The Challenges Posed by Tax Incentives in the Extractive Sector: The Case of Liberia

This study examines the challenges posed by tax incentives in Liberia’s extractive sector, with a focus on the mining industry. Tax incentives are commonly used by developing countries to attract foreign and domestic investment. However, their effectiveness, particularly in immobile sectors like mining, remains contentious due to the potential for significant revenue losses and fiscal distortions.

Liberia, emerging from a prolonged civil war, has leaned heavily on tax incentives to revitalize its economy, especially in the resource-rich mining sector. This report provides an in-depth analysis of Liberia’s fiscal regime, including the legal and institutional frameworks that govern mining activities and tax arrangements. It explores the various forms of tax incentives, their policy intentions, and the trade-offs involved, such as revenue forgone versus economic stimulation.

The research identifies key weaknesses in Liberia’s incentive structures, including lack of transparency, poor enforcement, and insufficient oversight mechanisms. It concludes with policy recommendations aimed at reforming Liberia’s tax incentive framework to enhance revenue mobilization, reduce inefficiencies, and ensure that incentives contribute meaningfully to national development.