How a falling currency raised personal income taxes without an act of the Legislature
If you earn United States dollars in Liberia, your income tax has gone up since 2011. You were not told. The Legislature never voted to raise it.
In 2011, a worker earning US$700 a month paid approximately US$78 of that amount in personal income tax (PIT). By 2025, she was paying about US$130 on exactly the same salary. Neither her salary nor the tax schedule changed. The only variable that changed in the tax calculation was the exchange rate: the Liberian dollar lost value, and she paid the price.
At the 2011 annual-average exchange rate of L$72.23 per United States dollar, her US$8,400 annual salary converted to approximately L$606,700, and she paid 11.1 percent of it in tax. By 2025, the average rate had reached L$192.94. The same salary converted to approximately L$1.62 million, and the share she paid rose to 18.6 percent. Over a full year, she paid US$629 more in 2025 than in 2011.
This is a tax increase caused by currency depreciation, not by a legislative decision.
How the Increase Happens
Liberia’s personal income tax (PIT) schedule took its current form under the Consolidated Tax Amendments of 2011. It follows a conventional progressive structure, reflecting the principle that those who earn more should contribute a larger share of their income in taxes. The first L$70,000 of annual taxable income is exempt. Above that threshold, successive portions of income are taxed at marginal rates of 5, 15, and 25 percent. In form and intent, there is nothing unusual or inherently flawed about the design.
The difficulty lies in how the schedule interacts with Liberia’s dual-currency economy. US dollars circulate alongside Liberian dollars and are widely used to pay formal-sector wages, but the PIT schedule is expressed entirely in Liberian dollars. Under Section 6 of the Revenue Code, a US-dollar salary must therefore be converted into Liberian dollars before the applicable tax liability under Section 200 can be determined.
When the current PIT schedule was enacted in 2011, its thresholds and base amounts reflected the exchange rate prevailing at the time. As the Liberian dollar depreciated, those amounts were not adjusted to keep pace. The currency moved; the statutory amounts remained fixed. More than a decade later, the PIT schedule remains anchored to exchange-rate conditions that no longer exist.
As the Liberian dollar depreciates, a fixed US-dollar salary enters the tax calculation as a larger Liberian-dollar amount. The table cannot distinguish between an increase caused by a raise and one caused solely by depreciation. It sees only the larger figure and pushes that figure further up the table, exposing more of it to higher marginal rates. In effect, the calculation treats depreciation as though the worker had earned more.
The tax-exempt threshold provides the clearest illustration of what depreciation does over time. Under 2011 exchange-rate conditions, the L$70,000 exemption protected approximately US$969 of annual income, or US$81 a month. By 2025, it protected only about US$363 a year, or US$30 a month—a decline of 62.6 percent. The exemption itself remained L$70,000; what changed was the amount of US-dollar income it kept outside the tax net. In practical terms, a worker could earn approximately US$969 a year and remain exempt under 2011 conditions. By 2025, a worker had to earn no more than approximately US$363 to remain outside the tax net.
In addition to bringing previously exempt workers into the tax net, depreciation can push a fixed US-dollar income across band boundaries farther up the schedule. The resulting burden is not evenly distributed. Simulations show that the difference in the share of income paid in tax under the 2011 and 2025 exchange-rate conditions peaks at approximately 8.1 percentage points near an annual income of US$11,076—the 2011 US-dollar equivalent of the threshold at which the top band begins. Beyond that point, the difference narrows as the effective rates under both conditions approach the top marginal rate of 25 percent.
The calculations hold US-dollar income constant to isolate the tax effect of currency depreciation. How the purchasing power of that income changed between 2011 and 2025 is a separate issue.
The Law Anticipated This Problem
Section 8 of the Revenue Code requires the Minister of Finance and Development Planning to examine the movement in the annual-average exchange rate by January 31 each year. If the movement reaches the threshold specified in the law, the Minister must adjust the Liberian-dollar amounts in the Code proportionately. The adjustment may operate upward or downward, and the resulting amounts may be rounded.
