affecting
maintaining their business profits. Next problem in the sequence is declining domestic demand with 31%.
High taxes and low inflation accounted for 15% and 3% respectively. It was also observed from Figure M14a

22

that 17% of the respondents attributed their inability to maintain their business profits to other problems not
specified in the interview.

Other

17%

High taxes
low inflation

15%
3%

Declining domestic demand

31%

Fluctuating international price


0%

34%
10%

20%

30%

40%

Size of initial capital to start a business


The initial capital to start a business is among the priority factors any entrepreneur may consider in setting up
a business. The survey covered eight thousand two hundred and thirty-five (8,235) established businesses
countrywide. As shown in Figure.M3.., 27% of entrepreneurs started business with amount ranging from
Le250,001 to Le500,000. It can also be observed that 24% of the established businesses started with initial
capital of less than Le100,000. This in essence shows that many entrepreneurs especially sole traders would
not want to reveal the initial capital of there businesses

23

More than Le 75 Million

1%

Le 25 - Le 75 Million

1%

Le5 - Le 25 Million
Le 1 - Le 5 Million

2%
3%
17%

Le 500,001 - Le 1 Million

27%

Le 250,001-Le 500,000

25%

Le 100,000 -Le 250,000

24%

Less than Le 100,000


0%

5%

10% 15% 20% 25% 30%

Only 1% of the established businesses was started with an initial capital of more than Le75 million. A total of
6% of the businesses were started with amount of Le1 million and more.

Main source of capital to start a business


One of the main factors affecting the setting up of a business in Sierra Leone is how to raise up the initial
capital especially for indigenous businesses. The fact the income of the average Sierra Leonean is low, there is
a higher tendency for savings to be low. Many people do not want to go for bank loans to start a business due
to the bureaucracy in getting the loan and high interest rate on loans. The survey revealed that 66% of the
initial capital to set up a business is from personal savings. The next highest (19%) source of capital is from
loans from relatives/friends. As seen in Figure..M1.., only 10% starts business with bank loan whilst 5%
accounts for loans for other sources.

24

Others

5%

19%

Loan from relatives/friends

10%

Bank Loan

66%

Personal Savings

0% 10% 20% 30% 40% 50% 60% 70%

Other sources of capital to start a business


Figure M4 shows the level of other sources of capital available to the business owners in the country. It was
observed that 48% of business owner started business with capital raised from their personal income. The next
highest source of their capital was from support from relatives with 20%. The response shows that only 14%
raised their capital from bank loans which appears too small. Loans from friends and other unexplained
sources of capital were least considered as reported in Figure M4.

Others

7%
20%

Support from relatives


Loan fromfriends

11%

Bank Loans

14%
48%

Personal Income

0% 5% 10%15%20%25%30%35%40%45%50%

Payment of rent on business premises

25

The culture of paying tax in Sierra Leone still remains a difficult endeavour for tax collection agency. This is
particularly true of small businesses and other businesses in the informal sector. It is therefore another
complicated task to get information on the payment of rent either from the tenant or the landlord. The tenants
are afraid of divulging information on the amount of money they pay as rent on the suspicion that they will be
asked by their landlords to quite the premises. The landlords on the other side are conscious of the fact that
rental tax is dependent on the amount of money they collect as rent.
The survey therefore sought to find out whether the business people pay rent on their business premises, the
amount paid as rent and time of payment.

24%

Yes
No

76%

Thus, business owners interviewed were asked whether they actually pay rent on their business premises. The
response shows that a greater number of business owners (76%) pay rent on their business premises whilst
24% said that they do not pay rent at all for their business premises.
Problems affecting the expansion of capital of businesses in the country
Naturally, most entrepreneurs would want to expand the capital of their businesses as much as they can.
Expansion of capital to a greater extent has direct connection with the expansion of the overall business.
However, capital expansion is not always possible due to certain disturbing factors. The NRA is not only
interested in collecting taxes from the business people but also in the expansion of established businesses in
26

the country. The expansion of businesses directly increases business income thereby providing the
environment for more tax revenue collection from business entities. Therefore the survey investigated some of
the problems facing the business owners in expanding the capital of their businesses in the four regions of the
country.

