Cameroon’s Tax System Triggers Debate at the Nkafu Policy Institute

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Cameroon’s Tax System Triggers Debate at the Nkafu Policy Institute

A debate organized by the Nkafu Policy Institute at the Denis and Lenora Foretia Foundation has examined the taxes systems currently operating in Cameroon. The event that took place Thursday the 23th of January 2020 at the Mansel Hotel in Yaounde code named the Nkafu Debates brought together fiscal experts and business consultants from Cameroon and beyond to examine the best system suitable for a struggling economy like that of Camerooon.

A concept note from the Yaounde bases civil society group shows that there exists a limit to which an increase in taxes leads to more government revenue according to Arthur Laffer. His thesis according to the Nkafu Policy Institute demonstrated by the Laffer curve says: “Too much tax kills tax.” In other words, if tax rates are too high, people would not work hard leading to less income and profits for the government to tax.

Based on the Laffer curve, two schools of thought can be derived. The first school supports that a favorable taxation regime acts as a catalyst for the development of start-ups, foreign direct investment and private investment. The second school demonstrates that an unfavorable tax rate negatively affects investment decisions, economic growth and employment.

Arguing for the fact that more taxes will increase fiscal revenue in Cameroon included Alain Florentin Zouga, associate policy researcher at the CPARC and Marylse Noussi, Jurist and policy analyst. The other panel against this notion consited of Ngeh Edison, Tax Consultant and Entrepreneur at EDOAN Consulting and Ndikombui Nigel, Auditor and Senior Tax expert at Goodwill Consulting.

The panel from an objective point of view examined both schools of thought and proposed solutions to the pending gaps, urging that both government and citizens have a role to play in finding a consensual pathway to taxation and economic growth in the country

In Africa, governments tend to increase taxes in order to gain more revenues. Indeed, falling prices in oil exports and poor economic structures have led to a rapid cycle of indebtedness hence reducing available resources to finance public goods and services. Taxation then becomes an internal strategic tool used by governments to solve this situation. However, African countries face a dilemma. Indeed, an excessively heavy tax burden might crush activity while an excessively low one can starve an economy of the ‘oxygen’ it needs to advance.

In Cameroon, taxation remains the first obstacle to the development of entrepreneurial activities (General Census of Enterprises, 2016). Indeed, high taxes prevent entrepreneurs to fully establish and flourish their activities. The corporate tax (33% in total) and the value-added tax (19.25%) remains high compared to countries like Nigeria or Rwanda.

In addition, each year the government of Cameroon creates ‘new taxes’. For example, in the 2019 Budget, a flat rate of 200 F CFA per application was created for software and application that are downloaded online via phone or tablet. Moreover, the 2020 Budget bill projects to increase taxes on cosmetics and artificial hair just to name but a few. (sources: Nkafu Policy Institute)

The above situation has led to the development and the predominance of the informal sector in Cameroon. Indeed, the majority of businesses prefer to remain informal (i.e. approximately 89% of small enterprises) to avoid being charged high taxes. Consequently, the government cannot fully collect the projected amounts.

The debate will discussed the best way for governments in Africa to increase fiscal revenues with a focus on Cameroon. However, the main question sort to know if Cameroon would prioritize more taxes or high tax rates to increase fiscal revenues. It also focused on comparing the views of different Cameroonian experts on the best method for optimizing fiscal revenues in Cameroon.

participants at the debate learn about the different tax systems

The event brought together participants from various fields of expertise: economists, government officials, speakers, entrepreneurs, humanitarian organizations, non-governmental organizations, academics and researchers, students, the general public and civil society actors. Main areas included Taxation, Fiscal Revenues, Tax System, Small Business, Entrepreneurship, Economic Development, Economic Emergence, Public Policies.

Participants at the debate gained more understanding of taxation, the benefits and challenges of high tax rates, recognized the best path for fiscal mobilization in Cameroon, the profits and problems related to tax compliance as well as apprehending the reforms needed for a good tax system in Cameroon.

 

Source: Bantu Voices

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2020-02-14T11:40:26+00:00February 14th, 2020|actions, debate, Reportage|