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Africa > Madagascar, Republic of

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Cover IMF How To Notes
How to Design a Presumptive Income Tax for Micro and Small Enterprises
Jean-François Wen
Turnover taxes are prevalent in developing countries as a simple form of presumptive taxation of business income. Such simplified tax regimes can reduce the relatively high compliance costs of micro and small enterprises, which might otherwise discourage entrepreneurs from formalizing their activities and paying taxes. The note addresses design issues for a turnover tax regime—which taxes it replaces, what the criteria are for eligibility, how to determine the optimal threshold, and how to set the tax rate. A key observation is that, although low turnover tax rates may incite larger firms to artificially reduce their sales, the rate should also not be so high as to discourage formalization of activities. A table of tax rates and turnover thresholds observed internationally is provided. The note concludes by suggesting analytical steps to guide practitioners in designing turnover tax regimes.
Keywords:
Presumptive tax; turnover tax; informal sector; microenterprises; taxpayer Compliance cost; turnover tax rate; turnover tax systems; IMF library; Sales tax; Income and capital gains taxes; Income tax systems; Corporate income tax; Effective tax rate; Africa; South America; Eastern Europe; West Africa; Western Europe
Cover IMF Staff Country Reports
République de Madagascar: quatrième revue de l’accord au titre de la facilité élargie de crédit, et demandes de dérogation pour non-respect de critères de réalisation et de modification de critères de réalisation-communiqué de presse; rapport des services du FMI; et déclaration de l’administrateur pour la République de Madagascar
International Monetary Fund. African Dept.
En 2022, le PIB réel a dépassé son niveau antérieur à la pandémie. Cela étant, le repli de la demande émanant des partenaires commerciaux, les phénomènes météorologiques récents et le risque d’accentuation des tensions politiques à l’approche des élections présidentielles, prévues en novembre 2023, continueront de peser sur les perspectives en 2023. Le déficit budgétaire s’est creusé dernièrement, mais le règlement des dettes croisées avec les distributeurs de pétrole devrait améliorer le solde budgétaire en 2023 et réduire les risques budgétaires à l’avenir.
Keywords:
oil distributor; ECF review; IMF team; policy adjustment; IMF's transparency policy; liabilities to oil distributor; government financial support; Fiscal stance; Credit; Oil, gas and mining taxes; Global
Cover IMF Staff Country Reports
Republic of Madagascar: Fourth Review Under the Extended Credit Facility Arrangement and Requests for a Waiver of Nonobservance of Performance Criteria and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Republic of Madagascar
International Monetary Fund. African Dept.
This paper discusses Republic of Madagascar’s Fourth Review under the Extended Credit Facility Arrangement and Requests for a Waiver of Nonobservance of Performance Criteria and Modification of Performance Criteria. Madagascar’s growth has decelerated, and inflation remains high. Program performance remains mixed with a breach of the 2022 deficit target but progress on the structural reform agenda. The authorities have also adopted the necessary changes to the public procurement legal framework to allow for the collection and publication of ultimate beneficiary owner information and submitted a revised mining code in line with IMF staff recommendations to Parliament. The authorities are taking measures to adjust non-priority spending in the face of lower-than-expected revenue in 2023. It is proposed to relax the 2023 domestic primary deficit target to accommodate higher transfers to the electricity state-owned enterprises that reported record losses in 2022 and accumulated large arrears. Related modifications of other quantitative performance criteria are also proposed. Improvement in budget execution, transparency, and governance are critically needed to foster stronger and sustainable growth.
Keywords:
oil distributor; ECF review; IMF team; policy adjustment; IMF's transparency policy; liabilities to oil distributor; government financial support; Fiscal stance; Credit; Oil, gas and mining taxes; Global
Cover IMF How To Notes
How to Manage Value-Added Tax Refunds
Mario Pessoa
,
Andrew Okello
,
Artur Swistak
,
Muyangwa Muyangwa
,
Virginia Alonso-Albarran
, and
Vincent de Paul Koukpaizan
The value-added tax (VAT) has the potential to generate significant government revenue. Despite its intrinsic self-enforcement capacity, many tax administrations find it challenging to refund excess input credits, which is critical to a well-functioning VAT system. Improperly functioning VAT refund practices can have profound implications for fiscal policy and management, including inaccurate deficit measurement, spending overruns, poor budget credibility, impaired treasury operations, and arrears accumulation.This note addresses the following issues: (1) What are VAT refunds and why should they be managed properly? (2) What practices should be put in place (in tax policy, tax administration, budget and treasury management, debt, and fiscal statistics) to help manage key aspects of VAT refunds? For a refund mechanism to be credible, the tax administration must ensure that it is equipped with the strategies, processes, and abilities needed to identify VAT refund fraud. It must also be prepared to act quickly to combat such fraud/schemes.