Table M13: What problem(s) do your business face in expanding your capital? (%)
Reason
West
South
East
North
High interest rate on loans
27.3
26.5
32.1
23.0
Lack of loan facilities
28.7
44.2
21.5
36.2
Inability to float shares in capital markets 3.9
3.1
4.9
2.3
High Taxes
12.5
8.3
9.6
6.5
Others
27.3
17.6
31.7
31.7

Average
27.2
32.6
3.5
9.2
27.1

Table..M13.....highlights some of the main problems affecting business expansion in the country on regional
bases. Lack of loan facility is the most outstanding difficulty facing business expansion countrywide. On the
average, 36.6% of business owners reported that lack of loan facility is the most prominent problem affecting
the expansion of their capital. High interest rate on loans accounted for average of 27.2% of the problems
facing business expansion. Responses from the four Regional show a varying degree of problems affecting
business expansion. The leading problem in the East is the high interest rate on loans as reported by 32.1% of
the respondents. Unlike the East, lack of loan facilities is the most acute problem facing capital expansion in

27

the West, South and North regions. The least considered problem is the inability to float shares in capital
markets which accounted for an average of 3.5%.
Problems affecting businesses in maintaining their profit
The most plausible aim of an entrepreneur is profit maximisation. All entrepreneurs worldwide, Sierra Leone
not been an exception aspire for higher profits and how to maintain that level. In real life situation, attaining
an enviable success level may not be as difficult as maintaining the position. This is also applicable in
business life where maintaining profit level becomes hard nut to crack. Therefore, apart from finding and
retaining the right type of customers, providing value for money, prudence financial management system, the
survey also investigated some of the main problems facing business owners in the four regions of the country
in trying to maintain profits.
Table..M14.... presents an outline on the main constraints facing the entrepreneurs in maintaining their profits.
Among the main obstacles reported by the respondents in all the regions, declining domestic demand is the
most outstanding issue preventing business people from maintain profits. This on average accounted for
37.2% of the respondents.

Table M14: What problem(s) do your business face in maintaining profit? (%)
Reason
West
South
East
North Average
Fluctuating international price
19.2
16.6
15.3
14.5
16.4
Declining domestic demand
28.2
38.6
39.7
42.5
37.2
Low inflation
1.7
1.5
3.8
4.2
2.8
High Taxes
17.6
14.1
20.4
20.7
18.2
Others
33.1
29
20.4
17.9
25.1
Except for Western Region in which other reasons take prominence, Southern, Eastern and Northern regions
were very much particular of declining domestic demands of the goods. Since almost all the businesses
interviewed deal in goods that are imported from other countries, fluctuating international price also came out
clearly as one of the main problems affecting the profitability of most businesses in the country. 18.2% of the
respondents attributed their of maintaining profits to high taxes.

28

3.4

Withholding Tax

3.4.1

Businesses Awarded Contracts

In identifying businesses that pay withholding tax, it becomes imperative for us to determine the proportion of
those awarded contracts against the ones not awarded any contracts.

Ten percentage of businesses were

awarded contracts 90 percent of them were not awarded contracts.


Figure ... is a Pie Chart showing the percentage of businesses awarded contracts during the study period.

10%

90%

Yes

No

Figure ... revealed that the bulk of businesses in Sierra Leone are not awarded contracts. From the 10 percent
that are awarded contracts, respondents were asked who awarded them contracts. Thirty-nine percentage of
the contracts were awarded by Government, 32 percent by Non-Governmental Organisations and 29 percent
by the Private Sector. Figure ... depicts the percentage of businesses awarded contracts by sector.

29

39%
40%
32%

35%

29%

30%
25%
20%
15%
10%
5%
0%
Government

Non-Government

Private Sector

Figure... indicated that Government is the lead provider of contracts (39%) followed by Non-Governmental
Organisations (32%) and then the Private Sector (29%).

3.4.2

Awareness of Businesses about the 5% Withholding Tax

To determine the knowledge of taxpayers or prospective taxpayers about withholding tax on contracts,
respondents were asked about their awareness of the 5% withholding tax on contract. It is assumed that all
business operators in Sierra Leone are aware of the 5% withholding tax, yet Figure ... shows that only 24% of
the businesses are aware while 76% of them are not aware of the 5% withholding tax on contract.
Figure ... is a pie chart indicating the percentage of businesses that are aware of the 5 percent withholding tax
on contracts.

30

24%

Yes

No

76%

Figure.. illustrates that the bulk of businesses that are not aware of the 5 percent withholding tax, which is
great cause for concern.
3.4.3

Payment of the 5% Withholding Tax

From the 24% of businesses that are aware of the 5% withholding tax, respondents were asked whether or not
they pay the said tax.
Figure.. depicts the proportion of businesses that actually pay the 5% withholding tax.

22%

78%

31

Figure.. revealed that 22% of businesses paid the 5% withholding tax on contract while 78% of them did not
pay the said tax on contract.
At regional level, most of the respondents did not pay the 5% withholding tax on contract.

