Cameroon Tribune, 8th of May 2020 edition
Comments collected by Jocelyne Ndouyou-Mouliom and Aicha Nsangou
1. Mr Director-General, the Head of State has just released 19 measures to ease the restrictions imposed in the fight against Covid-19. About 10 of them are tax-related. Your administration was probably involved in the development of these measures, what are the prerequisites that led to their validation?
Tax measures are indeed prominently included in the support mechanism for businesses and households, decided by the President of the Republic, His Excellency Paul BIYA, and made public by the Prime Minister, Head of Government. These tax measures are the culmination of a process that involved the authorities, as part of a participatory approach, assessing the impact of the crisis on businesses, and then identifying possible solutions, to examine them, to evaluate them and finally to make choices. Since the outbreak of the crisis, under the leadership of the Minister of Finance, the tax administration has engaged consultations with the entire private sector through socio-professional groups (GICAM, ECAM, MECAM, CCIMA, APECCAM, Filière Bois, ASAC, CAFCAM, AMCHAM, SYNDUSTRICAM, Hôtellerie, Cimenterie, Association des Bayam Selam, Plateforme des Syndicats des Transporteurs, etc.). As a sign of the times, most of these consultations took place via videoconferencing for obvious reasons. The main aim was to gather from the main players in the economy, their assessment of the crisis, its impact on their
activities, and their proposals for support measures expected from the authorities
In addition to this dialogue with the private sector, the tax administration has, thanks to the videoconferencing system, actively participated in numerous initiatives to exchange and mutualize best tax practices in response to Covid launched by international partners such as the OECD, the IMF, the African Tax Administration Forum (ATAF) and the Tax Administration Leaders’ Circle of Reflection and Exchange(CREDAF).At the end of all these consultations, the first observations made showed that the Cameroonian companies were affected, to varying degrees, by the crisis due in particular to the slowdown in economic activity at the international and national level, and the implementation of the first round of response measures. The consultations made it possible in this respect to identify the sectors most affected by the crisis, in particular the hotel industry, transport, companies whose activities are outward-looking; but also those which are less or very little. All the proposals identified were then examined and submitted to the authorities according to the various scenarios of the crisis.
2. To decipher in a specific way these measures, how to understand the one that concerns the suspension under the 2nd quarter 2020 of general accounting audits, except in case of suspicious tax behavior. What does that mean?
In a tax reporting system such as ours, it is the taxpayer who freely reports the activities he or she has carried out over a period of time and the amount of tax payable. In order to prevent this freedom from giving rise to abuse, tax checks are regularly carried out and often result in corrections of the declarations previously subscribed; this makes it possible to restore the equality of all before the tax.
In view of the impact of the crisis on the treasury of companies, the authorities wanted to exempt them from accounting checks which, by their nature, are likely to give rise to immediate payments of additional taxes. Since these accounting checks are on-the-spot checks within the undertakings, the requirement to comply with the rules on distance-sharing has also reinforced the authorities in taking this measure.
It should be noted, however, that this suspension does not apply in the case of suspicious tax behavior; that is, where a company bears a strong suspicion of fraud or of undermining its declarations. This safeguard makes it possible to limit the abuses and windfall effects that would not only deprive the State of resources but would also promote distortions between citizens’ taxpayers and those who are not.
3.This refers to the extension of the deadline for filing statistical and tax returns without penalties for the payment of the corresponding balance. What was the originally planned date and what will be done in case the payment has already been made?
The deadline for submitting statistical and tax returns (FSD) is 15 March of each year. Taking into account the difficulties that the companies may have encountered in subscribing to this declaration within this period, in the context of the current health crisis, the authorities granted them an extension of time to comply with this tax obligation without incurring penalties. Certainly, to date, some companies had already been subject to late filing penalties for their DSF. However, with the penalty relief that has just been granted, those companies to which penalties have been applied will be cancelled outright, and for those who have already paid them, they will receive a competitive tax credit, which can be carried forward to future payments. I would point out that it is this approach that will apply to all those who had already paid taxes in the second
quarter and who have been the subject of tax relief measures by the authorities.
4. Mr Director General, the President of the Republic has decided to support businesses through the allocation of a special envelope of FCFA 25 billion, for the clearance of VAT credits pending reimbursement. Is that enough to clear the state’s debt?
I think it is important to point out at the outset that the authorities have worked hard to improve our system of refunding VAT credits in recent years. In this respect, we can mention the escrow account mechanism set up which makes it possible to automatically allocate each month 6 billion FCFA to operations to refund VAT credits; the processing of applications following a risk-based
approach, making possible the spontaneous repayment without prior checking to the companies presenting no risk, the checks being done a posteriori; and, above all, the dematerialisation of the entire procedure for claiming VAT credits already implemented at the level of the Large Enterprises Directorate. The only difficulty that remained until then was the one related to the stock of credit
accumulated before the reforms I have just mentioned; stock valued to date at about 25 billion. Hence the allocation of this special envelope of equal amount that will make it possible to eliminate this stock pending reimbursement. I should also point out, so that it is clear enough, that this special envelope is in addition to the initial provision of 72 billion in the state budget for the financial year 2020.
5. Several tax payment exemptions are announced: property tax, tourist tax in the hotel and restaurant sector for the remainder of the 2020 financial year, starting in March; exemption from the duty-free tax and parking tax for taxis and motorcycles, axle tax for the second quarter. What were the revenue forecasts for these different revenue items?
Let me clarify that with respect to the property tax, this is not an exemption, but rather a deferral to September 30 of the due date of this tax normally set at June 30. This measure is aimed at households that are the main contributors.
