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Yaoundé - 24 October 2021 -
Economy

Cameroon: Tax expenditures should be retargeted to benefit poor households, the DGI suggests

Cameroon: Tax expenditures should be retargeted to benefit poor households, the DGI suggests
  • Comments   -   Monday, 30 August 2021 13:28

(Business in Cameroon) - In 2019, Cameroon spent XAF584.7 billion on tax expenditures, according to a recent report published by the directorate general of taxation DGI. This amount represents 21% of the tax earnings collected and 2.6% of GDP that year.

During the period under review, the country spent XAF351.7 billion on consumption taxes, representing 60.1% of its overall tax expenditures. However, according to the report, those expenditures profited the wealthiest households than the poor, which are normally the target of the measures.

For instance, only 5.8% of the tax expenditures on foods and beverages (which accounts for 46% of the overall tax expenditures) profited 20% of the poorest households while 40.8% went to 20% of the rich households.

Also, as the DGI indicates, during the period under review, only 4.6% of the VAT exemptions went to poor households against 47% for rich households. The reason for these discrepancies is that the expenditures are not targeted enough to profit poor households. Specifically, since consumer spending increases proportionally with households' revenues, rich households spend more on consumption than the poor, therefore, indirectly capturing the highest proportion of the consumption tax expenditures.

So, the DGI suggests the government should instead collect the tax revenues concerned and redistribute them equitably to poor households by for instance creating a subsidy to compensate for losses sustained when exporting raw materials to international markets. For the DGI, that subsidy would have more impact on poor households because, in Cameroon, 64% of the rural population consumes products from their farms and growing cash crops.

The directorate also suggests the government should boost local rice production and fish farming because those two products capture most of the tax expenditures from consumption taxes

Sylvain Andzongo

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