Keywords:
value-added tax; refunds; VAT; management framework; VAT refund; Georgia revenue service; VAT system; Tax refunds; Tax administration core functions; Credit; Income; Global; Africa
Cover IMF Staff Country Reports
Republic of Madagascar: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper analyses tax revenue mobilization potential in Madagascar and lessons learned from successful episodes in sub-Saharan African (SSA) countries. The analysis shows that there is a significant tax potential including through a possible broadening of the tax base, notably for consumption taxation; and underscores the importance of a comprehensive revenue strategy, including by combining reforms in tax policy and in tax and customs administrations. Significant progress has been made in terms of organization, simplification of procedures, management, and dialogue with the taxpayers. Communication between the two tax administrations could be improved. The tax administrations should notify each other if a case of fraud. Also, the domestic tax administration should have access to customs import/export data: many importers are active and make customs declarations without being identified by the domestic tax administration. Given the weaknesses in the provision of public services, social dialogue and consultation are important to explain the rationality of the tax system and the use of the tax revenue by the State.
Keywords:
ISCR; CR; investment; country; public investment; theorical tax potential; audit performance; tax frontier; PPP investment portfolio; investment-growth linkage; Public investment spending; Public investment and public-private partnerships (PPP); Credit; Central bank policy rate; Sub-Saharan Africa
Cover IMF Staff Country Reports
République de Madagascar: demande d’un accord au titre de la facilité élargie de crédit; première revue du programme de référence — communiqué de presse; rapport des services du FMI et déclaration de l’administrateur pour la république de Madagascar
International Monetary Fund. African Dept.
Madagascar est un pays fragile qui s’efforce de se remettre d’une longue période (2009-2013) de crise politique et d’isolement international pendant laquelle les principaux indicateurs sociaux et de développement se sont dégradés. Le redressement pâtit de la faiblesse du recouvrement des recettes, du niveau élevé de dépenses publiques non prioritaires et de problèmes de gouvernance. Toutefois, les résultats, généralement satisfaisants, du programme de référence sur six mois qui s’est achevé en mars 2016, constituent un signe d’amélioration des capacités d’exécution.
Keywords:
ISCR; CR; tariff increase; electricity tariff; asset declaration
Cover IMF Staff Country Reports
Republic of Madagascar: Request for an Arrangement Under the Extended Credit Facility: First Review Under the Staff Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Republic of Madagascar
International Monetary Fund. African Dept.
This paper discusses the Republic of Madagascar’s request for an arrangement under the Extended Credit Facility (ECF) and first review under the Staff Monitored Program (SMP). Madagascar’s macroeconomic performance was broadly satisfactory under the SMP, which ran from September 2015 to the end of March 2016. The authorities’ ECF-supported program, anchored on their National Development Plan, aims to reinforce macroeconomic stability and promote sustainable and inclusive growth. It focuses on promoting robust and inclusive growth, combining improved access to education, health care, and social protection with infrastructure and private sector development. The IMF staff supports the authorities’ request for an ECF.
Keywords:
ISCR; CR; tariff increase; electricity tariff; asset declaration; Madagascar's terms of trade; priority spending; Credit; Tax administration core functions; Southern Africa; East Africa; Europe; Sub-Saharan Africa; Global
Cover IMF Staff Country Reports
République de Madagascar : questions générales
International Monetary Fund. African Dept.
Keywords:
ISCR; CR; Madagascar; pass-through; price
Cover IMF Staff Country Reports
Republic of Madagascar: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper presents a study on poverty in Madagascar. Madagascar is a country with general, widespread, and increasing poverty. Most of the population is extremely poor and struggling to pay for food. Madagascar has the potential to grow rapidly. It is endowed with abundant natural resources, a unique wildlife, and a young, vibrant, and rapidly growing population. Taking full advantage of the young population will require higher investment in education and healthcare. Economic inequality appears to have declined and the poorest have in fact increased their consumption. Thus, while it is true that more people are poor today than in 2001, on average those who are deepest into poverty appear to be economically better off today than in 2001. Poverty is primarily a rural challenge. An overriding majority of the population lives in rural areas and rural poverty rates are almost double those of urban areas.
Keywords:
ISCR; CR; Madagascar; pass-through; price; youth literacy rate; pass-through estimate; adjustment channel; pass-through coefficient; exchange rate depreciation; pass-through rate; world development indicator; bank lending take; Income and capital gains taxes; Commercial banks; Sub-Saharan Africa; Global; East Africa; Africa
Cover IMF Working Papers
How does a domestic tax reform affect protection against imports? The case of the Republic of Madagascar
Mr. Jean-Jacques Hallaert
In 2008, Madagascar reformed its domestic tax system. Because the excise duties and VAT regimes were reformed, the taxation of imports has changed. This paper quantifies how the reform changes the protection against imports and the fiscal revenues from taxation of imports. It shows that, even if the reform has only a limited impact on the average rate of protection, it substantially alters the structure of protection across goods. Moreover, because the reform further increases the already high rate of taxation of imports, it will also boost revenue from taxes on imports and reduce the fiscal losses from the SADC FTA.
Keywords:
WP; import; tariff; rate; taxation of imports