Togo Considers IMF’s Suggestion to Reduce VAT Exemptions
Monday, 17 March 2025 17:07 
(Togo First) - In response to the International Monetary Fund’s (IMF) suggestion to cut VAT exemptions to boost its public revenue, Togo plans an in-depth audit of its tax system, before making any changes.
In its latest report, the IMF urged Togo to reform its tax framework to increase public revenue. Key suggestions include reducing VAT exemptions, extending personal income tax (IRPP), and aligning with the global minimum tax for certain companies. Among these, VAT exemptions are the primary focus.
In 2023, VAT exemptions cost the Togolese government CFA60.8 billion—42.4% of total tax expenditure, or 2.6% of GDP. This figure is significant given Togo’s efforts to improve public revenue collection. In 2022, CFA40.8 billion in VAT revenue was also lost due to exemptions.
Despite the IMF’s push, Togo is taking a cautious approach. Authorities fear that abruptly removing VAT exemptions could harm certain sectors and raise living costs. To address this, the government plans to assess VAT exemptions by June 2025 to identify which ones benefit low-income households and which primarily help businesses or wealthier groups.
The goal is to differentiate between “progressive” exemptions that support vulnerable populations and “regressive” ones that favor higher-income groups or specific industries. However, reducing exemptions would likely mean higher taxes on some goods and services, potentially increasing living costs for households that spend most of their income on consumption. Businesses benefiting from current tax breaks may also face reduced competitiveness as they pass on higher costs to consumers or cut investments.
To offset the potential negative effects of the reduction, the IMF has proposed targeted cash transfers for vulnerable populations. The government is working on a comprehensive medium-term revenue mobilization strategy (SMRMT), expected by June 2026, which could include such measures. This plan will rely on a biometric identification system under development to ensure accurate targeting and avoid duplicate benefits. By the end of 2025, half of Togo’s population and most poor households are expected to be registered in this system.
A Delicate Reform
The debate over VAT reform remains contentious. Some economists argue that VAT exemptions protect low-income households’ purchasing power, while others highlight the revenue loss for the state, which limits its ability to invest in infrastructure and public services.
Another issue is special tax regimes, designed to attract investment but also reduces state revenues. The IMF suggests gradually requiring companies benefiting from these regimes to relocate into special economic zones.
Fiacre E. Kakpo