Of the four

regions in our country, only the South have 61% of businesses that pay the 5% withholding tax while the
remaining regions, that is, the East, North and West have more 5% withholding tax evaders. In the Eastern
Province, only 8.6% of the businesses operating in that region pay the 5% withholding tax while 91.4% of
businesses there do not pay the tax on contract. Only 28% of businesses in the Northern Province pay the 5%
withholding tax on contracts whilst 72% of businesses do not pay. In the Western Area, 26.5% of businesses
pay the 5% withholding tax while 73.5% do not pay. On average, only 31% of businesses in Sierra Leone pay
the 5% withholding tax whereas the majority (69%) of them do not pay. Table .. indicates the percentage of
businesses paying against those not paying the 5% withholding tax on contracts.
Table... Percentage of Businesses Paying the 5% Withholding Tax by Region
Percent
Region
West

Yes

No

26.5

73.5

60.6

39.4

8.6

91.4

28.0

72.0

South
East
North
Average
30.9
69.1
Figure.. shows that almost 70% or more of respondents in all regions have been unenthusiastic about paying
the 5% withholding tax, with those in the Ssouth region recording the lowest (39.4%). Significant responses
were recorded in the north and west with the east recording over 90 percent for not paying the 5% withholding
tax.

32

On the other hand, of the 31% who pay the 5% withholding tax almost half is recorded in the south; 7% in the
east and the north and west had over a quarter of respondents paying the 5% withholding tax
3.4.4

Reasons for not paying the 5% Withholding Tax

Considering how important it is for the authorities to know the reasons for businesses not paying the 5%
withholding tax, respondents were asked why they do not pay the 5% withholding tax. As shown in Figure...,
6 percent of the businesses covered consider the amount payable too small to be paid; 7 percent of them do
not know where to pay while 87 percent cited various other reasons for not paying the 5 percent withholding
tax on contract.

87%

7%

th
er

pa
id
w
m
ou
nt
A

on
't

as

to
o

no
w

sm
all

he
r

to

be

to

pa
y

6%

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Table.. provides an array of reasons for businesses in the different regions not paying the 5% withholding tax.

33

Table..: Reasons for businesses not paying the 5% withholding tax by Region
Reason
West
South
East
North Average
Dont know where to pay
8.7
30.0
3.8
5.2
11.9
Amount was too small to be paid
6.1
40.0
2.2
9.5
14.4
Other
85.1
30.0
94.0
85.3
73.6

3.5

Record

Keeping and Filing

of Returns
A good tax system requires taxpayers to keep records of their business transactions over a given period time,
upon which appropriate tax revenue can be determined. Also, filing of returns promotes voluntary compliance
and enables tax officials to undertake assessment and ascertain the appropriate tax the business should pay.
Our tax laws therefore provide for taxpayers to declare their tax obligations through returns filed for tax
administration purposes.

Respondents were asked whether or not they keep records of their business

transactions. Figure... presents the percentage of businesses that keep records.

40%
60%

Yes

No

In general, Figure ... shows that two-fifth of businesses do not keep records of their business transactions
while three-fifth of them actually keeps such records.

3.5.1

Type of Business Records maintained

The type of business records that respondents keep is of great interest to tax administrators; hence the
question, what records they keep, was posed to them. Figure ... shows the types of business records
respondents keep.

34

58%
60%
50%
40%
30%

18%

15%

20%

5%

10%

4%

the
rs
O

the
rE
xp
en
se
s
O

s/P
ur
ch
as
es

Co

st
of
Sa
le

ldi
ng
W
ith
ho
5%

Sa
les

0%

This indicates that more than one-half of the respondents maintain records of their sales, followed by those
who keep records on payment of the 5% withholding tax and on the cost of sales, which stood at 18% and
15% respectively.

Records on other business expenses and sundry items accounted for 5% and 4%

respectively.
On the other hand, from the 40% of businesses who do not keep records of business transactions, the study
looked at the reasons for not maintaining records. Figure... presents an array of reasons given for not keeping
records of their business transactions.

35

30%

Other

22%

Don't need to file returns

48%

Business is too small

0%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Figure .. indicates that almost half of the respondents considered their businesses too small to keep records a
little less than a quarter do not see the need to maintain records as their business is supposed to file returns.
About one-third stated various other reasons for not keeping records.
3.5.2

Records of Transactions from Start of Business Operations

37%

Yes

63%

No

Figure.. revealed that the majority (63%) of businesses operating in Sierra Leone do not have records of their
transactions from the start of business operations. Hence, respondents were asked why they do not have
records of their transactions from the start of operations and their responses shown in Figure..:

36

30%

Other

22%

Don't need to file returns

48%

Business is too small

0%

5%

10% 15% 20% 25% 30% 35% 40% 45% 50%

37

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