Tuesday, July 26, 2011

The Gambia Ranked 2nd Highest Taxed Nation


As economic and social discourse continues on the tall order of tax imposition the private sector and, by extension, the whole nation have to grapple with in The Gambia, the 2011 ‘World Bank Doing Business Report’ has ranked the Smiling Coast of Africa the 2nd highest taxed nation in the world.      
The fact that The Gambia is a 'tax-based economy' was made clear at a recent national economic summit where reports emerged from impeccable sources that the West African country of a population of 1.7 million is rated the second highest taxed-based economy in the World.

The various types of tax currently in operation have risen to 15 in a country where the majority of its population is classified as living below the poverty level.

While majority of Gambians continue to wallow in poverty, a 2011 'World Bank Doing Business' report has positioned The Gambia among the '8th bottom most difficult countries to do business'.

Many business agencies ranging from tourism, to horticulture and clearing agencies have continued to express concern over the rapid rise of the numerous taxes enforced in recent months on the heels of a dwindling business climate in the West African country.



Sulayman M. Joof, secretary general of the Association of Clearing and Forwarding Agencies (ACFA), in his remarks on the tax issue, said: "The Gambia is ranked 2nd highest tax nation in the World. [We have] high municipal taxes and incoherent tax regime. The Gambia is among the 8th Bottom most difficult country to do business. According to the World Bank Doing Business Report 2011, The Gambia is ranked 176th in the world, in terms of ease of doing business."

Joof was presenting a report at the recent Economic Summit held at the Kairaba Beach Hotel on the 'Challenges of Trade Facilitation in The Gambia', when he cited "limited facilities for payment of customs duty and taxes" as one of the reasons for high cost of transactions and delays in the clearance of goods. For the public-private sector partnership to make headway, Joof recommends that "government should lower and harmonise taxes at national and local level".

Many business entrepreneurs are of the view that if the current tax situation should persist, “there will come a time when government will not have institutions to tax, fearing that businesses will close or assets will fly”; that is capital flight in terms of investment shift to other countries.

Since the wake of the world economic crisis in 2008, most destinations have taken measures to support the tourism sector to maintain or increase the arrival figures of tourists. France has reduced sales tax from 19.6% to 5.5%; Turkey has cut value-added tax on tourism services from 18% to 8%, and Jordan has reduced sales tax on hotel rates from 14% to 8% linking it directly to a policy drop in room rates, the report highlights.

On the other hand, in The Gambia, the government has finalised replacing sales tax with a new tax called 'Value Added Tax (VAT)'. But some members of the private sector have expressed fear that the proposed VAT may not work, citing the tense social, economic and political climate it created in other countries such as Nigeria, Sierra Leone and Ghana when it was first introduced.

"There was a protest about this tax, and The Gambia should avoid making such mistakes," says Reymond Jatta, Programme Officer (Economy and MDGs) of the National Authorising Support Unit (NAoSU)/EDF.
Mr Jatta’s comments were subscribed to by Baboucar Jack of SAKAN Int'l Co Ltd - importer of Sakan rice.

This initiative may be complicating, Mr Jack alludes, calling on the competition commission to help in regulating the business processes, saying “abuse of market compliance is rampant among investors”.
Importers are abusing the market policy by destabilising prices of products, he said, adding that if the situation should persist, business would dwindle.

Gambia's Trade Minister
A report from the Department of Animal Health and Production Service also states: "The levy of sales tax (of 17%) on poultry inputs such as feed and feed ingredients of day-old chicks, hatching eggs and veterinary drugs and vaccines, remains a serious challenge in the poultry sector.”

The Minister of Trade, Employment, and Regional Integration, Abdou Kolley, in his intervention in the intensified debate, defended the introduction of VAT in the country’s business milieu, dismissing claims the application of VAT “will be a failure”.

For him, the initiative has been conceptualised by government few years back, and that a thorough study of its impacts has already been done. He also showed concern regarding the private sector's cry of tax inflation, but pointed that cutting taxes has to be done gradually, if it is going to be done at all.

Cutting taxes massively and simultaneously, the trade minister argues, will create a deficit in government's budget, which may lead to a situation where government will have to lean heavily on other reserves. This may be detrimental to budget planning.

Government will be committed to implementing most of the recommendations made at the summit, the trade minister said, whilst calling for more public-private partnership (PPP) in the management of the socio-economic drive of the nation.

While the issue of tax reduction is being raised by members of the private sector, Minister Kolley has disclosed that at the government level, “we agree taxation should be done [but] in such a way that we do not kill [the business sector]”.  He however calls on the private sector to make a commitment on their part to meeting tax obligations.

Optimism about tax compliance
Whilst revenue collectors, municipal councils and area councils continue to bemoan tax defaults, members of the Gambian private sector are optimistic that the reduction of tax will address their complaints and increase tax compliance massively.

One of the grave concerns is that the high level of taxation in The Gambia is driving many institutions and conglomerates into the vicious circle of tax defaults, often twisting and turning down tax collectors' demand.
Minister Kolley however pointed: “There is no certainty that compliance will increase when taxes are reduced.”

Whilst government should collaborate with the private sector, he noted, the private sector should as well complement the effort of the government.

26 comments:

  1. I support the idea of VAT for the Gambia but only if it is managed like the UK one. Certain items like our staple food (rice) should be exempt or zero rated, whilst things like furniture, electronics, hotel rates etc taxed but at a reduced rate to test public reaction before they are subsiquently increased or reduced. A.SUWAREH, MBA Student. UK.

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