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91. Barriers To Formalization Of Businesses In Cameroon: High Tax Rates

Publication Date:
02-2021
Content Type:
Special Report
Institution:
The Nkafu Policy Institute
Abstract:
Clearly expressed in its National Development Strategy 2020-2030 (SND30), Cameroon’s desire for the coming decade is to achieve sustainable growth driven by the manufacturing industry. Thus, the government hopes to increase (i) manufacturing value-added from 14.5% in 2017 to 25% in 2030 and (ii) the share of manufacturing exports to 54.5%. However, in the absence of an efficient industrial sector, the economy tends to specialize in the “end of the chain” activities, including extraction (mining and oil) and subsistence agriculture on the one hand and trade and services on the other. According to the Third Survey on Employment and the Informal Sector conducted by Cameroon’s National Institute of Statistics in 2018, nearly 90% of the Cameroonian labor force remains trapped in the informal sector. The sector comprises a set of individual companies – generally nonagricultural – that operate on a small scale and are not registered with the competent authorities. Many entrepreneurs choose to operate informally because of barriers to formalization. For example, businesses spend an average of 624 hours to make 44 payments per year to the tax authorities. The total tax rate remains one of the highest in Central Africa, at 57.7% of business profits than 47.1% in Gabon (World Bank, 2020).
Topic:
Labor Issues, Business, Tax Systems, Economic Development, Sustainability, Labor Market, and Informal Economy
Political Geography:
Africa and Cameroon

92. Should We Consider A Post-Covid-19 Reform Of The VAT In Cameroon?

Publication Date:
03-2021
Content Type:
Special Report
Institution:
The Nkafu Policy Institute
Abstract:
The COVID-19 pandemic so far has had a profound impact on the global economy. The containment measures adopted by governments to curb the spread of the disease have curtailed business activities, making it impossible for companies to adequately meet their tax obligations. As a result, forecasts for customs revenues and internal tax resources have been revised downward, mainly due to the closure of borders. Collected both at the borders and within the country, Value Added Taxes revenues have naturally been very negatively affected by the crisis. In Cameroon, losses related to value added tax in 2020 were estimated at CFAF 298.017 billion, representing 50.73 percent of recorded tax losses, which is hardly surprising. Value-added taxes are identified as the main source of tax revenue in Cameroon. They were estimated at 44.73% of tax revenue in 2019 and about 7% more than in 2016. The importance of VAT in tax revenue mobilization requires an examination of the Cameroonian tax system, particularly the factors that could explain a reform of the tax. Moreover, given that Cameroon is at high risk of external debt distress (IMF, 2018), there is an urgent need to find new ways to ensure the continued sustainability of public finances. This Tax Policy Letter analyzes the rationale for VAT reform in Cameroon. First, we present the severity of the economic repercussions of the coronavirus health crisis at the level of VAT revenues in Cameroon. Noting that VAT is the main source of indirect tax revenue – 60.19% in 2019 compared to 54.54% in 2016, for example – we then examine the guiding principles that govern its collection and application in Cameroon. A careful examination of these principles has allowed us to analyze the benefits associated with a reform of this tax on final consumption.
Topic:
Economics, International Political Economy, Tax Systems, Macroeconomics, Fiscal Policy, and Revenue Management
Political Geography:
Africa and Cameroon

93. The Declaration and Payment of Taxes in Cameroon: A Critical Appraisal

Author:
Dr. Louis-Marie Kakdeu, Ulrich D’POLA KAMDEM, and Dinga Tambi
Publication Date:
05-2021
Content Type:
Special Report
Institution:
The Nkafu Policy Institute
Abstract:
The Nkafu Policy Institute is delighted to share with you the results of a report that critically appraises the declaration and payment of taxes in Cameroon. Indeed, since 2004 the Doing Business Index (DBI) of the World Bank has been ranking national economies based on their performance in several domains. One of these domains includes the “paying taxes” indicator. It records taxes and mandatory contributions that medium-size companies must pay in a given year and equally measures the administrative burden of paying taxes and contributions and complying with post-filing procedures. Therefore, the weight of the tax burden remains a decisive element in the attractiveness of an economy as it encourages or dissuades national and foreign investors, widens or reduces the tax base, stimulates or refrains entrepreneurship. During the 2009 and 2016 General Census of Enterprises by the National Institute of Statistics, the following key question was asked to top management personnel: “What are the most important obstacles to entrepreneurship in Cameroon?” Taxation was cited as the first major obstacle regardless of cities, according to National Institute of Statistics reports.
Topic:
Economics, Governance, World Bank, Regulation, and Tax Systems
Political Geography:
Africa and Cameroon