The operative word in the statute is “shall.” This is not a power the Minister may choose to exercise. It is a duty that must be performed when the trigger is met. Because the PIT thresholds and base amounts are Liberian-dollar amounts stated in the Code, they fall within the scope of Section 8.
One part of the provision nevertheless remains unclear. Section 8 sets the trigger at “ten basis points.” In ordinary financial usage, that means one-tenth of one percentage point, an unusually low threshold in this context. Even if the phrase were read much more conservatively to mean a movement of at least 10 percent, the condition was met several times between 2011 and 2025. The ambiguity may affect how often an adjustment was required, but it does not explain why the table was never adjusted at all.
The institutions responsible for tax policy and administration have acknowledged the problem. In April 2024, the Liberia Revenue Authority’s (LRA) Tax Expenditure Report noted that applying Section 8 would “significantly change” the benchmark PIT table and the resulting tax-expenditure estimates.
A joint report published by the Ministry of Finance and Development Planning (MFDP) and the LRA in August 2025 went further. It stated that depreciation has significantly eroded the thresholds, caused “widespread bracket creep,” and brought previously exempt low-income earners into the tax net. It also warned of the consequences for fairness and progressivity and called for the schedule to be reviewed and revised.
The concern has since entered the wider public discussion. Writing in the Liberian Observer in August 2026, Luther N. Mafalleh also drew attention to the erosion of Liberia’s PIT thresholds and the unequal burdens produced by the outdated table.
Despite these acknowledgments, as of September 4, 2026, the LRA’s own tax-education page still instructs taxpayers and employers to calculate personal income tax and wage withholding using the PIT table enacted in 2011.
The question, then, is no longer whether Section 8’s trigger was ever met. It was. What has not followed is the determination and adjustment required by the law.
The continued use of the 2011 table despite official acknowledgment of the problem points to a weakness in implementation. Section 8 imposed a duty but did not support it with a complete administrative framework. Three gaps are apparent: the Code does not prescribe how the responsible institutions should coordinate the adjustment; the January 31 deadline is disconnected from the budget process; and Section 8 neither requires publication nor specifies what follows if the deadline is missed.
The second gap deserves emphasis. The January 31 deadline is poorly positioned. Under the former July-to-June fiscal year, it fell during budget execution. Under the current calendar-year system, it falls one month after execution begins. In both cases, the determination sits outside preparation of the budget it will affect. Its effect on personal income tax collections is therefore not incorporated by design into the revenue forecast or proposed budget. The deadline may also arrive before the Central Bank has published the completed annual-average exchange rate on which the determination depends.
None of these gaps prevented the implementation of Section 8. Taken together, however, they left implementation dependent on ad hoc coordination and ministerial action rather than a routine, transparent process linked to the fiscal calendar.
What Should Be Done
Two things must now happen. The effects of fourteen years without adjustment must be corrected, and the annual process must be made to work.
The first step is to give the PIT table a new starting point. Applying the change in the annual-average exchange rate between 2011 and 2025 would raise the tax-exempt threshold from L$70,000 to approximately L$187,000. The other thresholds and base amounts would rise by the same proportion. No tax rate would change, and no band would be added or removed.
The L$187,000 figure is only illustrative. The final figures should be based on the latest completed and certified annual average available when the amendment is enacted. Section 8 does not say how adjustments missed over many years should be recovered. The clearest route is therefore for the Legislature to amend Section 200 and replace the existing PIT amounts with the rebased figures.
Using the exchange rate for this correction is appropriate because the distortion measured here arose through exchange-rate conversion. That does not settle what measure should govern future adjustments. Nor would the rebase affect only US-dollar earners. Because Liberia uses one PIT table for both currencies, it would also affect workers paid in Liberian dollars. MFDP and the LRA should use taxpayer data to estimate the effects across income levels and currencies of payment, including the likely effect on revenue. This proposal concerns the PIT table; other Liberian-dollar amounts in the Revenue Code require separate review.
The second step is to make the annual process work. The phrase “ten basis points” should be replaced with a clear threshold. A cumulative movement of 5 percent would avoid changing the table for every small fluctuation while preventing its value from drifting too far before an adjustment is made.
