By Bin Joachem Meh & Dr Fabien Sundjo (Download Pdf Version)
Interrogating the Inclusiveness of the Cameroon Tax Policy
Management of the State requires resources and one of the major sources of income to the State is tax. Taxation is one of the most effective internal measures that the government use to raise resources needed to meet their social, economic and political objectives. Taxation is a sovereign right of the state where resources are transferred from private accounts to public use in order to achieve the economic and political objectives of society (Moore, 2014). The economy of Cameroon like any other economy in the world has basically two types of taxation systems which include; direct and indirect taxation through which the government can raise its revenue. In the process of fostering the objectives of revenue collection by the State, care needs to be taken not to discriminate between women and foreign groups (Amin, 1998).
The Cameroon Government’s Vision 2035, a road map to become an emerging economy by 2035, stresses the importance of large-scale infrastructure development and the need to attract more foreign direct investment (FDI). In this light and in April 2013, the Cameroon Government enacted an Investment Promotion Incentives Law whose aim is to motivate foreigners to bring-in capital and to allocate it within major sectors in need of capital in order to boost the economy. Cameroon’s development strategy is to attract funding from foreign countries and invest them in large infrastructure. Statistics, and figures from the World Bank show that the flow of FDI to Cameroon is relatively low but steadily increasing. This pattern can be explained by both the favorable tax system and the welcoming nature of Cameroonians (Cameroon US Embassy, 2019). The objective of this work is to interrogate whether the Cameroon tax system discriminates between women and foreigners. Tax discrimination is a situation where by some individuals pay tax differently from others.
Cameroon’s Tax law and the canon of a Good Tax System
From the structure of a tax system, it can be determined whether it discriminates or not. A good tax system should be able to respect some basic principles which are fairness, adequacy, simplicity, transparency, and administrative ease just to name a few. Most importantly, these principles should never differ or discriminate against women and foreigners. Opinions may differ as to the key elements to be considered in ensuring the “quality” of a tax system. Nevertheless, there are five basic conditions that every good tax system should respect to the greatest extent to be considered efficient. Cameroon tax system, just like every other economy in the world, takes into consideration the most important principles necessary for efficiency in the tax system (Ambe, 2019).
Classification of Taxes in Cameroon
Tax systems can be classified as a progressive, regressive or proportionate tax regime. Cameroon’s tax classification is based on the following rates, which depend on the taxpayer’s turnover and income. Base on turnover, the tax rate is 2.2% or 5.5% in Cameroon depending on the turnover and taxpayer’s regime and it could move up to 15% for taxpayers not registered with a taxation center and engaged in import activities. The 15% rate could be increased to 20% in the event where the taxpayer carries out the sale of in-bond goods. The tax system adopted by the Cameroon government is progressive in nature and hence favorable to the poor and women. In order to attract more foreign investment, Cameroon revamped its Investment Code in 2013 (UNCTAD, 2013) such that it does not discriminate between local and foreign investors. This code provides for tax exemptions, duties, and other non-tax related benefits. It promises assistance with obtaining the issuance of visas, work permits, environmental compliance certificates, land certificate, and long-term leases when certain conditions are met.
Canons of taxation
There exist several canons of taxation which are: equitable, economical, convenient, certain, efficiency, flexibility, impartiality, simplicity, acceptability and benefits principle.
Equity: A tax system should be fair that is, based on the taxpayer ‘s ability to pay e.g., progressive income tax (PAYE). It should be noted that this principle is divided into vertical and horizontal equity. Vertical means people with different levels of income should pay different proportions of their income as tax to the government. Whereas horizontal equity means people with the same levels of income should pay the same proportion of their income as tax to the State.
Convenience: The method of payment should be convenient on the taxpayer. That is, the method, procedure, and time payment should favor the tax payer, for example farmers should pay taxes to the government only after sales.
Economy: A tax should be easy to administer and inexpensive to collect so that the yield is maximized relative to the cost of collection. In other words, the principle of economy states that the expenses incurred in the process of collecting taxes should not be greater than the actual amount of tax revenue collected.
Certainty: A taxpayer should know what, when, where and how to pay, in such a manner that tax evasion is difficult. (Tax evasion is the illegal failure to pay a lawful tax, whereas tax avoidance involves the arrangement of personal or business affairs within the law to minimize tax liability).
Flexibility: The tax structure must be capable of easy alteration in order to meet new circumstances. That is, a good tax system must be dynamic or should be designed such that it can easily be adjusted so as to respond to prevailing changes in the economy like; price change, economic growth, unemployment etc.