94. Reconciling Tax and Trade Rules in the Digitalised Economy: Challenges for ASEAN and East Asia

Author:
Jane Kelsey
Publication Date:
08-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
As the digital economy expands in scale, scope, and form it poses major challenges for public revenue and tax policy and administration in Asia and other parts of the global South. When attempts led by developed countries at the OECD-led Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to agree on new norms for taxing digital giants like Facebook, Google, and Amazon stalled, individual countries, including a number of developing countries in Asia, began developing their own responses, notably the adoption of digital services taxes. High-level compromises have recently been announced at the OECD, but the details are yet to come and are not expected to address the needs of developing countries to effectively tax the activities of digital giants operating from offshore. As countries seek effective and workable means to tax the digitalised economy, existing and proposed international rules on digital trade in free trade agreements, and plurilateral moves to develop electronic commerce rules in the World Trade Organization, may fetter their ability to do so. To date, very little attention has been paid in trade negotiations to the consequences of these developments for countries’ tax regimes. Nor have the adequacy, effectiveness, and workability of the tax exceptions in trade and investment agreements been properly re-assessed. Many governments are only becoming aware that trade rules may constrains their ability to regulate the (poorly understood and fast moving) digital domain after they have signed up to them. A series of investigations by the US government under Section 301 of the US Trade Act 1974 into digital services taxes, including those adopted by India and proposed by Indonesia, provides a real-world basis on which to assess how binding and enforceable digital trade rules might be used to challenge digital tax measures at the unilateral, bilateral, and multilateral levels. In highlighting these risks, the paper aims to provide a framework for the tax and trade divisions of governments in ASEAN and East Asia to reflect together on the potential for proposed digital trade rules to impact negatively on their public revenue.
Topic:
International Cooperation, International Trade and Finance, Digital Economy, Tax Systems, Commerce, and Digitalization
Political Geography:
Asia and Southeast Asia

95. The Measurement of The Students’ Attitudes Regarding Tax Consciousness: A Case Study

Author:
Ufuk Gergerli̇oğlu and Deniz Aytaç
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
AURUM Journal of Social Sciences
Institution:
Altinbas University
Abstract:
Tax consciousness means to follow the changes in tax legislation and obtain adequate information regarding tax practices. It is not possible to mention tax compliance without having sufficient tax consciousness. Therefore, efforts to increase tax consciousness are important. If attempts start at an early age, it can be beneficial. In this context, this study aims to reveal tax consciousness levels for university students regarding the impact components of tax consciousness. The data was obtained from 385 students who study at the Faculty of Economics and Administrative Sciences at Hitit University through questionnaires. The collected data were analyzed by using the Statistical Package for Social Science (SPSS) version 19. The result of this study demonstrated that 67% of students who participated in the survey believe that education in the family has a substantial role in the improvement of tax consciousness.
Topic:
Education, Economy, Tax Systems, and Survey
Political Geography:
Turkey, Middle East, and Mediterranean

96. Labour Taxes and International Trade: The Role of Domestic Labour Value Added

Author:
Amat Adarov, Mario Holzner, Branimir Jovanovic, and Goran Vukšić
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper revisits the relationship between labour taxation and international trade, focusing on the role of domestic labour value added. Using sectoral data from 41 EU and OECD economies over the period 2005-2014, we assess how labour taxes affect exports and imports and how domestic labour value added shapes this relationship. We find that higher labour taxes reduce exports but that the effect depends to a large extent on the share of domestic labour value added, which differs by industries, countries and time periods. Imports do not seem to be affected. This implies that changes in labour taxes will not affect all sectors and countries in the same way and that policy makers should be aware of this when deciding on labour taxes. We also calculate the contribution of labour tax changes to the export dynamics in the analysed period and sample of countries, finding that in general the contribution is small.
Topic:
International Trade and Finance, Labor Issues, Tax Systems, Exports, and Imports
Political Geography:
Global Focus

97. How do Corporate Taxes affect International Trade?

Author:
Mario Holzner, Branimir Jovanovic, and Goran Vukšić
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper investigates how corporate income taxes affect international trade, and identifies the underlying channel. Using data on 33 NACE sectors, for 34 EU and OECD economies, over the period 2005-2014, we find that corporate income taxes reduce exports and imports only when the stock of foreign direct investment (FDI) is high. The effect is present primarily in the service sector and in countries with low corporate taxes. We interpret these findings as evidence that multinational enterprises reduce their operations in countries that raise their corporate taxes. The effect has been found to be small on aggregate, implying that the expected increase in corporate taxes in the future, arising from the global minimum tax, is unlikely to hurt international trade.
Topic:
International Trade and Finance, Foreign Direct Investment, Tax Systems, Exports, Profit, Imports, and Corporations
Political Geography:
Global Focus

