GOV’T INTENDS TO EASE TAXATION BUT WANTS MORE TAX REVENUE

While the Gambia government is grappling with reversing the trend of the “significant drop” in revenues as a percentage to GDP from 17.5 per cent in 2007 to about 14 per cent in 2011, it also plans to put in place fiscal reforms that will review higher tax rates as well as broaden the tax base to make tax payments less burdensome.

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).