Togo: Government missed out on CFA140 billion from January to September 2023 due to tax exemptions

Public finance

Thursday, 23 November 2023 16:38

Togo: Government missed out on CFA140 billion from January to September 2023 due to tax exemptions

(Togo First) - In Togo, tax exemptions cost the State almost CFA140 billion between January and September 2023, an increase of 18% year-on-year.

The government expects to miss out on CFA146 billion for the whole year. These "illiquid" revenues, i.e. not collected, have a direct impact on public finances but are part of a government strategy to support the economy during crises.

In recent years, Lomé has introduced several major tax exemptions to make people’s lives easier and cope with inflation. The latest exemption introduced is the VAT cancellation for university and company canteens.

In the corporate world, tax exemptions are aimed at fostering investment and economic recovery. For example, construction and public works equipment are exempted from customs duties and taxes.

Agriculture is another sector that benefits from several exemptions, especially on input costs. There are also incentives for new investors, notably in the free trade zones. Companies in difficulty receive temporary support, and NGOs and international institutions benefit from advantageous tax conditions. Customs exemptions are also targeted at certain crucial imports, supporting the local economy.

Despite the impact of these policies on public finances, the Office Togolais des Recettes (OTR) records promising results. The tax office has collected CFA590 billion between January and September 2023, up by 11% year-on-year. This represents about 77% of its annual liquid tax revenue target, CFA765 billion.

However, while the relevance of these exemptions is debated, no recent study has yet assessed their positive or negative impact on the economy. The OTR took a first step in this direction: for some years now, the OTR has been elaborating a detailed table of tax expenditure, including exemptions, reliefs, and tax breaks. This approach, essential for greater transparency, could eventually provide the data needed for an objective assessment of the real impact of these policies on the Togolese economy.

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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.