Communauté Économique et Monétaire Afrique Centrale (CEMAC), 1999, Taxe sur la Valeur Ajoutée (TVA) et le Droit d’accise (DA), Directive No. 1/99/CEMAC/028/CM/03, du 19 décembre 1999.
Communauté Économique et Monétaire Afrique Centrale (CEMAC), 2001, Critères et Indicateurs Macroéconomiques de la Surveillance Multilatérale, Directive No. 01/01/UEAC/094/CM/06, du 3 août 2001.
Doe, Lubin, 2006, “Reforming External Tariffs in Central and Western African Countries,” forthcoming as an IMF Working Paper (Washington: International Monetary Fund).
Ebrill, Liam, Michael Keen, Jean-Paul Bodin, and Victoria Summers, 2001, The Modern VAT, (Washington: International Monetary Fund).
Terkper, Seth, 2003, “Managing Small and Medium-Size Taxpayers in Developing Economies,” Tax Notes International (January), pp. 211–34.
Union Économique et Monétaire Ouest Africaine (UEMOA), 1998a, Droits d’accise, Directive no. 03/98/CM/UEMOA, du 22 décembre 1998. Pacte de convergence, de stabilité, de croissance et de solidarité, Acte additionnel No. 04/99 du 8 décembre 1999.
Union Économique et Monétaire Ouest Africaine (UEMOA), 1998b, Taxe sur la Valeur Ajoutée (TVA), Directive No. 02/98/CM/UEMOA du 22 décembre 1998.
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The author is very grateful to Edouard Maciejewski for his extensive comments. He warmly recognizes the very useful comments and support of Thanos Catsambas. His special thanks go to Michael Keen, Adrienne Cheasty, Jean-Paul Bodin, James Daniel, Thomas Dalsgaard, and Executive Directors in charge of the countries covered for their helpful comments on earlier drafts. He is also greatly indebted to Seth Terkper and Olumuyiwa Adedeji for their generous time and insightful comments. Finally, he acknowledges the useful comments made by several other colleagues.
The WAEMU comprises Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. The other two groups of countries covered are: the CEMAC (Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon); and the WAMZ (the Gambia, Ghana, Guinea, Nigeria, and Sierra Leone). The coverage of Guinea-Bissau, a member of WAEMU since 1994, and Equatorial Guinea is limited because of lack of information.
In this paper, the word “harmonization” is used to indicate the adoption of a common regulation. It does not mean that this regulation has been or is being effectively implemented.
Macroeconomic stability is monitored in the three zones using convergence criteria (see Doe’s 2006 companion paper entitled “Reforming External Tariffs in Central and Western African Countries”).
Togo was the last of the WAEMU countries to have introduced the VAT in 1995. Guinea-Bissau has yet to reform its domestic consumption taxes as prescribed by the WAEMU.
It was a production tax levied on locally manufactured goods that were exported to other UDEAC countries. This tax was paid by companies that received tax incentives such as exemptions from the payment of the customs duty and the turnover tax.
Applied neutrally to imports and domestic production.
Agriculture, mining, transportation, pharmaceuticals, printing, etc.
Alcoholic beverages, cigarettes and tobacco, petroleum products, and vehicles.
Gasoline bore a smaller effective tax than diesel in Burkina Faso compared to Mali. Taxes accounted for 64 percent and 83 percent of pump price of gasoline and diesel, respectively, in Burkina Faso compared with 49 percent and 31 percent in Mali.
The revenue administration argument is only partly valid because industrialized countries also apply thresholds to prevent burdening their tax agencies with numerous low-yield tax returns.
Diplomatic missions are also exempted from VAT.
The list of exemptions includes food, meat and fish products, financial services, health services, school fees, pensions, and social portions of water and electricity consumption.
In this section, unless otherwise specified, all the references to articles pertaining to the VAT in the CEMAC relate to the Directive 1/99/CEMAC-028-CM-03 and in the WAEMU to the Directive 02/98/CM/UEMOA.
Terkper (2003) argues that a distinction should be made between formal and informal small and medium enterprises. According to him, the former keep accounting records and should be subject to standard (or slightly modified) tax laws whereas the latter, particularly taxpayers under presumptive tax regimes, are not structured and therefore cannot meet the record requirements.
The problem of atomistic potential taxpayers with small taxable base and weak record-keeping capacity is not specific to VAT but is faced in the administration of other taxes as well (income tax, profit tax, etc.). The option of using thresholds can also be applied in the agriculture and transportation sectors.
The Central African Republic is not an oil producing country.
The WAEMU exempts foreign-financed projects and programs (Article 2), while the CEMAC is silent on this subject.
In both zones, the VAT paid on accommodation, food, and entertainment is not deductible.
Exports are exempted in order to promote this activity, and more generally economic growth, by eliminating double taxation of goods in producing and consuming countries.
In practice, this requirement is not respected.
Only the WAEMU is covered because petroleum taxes are not yet harmonized in the CEMAC. The latter has started discussions aimed at this harmonization in 2003.
After completion of the paper, the government of the Central African Republic increased the rate of the VAT from 18 percent to 19 percent with effect from January 2006.
Edible oil, soap, lubricants, poultry, and mineral water and cigarettes.
The highest rate is imposed on alcoholic beverages (in Benin, Guinea-Bissau, Niger, Senegal, and Togo), all tobacco products (in Benin and Senegal), imported tobacco products only (in Burkina Faso), arms and ammunitions (in Mali), and cola nuts in Senegal.
In relation to the harmonized list.
The surveillance of macroeconomic performance using convergence criteria (Doe, 2006) assumes that countries implement fiscal policies that do not yield unsustainable budget deficits, debts, and high interest rates.
The adoption of, and compliance with, a common investment code will also help eliminate financially harmful intercountry competition.
For instance, if the CEMAC’s range for exemptions from VAT for school notebooks is between 5 and 15 percent of the tax base, a revenue scarce country may apply a rate of 5 or 6 percent while another country that wants to promote learning would set its exemption rate at 12 or 14 percent.
When a producer pays VAT upstream but is not eligible to file a VAT return because the consumption of the good is exempted, he cannot recover the VAT paid. To enable him to do so, he should be allowed to file a return.
The disparities are greatest in Chad, with a 25 percent surcharge on imported sugar; Gabon, with a 20 percent additional tax on imported edible fats and oil, soap, poultry products, cigarettes, and flour; and Senegal, with a 20 percent surcharge on imported onions, potatoes, bananas, rice, and cigarettes.