98. The Value-Added Tax Reform and Labour Market Outcomes: Firm Level Evidence from China

Author:
Yuxiang Yang and Hongyong Zhang
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The tax incentives designed to stimulate firm investment may have a large impact on labour market outcomes. Using a comprehensive data set containing more than 1 million Chinese manufacturing firms during the period 2000–2013 with a difference-in-difference approach, we examine the impact of the value-added tax reform in 2004–2008 on the firm-level labour market outcomes. We find that firms in eligible industries and regions (treated firms) enjoying lower costs of purchasing fixed assets under the reform tended to increase capital investment and reduce employment relative to firms that did not have tax incentives (the control firms). Compared with the control firms, the treated firms became more capital intensive and had an increase in average wage but a decline in labour income share. We also provide evidence that the substitutions of labour input by capital input is associated with increases in firm productivity and the share of skilled workers, but not imported capital goods.
Topic:
Labor Issues, Reform, Tax Systems, and Labor Market
Political Geography:
China and Asia

99. Financing the European Union: New Context, New Responses

Author:
Clemens Fuest and Jean Pisani-Ferry
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Roughly two thirds of the European Union’s budget is financed out of member states’ national tax revenues. These resources, based on gross national incomes, are transparent, fair and in line with the principle of subsidiarity but they lead to political debates that emphasise the cost of EU spending rather than the benefits, and add to the perception of the EU budget in terms of net balances, rather than value added. The financing of the EU budget must be reassessed in the light of the July 2020 decision to launch the Next Generation EU programme. Budget resources could include a plastics charge, a carbon border adjustment mechanism, a digital tax, revenues from emissions trading and a financial transactions tax. We evaluate these options against four criteria: whether the origin of the revenue can be assigned to a particular member state; whether the revenue can be raised in isolation or requires pan-European tax coordination; whether the new resource can help reduce tax distortions in the EU; and whether the resource is related to EU policies. Revenues from emissions allowances fit these criteria best. Carbon emissions do not primarily cause damage only where they occur. Taking the EU cap on emissions as a given, additional emissions in a particular member state should be regarded as a negative externality on other member states. Emission reduction objectives are set at EU level. Whoever auctions off an allowance, wherever the corresponding emission occurs in the EU, and wherever the resulting good or service is consumed, the impact on common policy outcomes is the same. In this regard, proceeds from the sale of emissions trading system allowances are not that different from customs duties. Compared to the ETS, the other candidates for EU own resources are less convincing. Carbon border adjustments are intended to limit international competitive distortions rather than to generate revenue. Digital taxes and minimum corporate taxes are best left to the process underway in the Organisation for Economic Co-operation and Development. On a financial transactions tax there is no agreement within the EU. Total ETS revenues up to 2050 would approach €800 billion in a realistic scenario and possibly even €1.5 trillion assuming the scope of the ETS and the share of auctioned permits are increased. ETS revenues therefore would be largely sufficient to repay the Next Generation EU debt. However they would generate distributional effects, and so part of the revenues should finance grandfathered rights that would accrue to the member states. The EU can tackle the distributional issues involved in the reform of own resources.
Topic:
Budget, European Union, Finance, Tax Systems, COVID-19, Decarbonization, and Digitalization
Political Geography:
Europe

100. The Economic growth and income distribution implications of public spending and tax decisions

Author:
Zsolt Darvas
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The level and composition of public expenditures and revenues both have implications for economic development, as shown by the ‘fiscal multiplier’ and the ‘quality of public finance’ literature. Public finance decisions also influence the distribution of income. Based on a review of the literature, I argue for a fair distribution of income as reflected in low-income inequality, not particularly because of the impact of income inequality on long-term growth (which is a controversial issue), but primarily because income inequality typically implies inequality of opportunity. European Union countries have very diverse public finance structures and different levels of effectiveness and there is room for improvement in the growth and equality impacts in all countries. A general guideline would be that the most effective approach comprises progressive taxes and inheritance taxes, spending on education, health and public infrastructure, and better government effectiveness. At the height of the 2008 global crisis and the subsequent European financial and economic crises, the fiscal consolidation strategies of EU countries largely relied on cutting public investment and social spending (except pensions), which is the opposite of what is suggested in the literature. Better fiscal rules and good fiscal institutions are needed to safeguard growth- and distribution-friendly expenditures in a crisis.
Topic:
Governance, European Union, Inequality, Income Inequality, Tax Systems, Macroeconomics, Economic Development, and Public Spending
Political Geography:
Europe