Tax Expenditures Cost Lomé Nearly CFA60 Billion in 2019 (Report)

Public finance

Monday, 06 September 2021 18:42

Tax Expenditures Cost Lomé Nearly CFA60 Billion in 2019 (Report)

(Togo First) - For the first time, the ministry of economy and finance released, last June, a report assessing how much the State loses as a result of tax exemptions it introduced. In this article, Togo First takes a closer look at the 28-page document elaborated by the Togolese Revenue Office (OTR). The report, authorities said, aligns with continuous efforts to improve governance, especially in the management of public finance. These efforts help position the country as one of the most transparent in terms of budget visibility.

CFA56.9 billion or 10.3 % of tax revenues

CFA56.9 billion. That is how much the Togolese State failed to earn because of tax incentives. These incentives include abatements, reduced rates, exemptions, tax reductions, and special schemes. The amount, according to the tax authority, represents 10.3% of cash earnings and 1.3% of the country’s GDP.

92% of the tax expenditures assessed

The report identified 312 tax expenditures or special provisions in the general tax code, the finance law, the custom code (national and ECOWAS’), the free-trade zone agreement, the investment code, the mining code (national and WAEMU’s), special conventions and other regulatory laws. The five categories of tax assessed are value-added taxes, customs duties, other excise duties, corporate taxes, statistical charges. Based on available data, 290 out of the 312 (92.9%) identified provisions were assessed.

VAT grabs the lion’s share

While most of the identified provisions fall under headquarters agreements, incentives related to the value-added tax (VAT) cost the most in the national budget. According to the OTR (the tax revenue authority), the measures related to this tax cost CFA31.7 billion. Meanwhile, for corporate taxes and customs duties, losses incurred amount to CFA18.3 billion and 5.6 billion respectively.

Trade and industry, the biggest winners

Trade is the sector that benefited most from tax expenditures in 2019. Losses incurred due to incentives introduced in this sector cost the treasury CFA17.1 billion or 30% of the total value of tax expenditures. Again, the biggest share -CFA15 billion- went to VAT-related exemptions.

After trade, sectors that benefited most from tax expenditures two years ago were industry (CFA13 billion or 23.7%) and transport (CFA11 billion or 19.7%). Tax expenditures related to education, health, and social action represent only 1.4% of the overall value of tax expenditures. Agriculture is not better off.

The special provisions profited mainly businesses, which captured two-thirds of the value of the tax expenditures in place over the year reviewed. Next come associations, NGOs, international organizations, and diplomatic representations with respectively 12.8%. Measures targeting households represented only 3.8% or all tax expenditures.

Fiacre E. Kakpo

REFORMS OVERVIEW

STARTING A BUSINESS (more info)

At the fifteenth position, worldwide, and first in Africa, under the Starting a Business index of the 2020 Doing Business ranking, Togo sustains its reformative dynamics with more reforms….

ENFORCING CONTRACTS (more info)

Compared to some years ago when it was one of the lowest rankers under the Doing Business’ Enforcing Contracts indicator, Togo, leveraging many efforts to improve its business climate, was able to jump significantly on the index in the recent years... .

CONTRACT EXECUTION (more info)

Creation of special chambers of commerce for small debts • Creation of chambers of commerce at the Court of Appeal • Civil and commercial cases now handled by distinct clerks • Establishment of commercial courts in Lomé and Kara • Lawyers and bailiffs now have access to the FORSETI COMMERCIAL platform • A maximum period of 100 days was fixed to settle a commercial dispute .

TRADING ACROSS BORDERS (more info)

In comparison to previous years,Togo has significantly improved its ranking under the“Trading across borders” indicator by adopting multiple reforms that focus mainly on the digitization and reduction in delays, for import and export procedures related to import and export.

In comparison to previous years, Togo has significantly improved its ranking on the “Trading across borders” index by adopting multiple reforms that focus mainly on the digitalization and reduction in delays, for import and export procedures related to import and export.

CONSTRUCTION PERMIT (more info)

After moving from the 133rd to 127th place under the 2020 Doing Business’ construction permit index, Togo intends to reiterate this feat in the coming edition of the global ranking. To this end, it has introduced this year multiple reforms.

GETTING ELECTRICITY (more info)

Over the past two years, Togo’s ranking under the Doing Business’ Getting electricity and water indicator has increased consistently. Owing this performance to multiple reforms aimed at making it easier for businesses to access power and water, Lomé plans to introduce even more reforms this year to keep up its improvements.

REGISTERING A PROPERTY (more info)

Out of all the 'Doing Business’ indicators, Property Registration is where Togo has improved the most since 2018. Indeed, after spending years in the lowest part of this ranking, the country now seeks to beat Rwanda which is the best performer on this index in Africa. To do so, Lomé has been introducing many reforms, with the latest batch implemented this year.

PUBLIC PROCUREMENT (more info)

From professionalization to digitization, through legislative regulations, Togo’s public procurement framework is constantly being modernized. Several reforms have been implemented to improve the sector much to the benefit of the private sector, which is the focus of the National Development Plan.

PAYING TAXES AND DUTIES (more info)

To improve its business environment, Togo introduced some important reforms related to the payment of tax and duties. From the replacement of some taxes to the cancellation of others through exemptions, the country has only one objective: offer the most attractive tax framework to investors and economic operators. To achieve this, the authorities relied on digitization.