With over 80 per cent of the Gambia government’s
2012 estimated total revenue to come from mainly taxation, it is interesting to
see how the government could implement tax reforms that would ease out the
increasing tax burden on businesses, entrepreneurs and, by extension, the
people in 2012.
Gambia's Minister of Finance, Hon. Mambury Njie |
However, according to the Minister of Finance and
Economic Affairs, Mambury Njie, who read the 2012 national budget on 16
December at the National Assembly, the Gambia government intends to apply
fiscal reforms that will include comprehensive tax reforms aimed at easing out
the pressure and cumbersomeness of taxation in the country.
The finance minister said: “Fiscal reforms will also
include a comprehensive tax reform with broad objectives of making the tax
system much simpler, transparent and investment friendly by reviewing higher
tax rates as well as broadening the tax base to make tax payments less
burdensome.”
Hon. Njie also said government has engaged the IMF in
working out the fiscal modalities to get this done and once finalized they will
implement “this comprehensive tax reforms”.
In the last four years or so, entrepreneurs and corporate bodies in The
Gambia have been raising alarm over the increasing taxation in the country,
especially with regard to bank loan rate, payment of which many say is hitting
their business hard and slashing their profits, while many businesses shy away
from taking loans owing to high interest
rates.
According to statistics, total taxes on profits are
in the region of 283%; which makes it difficult for a business to be successful
if forced to pay almost three times the total profit it earns. The high
interest rates of commercial banks, which is currently around 20%, are also
hindering business expansion and investment growth in the country, although
bankers will say the high interest rates are a product of the risks involved in
giving out loans, considering the increasing level of non-performing loans in
the country.
The Gambia is generally considered a taxed-based
economy as the chunk of its revenue year in year out continues to be dependent
on taxation.
The 2012 budget therefore is heavily dependent on
tax revenue with concise revenue measures put in place to ensure the government
generates most its estimated tax revenue this time around to avoid the
declining trend of estimated tax revenue it has been grappling with over the
years.
According to the 2012 budget, tax revenue up to the
end of the fourth quarter of 2011 is budgeted at D4068.7 million (or 12.8 per
cent of GDP) against an estimated outturn
of D3633.9 million[meaning what is estimated to be realised at the end
of the day] representing an underperformance of 11 per cent against the
budgeted figure. Non-tax revenue is projected at D521.6 million up to
end-fourth quarter 2011. However actual collection to end-year is estimated at
D519.7 million.
2012
Revenue and Expenditure Projection
Finance Minister Mambury Njie stated that given the
gloomy picture of the World Economic Outlook characterised by threats of double
dip recession in some developed countries the fiscal outlook for The Gambia has
been cautiously projected.
He says the 2012 budget is prepared on the basis of
key macroeconomic assumptions, such as sustaining real GDP at 5.5 per cent,
inflation at 5 per cent, maintaining the overall budget deficit at 3 per cent,
and current account balance excluding budget support at15.3 per cent.
Total revenue and grants for 2012 is therefore
projected at D5771.3 million (17.6 per cent of GDP) as against a total of
D5650.2 million (17.8 per cent of GDP) a year earlier.
“Tax revenue is forcasted at D4613.9 million in 2012
increasing by D23.6 million from its previous year level of D4590.3 million,”
the budget states. “In the fiscal year 2012, grants are projected at D1157.3
million against D1059.9 million in 2011 including a 9.2 per cent increase.”
Expenditure
While total expenditure and net lending for the year
ending 2011 stands at D6116.5 million (19.3 per cent of GDP), the 2012 total
expenditure and net lending is projected at D6722.8 million or 10 per cent
increase by D606.3 million from its 2011 level.
“This is mainly due to higher than expected increase
in external resources,” Mr Njie said, adding: “Other charges for the year
ending 2011 are D2.2 million. This figure is projected to increase slightly in
2012 to D2.5 million constituting 7.76 per cent of total expenditure and net
lending compared to 7.13 per cent in 2011.
“The fiscal deficit for the year ending 2011 is
D466.6 (1.47 per cent of GDP). The deficit for 2012 is projected at D951.4
million (2.9 per cent of GDP). The deficit will be fully financed through
domestic and external borrowing. The net-external financing is estimated at D405
million while the domestic financing is projected at D541 million.
“The public debt is relatively high and stood at
69.2 per cent of GDP as at end-December 2010 of which domestic debt represents
29.3 per cent. The concern is on domestic debt as it is more of a burden to the
budget than external debt, which is highly concessional.”
Revenue
Measures
In its effort to mobilize resources, The Gambia
Government will introduce measures to help boost its revenue geared towards the
funding of development programmes, the 2012 national budget says.
The government has therefore proposed the following
measures to reverse the declining nature of tax revenue over the past three
years. These include implementation of a quota system on Duty exemptions on fuel for diplomatic missions; expansion of excise tax coverage through the collection of excise taxes on domestically produced goods; bringing into the tax net holders of Special Investment Certificate (SIC) whose certificates have expired; removal of the protection on sugar and cement, as the protection has not made any difference in the market price; increasing the revenue tax on laundry soap from D5 per kilo to D7.5 per kilo; and removing the fuel concession given to Gambia Ports Authority (GPA).
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