As for the axle tax, the discharge tax and other municipal taxes, this is effectively an exemption limited to the second quarter. In addition, the Head of State had already long before the publication of the measures of 30 April 2020, declared the exemption of VAT and customs duties on materials and equipment directly intended for the fight against Covid 19. It should be noted that measures to suspend tax controls and enforce collection also have a cost. Overall, for the time being, all the tax support measures decided by the authorities are estimated at FCFA 114 billion, that is to say, 92 billion in internal revenue and 22 billion in customs revenue. This tax cost, as you can guess, is only a portion of the overall cost incurred by the authorities in the response to the severe Covid 19 pandemic.
6. The exemption, for the second quarter, from the duty-free tax and community taxes (market duty, etc.) for the benefit of small food retailers (bayam-sellam) is also approved. Have decentralised local authorities already been made aware?
As you have well perceived, these measures directly concern decentralised local and regional authorities which are the beneficiaries of the proceeds of these levies. With a view to the effective application of these measures on the ground, consultations are held with all the actors involved for their harmonious implementation. In any case, the Prime Minister, Head of Government, personally ensures that all measures of support to taxpayers decided by the Head of State are scrupulously respected. We work in this direction under the supervision of the Minister of Finance and his counterpart in charge of
decentralized local authorities.
7. Are compensations planned for these decentralised local authorities?
In the context of the necessary future budgetary adjustments to take into account the impact of Covid 19 on the public finances of the State and the decentralised local and regional authorities, the authorities will, as usual, make the necessary arbitrations so that the decentralised local and regional authorities can absorb this external shock.
8. Are new measures possible, particularly for better support for small and medium-sized enterprises?
It seems to me important to emphasize at the outset that when reading the 9 measures decided by the Head of State, no category of enterprise was forgotten: large, medium, and small enterprises, and even micro-enterprises are not left out. It should be noted that none of the measures taken excludes SMEs. Whether it is a question of refunding VAT credits which, moreover, concern medium-sized enterprises more in the light of the credits they accumulate as a result of the withholding mechanism; whether it is a question of suspension of tax controls or forced recovery. All these measures benefit SMEs in the first place.
In addition, some of the measures taken specifically target this category of enterprise. This is the case, in particular, of the suspension of taxes applicable to the transport, hotel and food retailers sector; that is to say, all the attention that is given to SMEs which, in a crisis situation, are generally the most affected. Now it is essential to point out that, in general, our tax system is not based on a lump sum and mandatory payments. It is designed so that you only pay when you do an activity, a turnover. Since the tax is based on real and not flat rates, companies which, as a result of the crisis, are temporarily out of business or have low turnover will have nothing or little to pay.
9. Are these tax measures sufficient to enable companies to cope with the consequences of Covid?
In the current state of the crisis, they seem to be largely up to the task. In fact, as I said earlier, we are in discussions with other tax administrations and technical partners that are dealing with the issue of taxation in this crisis. In this regard, I must say that almost all States adopt this approach of fiscal prudence. The facilities granted in most cases are administrative in nature
(suspension of tax controls and compulsory recovery, etc.).
Cameroonian companies are therefore not at all disadvantaged in this regard. Better yet, they have other exceptional advantages. Look, companies affected by the crisis can also benefit from the special transaction measure on tax arrears dedicated by the Finance Act 2020 promulgated by the Head of State. This is an important measure to support businesses by allowing them to benefit from substantial reductions in their tax arrears. These reductions go up to 75%. The State has thus decided to virtually erase all the tax debts of the companies registered until 31 December 2018. This is unprecedented. However, it is time-limited. I would, therefore, like to invite companies that have tax debts to seize this opportunity to clear them up and thus clean up their balance sheet; this would allow them to more easily access financing as part of the relaunch of their activities after the crisis. The approach is quite simple: it is enough to send a request to the Director General of Taxes and a letter of reply indicating the rates of abatement already fixed by the law is notified to the taxpayer.
10.How does the tax administration itself adjust to always be able to do its job and make it easier for taxpayers?
The many reforms carried out in recent years in the tax administration, which for the most part had as a common denominator ICT, have so far enabled our services to cope with crisis situations. The same is true of the current health crisis. In addition to the teledeclaration and the telepayment already operational for several procedures for several years, we have worked to
launch new online services accessible to taxpayers remotely from their offices or homes without making any physical trips. These include tax registration, tax litigation and the repayment of VAT credits, all of which are now digitalized.
11. All these tax exemption measures will cause a significant loss of revenue in the state coffers. How do you plan to redeploy to replenish the funds differently?
The crisis necessarily has an impact on the mobilization of revenues insofar as they are dependent on economic activity. This impact, therefore, goes well beyond the cost of support measures to include the revenue losses associated with the decline in activity. As you know, the tax revenues to be raised in a given year are projected on the basis of assumptions. For the 2020 financial year, they were set based on a real GDP growth rate of 4% and a GDP deflator of 1.4%, or a nominal GDP growth rate of 5.4%. We also expected a barrel price of oil of more than 50 dollars. In view of these macroeconomic parameters, an objective of
2.103 billion has been set for the General Directorate for Taxation, which, as you know, is the first item of revenue mobilization for the state budget.
After the first quarter during which the DGI has mobilised beyond the objectives assigned to it, with 537 billion mobilized against 463 billion for the same period in 2019, a progression of FCFA 74 billion in absolute value and 16% in relative value, The Covid-19 health crisis is upsetting all these assumptions: the growth rate is expected to fall significantly and the barrel of oil is currently, as you know, below 30 dollars. The revenue forecasts should therefore be
adjusted in due course. However, it should be noted, as I said earlier, that the reforms to modernise the tax administration, carried out with the constant support of the authorities in recent years, have enabled our collection system to demonstrate a strong capacity for resilience in times of crisis. We, therefore, rely on the fundamentals of this resilience, namely the mechanism of securing our revenues and modernizing recovery, to preserve most of the State’s resources.