Efficiency: A tax should achieve its intended aims with minimum undesired side-effects or distortion.
Benefits principle: This principle states that people should pay taxes based on the benefits they receive from the government. This principle tries to make public goods similar to private goods.
Non-discriminatory nature of the Cameroon tax system and its economic effects
According to the Cameroon tax law all taxpayers are treated with equity and fairness. It does not discriminate against companies owned by foreigners in Cameroon. Its allowable deductions include business expenses (up to 30% of the taxable salary) and social security contributions. All individuals are entitled to an annual abatement of a fixed amount of CFAF 500,000 for wages and salaries. Wages of less than CFAF62,000, scholarships, interest on savings not exceeding CFAF10,000,000 and income on cash vouchers issued by businesses are exempt from personal income tax. A single tax amount is applied to both foreign and domestically owned companies. Cameroon applies an advantageous tax regime for diplomatic and consular missions, foreign organizations, and similar bodies based in Cameroon, guided by international conventions (Kakdeu et al. 2021). There is no special tax regime for expatriates, who are taxed on their Cameroon-source income. Foreigners who stay in Cameroon for more than 183 days in a calendar year are considered to be fiscally domiciled in Cameroon.
The Cameroon Tax regime and Women The tax regime applicable in Cameroon does not discriminate on gender bases. The same tax laws cover both men and women. Gender issues always affect the realities with economic variables (Kakdeu et al. 2021, p34). This has affected their contribution to domestic tax revenue. In Cameroon, women are less likely to be inside the tax net because there exists income inequality between men and women (Kakdeu et al. 2021, p34). In some Cameroonian traditions, women have lower chances of owning land titles and other properties. They, therefore, contribute a lesser quota of taxes from land and property. Discrimination against women in different economic circumstances could have increased their likelihood to escape taxes and reduced their contribution to national tax revenue. Fortunately, the Cameroon tax system does not discriminate against woman.
Some likely Economic effects of a tax system that discriminates against women and foreigners
As concern consumption, direct and indirect tax systems that discriminate between women and foreigners will lead to a decline in total consumption. For instance, direct tax will lead to a decline in household disposable income while an indirect tax may raise the market price of goods and services. Thereby, forcing the consumption function or curve to shift downward.
Secondly, savings could be affected. An increase in taxation and discrimination between women and foreigners may cause a fall in total savings. For example, an indirect tax on goods and services may increase the proportion of disposable income spent on consumption. Thus, reducing the amount of income available for saving. Further, an increase in taxation and discrimination between women and foreigners may reduce the level of national investment. For instance, a direct tax on personal income will lead to a fall in aggregate demand which may discourage investment activities. In the same light, when women do not have access to land titles and other properties it can lead to a fall in investment. On the other hand, expenditure taxes such as value added tax will increase the general price level of goods and services in the economy.
Finally, it can affect the distribution of income. The gap between the rich and poor will increase whenever the tax rate increases and there exists discrimination between women and foreigners. A direct tax that is progressive in nature will breach or reduce the gap between the rich and the poor. But indirect taxes on the other hand, will instead widen the gap between rich and poor because they are regressive in nature.
Conclusion and policy recommendations
Cameroon has no deliberate and direct economic or industrial strategies that have discriminatory effects on foreign investors or foreign-owned investments. However, the complex regulatory environment and existence of corruption throughout every segment of government creates numerous obstacles to potential investors.
The 2021 Cameroon tax law is in line with the government’s agenda to consolidate public finances through consultations with the private sector, women and foreign businesses. The enforcement of the reforms undertaken by the Cameroon government will make the Cameroonian tax system more efficient, and simple. Nondiscrimination between women and men, rural and urban resident, nationals and foreigners will be favorable for economic recovery. Paying taxes in Cameroon requires 624 hours per year as compared to 208.6 hours in sub-Saharan Africa and 158 hours in the OECD. Finally, the total tax and contribution rate is estimated at 57.7% in Cameroon, whereas it is 47.3% in sub-Saharan Africa and 39.9% in the OECD. Based on this background and following the facts and statistics presented in the work, the following recommendations were presented:
Firstly, reducing the gender gap in ownership of some resources like land between men and women can lead to an increase in investment and hence an increase in income generated from
Finally, encouraging foreign investors by reducing the period and the taxes required as well as simplifying the process of paying taxes.