Evaluating the Liberia Revenue Code: A Strategic Framework for Combating Illicit Financial Flows and the Informal Sector

Abstract

This paper critically examines the Liberia Revenue Code (LRC) for its efficiency in revenue  collection and its capacity to address illicit financial flows (IFFs) and the informal sector. It  explores how weaknesses in policy design, enforcement mechanisms, and institutional  capacity have limited the Code’s effectiveness in reversing revenue losses and expanding the  formal tax base. Drawing on relevant fiscal, legal, and economic literature as well as practical  developments within the Liberian context, the analysis demonstrates that while the LRC  provides a foundational tax framework, it lacks the structural provisions to effectively  combat the twin challenges of IFFs and informality. The proliferation of unregulated financial  activities and informal enterprises continues to erode Liberia’s tax base, undermining efforts  to achieve economic stability, equity, and development. The paper calls for the development  and implementation of a national strategy anchored on empirical research, institutional  strengthening, legal reforms, and digital innovations to ensure greater fiscal sustainability,  improved compliance, and a formalized economic environment conducive to national  development. It argues that without strategic intervention, the fiscal cost of these phenomena  will continue to widen, and the state will remain handicapped in delivering on its  developmental mandate.