That movement should be measured from the exchange rate used when the table was last set or adjusted, not simply from the previous year. If the threshold is not reached, the reference rate should remain in place. Otherwise, a series of smaller movements could accumulate without ever triggering an adjustment.
The determination date should also move from January 31 to April 30 so that it falls within the budget-preparation cycle. The Central Bank of Liberia would certify and transmit the completed annual-average exchange rate by March 31. The Minister would make and publish the statutory determination by April 30.
This timing would allow MFDP and the LRA to model its effect on PIT collections and include it in the revenue forecast before the proposed budget is submitted in October. If an adjustment is required, the LRA should publish the resulting PIT table and withholding guidance by June 30. This would give taxpayers and employers six months to revise payroll systems before a new schedule takes effect the following January 1.
A determination should be published every year, including when no adjustment is required. The law should also provide a clear fallback if the Minister misses the April 30 deadline. Silence must not allow an outdated table to remain in force indefinitely.
One question remains before this process becomes permanently automatic: should the table move both upward and downward when it applies to workers paid in two currencies? The answer matters. A rule that reduces the burden on United States-dollar earners during depreciation could increase the burden on Liberian-dollar earners during appreciation. We can correct the accumulated distortion now while deciding what rule should govern future adjustments.
Rebasing the PIT schedule would likely reduce collections relative to leaving the existing table unchanged. The size and distribution of that effect, however, can be established only through the taxpayer-level analysis proposed above. That estimate could inform the timing of implementation. If the full correction cannot be absorbed in a single year, the Legislature could phase it in over a fixed period. Fiscal constraints may shape the timing, but they should not be made to turn fourteen years of non-adjustment into a permanent tax policy.
This proposal does not decide whether Liberians should ultimately pay more or less in personal income tax. That is a decision only the Legislature can make. The principle is simpler. Changes in the share of workers’ income taken in tax should result from an explicit policy decision. They should not occur quietly because the currency moved against thresholds that no one adjusted.
A tax burden that rises because a duty went unperformed is not deliberate tax policy. It is taxation by default.
Nyane C-Jay Wratto is an independent researcher and former Assistant Commissioner for Tax Policy at the Liberia Revenue Authority. He served at the Authority from 2016 to 2023, including as Manager for Statistics and Revenue Forecasting. The views expressed are entirely his own.
Sources and Calculation Note
Central Bank of Liberia. Annual Report 2012, p. 28. View report.
Central Bank of Liberia. Annual Report 2025, pp. 48–50. The narrative on page 49 reports a 2025 annual-average exchange rate of L$192.94 per United States dollar, while Table 13 on page 50 reports L$192.98. This article uses L$192.94; the difference does not materially affect the results. View report.
Liberia Revenue Authority. “Domestic Tax Education.” Accessed September 4, 2026. View page.
Liberia Revenue Authority. Tax Expenditure Report. April 2024, p. 6, n. 3. View report.
Mafalleh, Luther N. “Equal Pay, Unequal Tax Burden: How Outdated Income Thresholds Are Hurting Liberian Workers.” Liberian Observer, August 2026. View article
Ministry of Finance and Development Planning. Budget Call Circular One, FY2027. August 15, 2026, p. 16. View circular.
Ministry of Finance and Development Planning and Liberia Revenue Authority. Liberia Annual Tax Expenditure Report, FY 2023–2024. August 15, 2025, § 2.1.1.1, p. 3. View report.
Republic of Liberia. Liberia Revenue Code, as Amended through 2020, §§ 6, 8 and 200. View Code.
Calculation Notes:
The tax liabilities, effective tax rates, threshold equivalents, distributional comparisons and illustrative rebased figures presented in this article are the author’s calculations. They apply the personal income tax schedule in Section 200 of the Revenue Code to US-dollar incomes converted at the Central Bank of Liberia’s 2011 and 2025 annual-average exchange rates. The calculations hold US-dollar income constant to isolate the effect of exchange-rate conversion.
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