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CHAPTER 10
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FISCAL PERFORMANCE versus DEVELOPMENT PLANNING
Introduction
The freedom to determine its fiscal policy combined with an independent
foreign policy is the backbone of a sovereign state.
British refusal to acknowledge the authority of the Liberian
settlers to impose duties on trade was the immediate cause of
the creation of the Liberian State in 1847. The same disputed
authority had been one of the causes of the numerous conflicts
the Liberian Government had with tribal people (see Chapter 2).
The pledging of certain revenues, the appointment of foreign
fiscal advisors and the subsequent limitation of the fiscal
policy had constituted violations of Liberia's sovereignty o.n
various occasions in the country's history. The decision to
grant long-term tax exemptions to foreign investors had led to
accusations that this was endangering the sovereignty of the
nation by limiting fiscal freedom of future generations. Today,
many a "sovereign nation" is confronted with the necessity to
make decisions which solve a critical fiscal situation but
still respect its sovereignty. One of the African countries
which fa.ced and continues to face this dilemma is Liberia.
Broadly speaking the revenue of the Liberian Treasury comes
from three major sources. First, income generated by the country's
trade with other nations; the main source of revenue in
this category comes from duties on imports. During the first
century of its existence (1847-1951) the country derived most
of its income from this source. Secondly, internal revenue which
until 1951 was mainly composed of a per capita tax (the Hut Tax)
and the Emergency Relief Fund Tax (1). In that year the introduction
of income tax legislation and the simultaneous taxing of
Firestone's profits changed this picture. Income from international
trade plus internal revenue constitute the domestic revenues.
Lastly, the Government obtains funds through international assistance.
This includes both assistance in "cash" (grants and
loans) and in "kind" (missionary activities providing educational
and medical services; military assistance; financial and other
expert advice, food aid, etc.). This source of income grew in importance
during Tubman's long reign over Liberia (1944-1971) and
its importance for the financing of the country's development efforts
has increased since 1971. The assistance in kind from
churches and philantropic organisations will here be excluded
from Government's revenue in conformity with international practice
and also because of the lack of data inherent to the nature
of this assistance.
Without proper data it would be difficult to judge a country's
fiscal performance. Data collection, however, is a difficult and
thankless task in Liberia as in other developing nations with a
comparable degree of backwardness.