Country papers prepared by the participants for the training workshop in tax policy, legislation and administration : Addis Ababa, 3-26 October 1973

UNITED NATIONS

ECONOMIC AND SOCIAL COUNCIL

LIMITED

E/CN.I4/HJD/2I

17 March 1977 Original:

I

ECONDIillC COMTOiSSION FOR AFRICA

COUNTRY PAFSRS--FR3PARED BY TEE PARTICIPAKTS K)R THE TRAINING

WORKSHOP IN TAX POLICY, LEGISLATION

(A2JDIS ABABA, 3-26 OCTOBER 1973)

Mbt_e: The views expressed in these papers do not necessarily

reflect the views of the Governments to--which the participants belong.

M77-465

Introduction

The compilation contains 22 country papers prepared by the participants for the Training Workshop in Tax policy, legislation and Administration held at Addis Ababa in

October 1973- The subjects of the papers cover diverse

topics on the taxation systems of different African countries and the role they are playing in the mobilisation of resources and their use for productive investment. Although there have been some changes in tax measures since these papers were produced there has not been substantial change in the taxation systems covered as such in these papers. It is hoped these papers would be found suseful in a comparative study and evaluation of tax systems in different African countries.

List of Country Papers Pages

1. Broad Features of Income Tax I - 10

System in Botswana . .

2. The Taxation Law of Burundi II - "19

3. Cameroon - The Main-Features of the 20-38

Taxation system and its role in

mobilising resources for development;

4. The Congolese Tax System 39 - 54

5. Characteristics of the Taxation System 55 - 64

in Gabon: its role in mobilising

resources and its contribution to ticcnomic Development.

6. Broad Features of Income Tax System -- 65'- 72' The Gambia (Appendix i)

7. Broad Features of the Ghana Income Tax 73 —■ 85

System and its role in mobilising resources for development.

8. Tax System in Kenya 86 - 95

9. Study of the General -characteristics of ■ $6 - 108- the Taxation system in the Libyan

Arab Republic

10. General Features of the Tax System 109 -'119

in Madagascar and its' role in securing funds for development.

of Country Papers - Fagea

11. Taxation System in Malawi and its role . 120 - 137

in Mobilising resources for development

(Appendix I and II)

12. The General Features of the Mauritanian . I38 - I48

Taxation system; its contribution to

mobilization of resources for development

(Annex I and II) ;

*

13. General Features of the Tax System of I49 - 152

the Niger- its role in the mobilization

of resources for development.

14. Broad Features of the Tax System of , 153 - I65

Nigeria and its role in mobilising

resources for development (Appendix I and II)

15* Administrative and other problems of 166 - I73 Income. Tax in Sierra Leone

16. Problems of Tax Evasion and Accounting ' I74 - I81

practices in. Sudan*

17. Taxation System in Tanzania and the 182 - 189 Hole it plays in mobilising resources

for vcvelcpment.

18. Tunisia - The main features of the I90 - 217

Taxation system and its role in

mobilising rssGurcos for development.

- 3 -

List of Country Papers

19. The Taxation System in Uganda 218 - 229

(Appendix I)

20. 'The Tax System in Upper Volta 230 - 233

21. Structure of the Tax System in the 234 - 240

Republic of Zaire

22. Broad Features of the Tax System 24I - 2%

and its administration in Zambia

(Appendix A)

Prepared by:

Mr. BoO. Gaobakwe . . ....,■ .._,;. . _..■■, . . . Deputy Commissioner

. . ' . of Taxes,Department

...BROAD/FEATURES OF.. INCOME TAXATION IN-BOTSWANA -' Qf Tax8ST ■ ' "f' "

■- ■'';■■■■ " - . ■■ • ■'Gaboroner Botswana

Historical Considerations . , . ....

Up to,'30th June 1973 ? the taxing legislation- No..:8l of 1959»Income Tax

(Consolidation) Proclamation - was the basis of income taxation. This Proclama tion^' with subsequent amendments, was-introduced in .Colonial, days.. .It was based largely on.'South African taxing.provisions and did not reflect, the..principles,, ^ policies and objectives of,the-Botswana.Government* In addition, tho responsibili ties imposedon the citizens of Botswana,, due to the complexities of the system.of deductionsr differential rates of tax,, rebatos and. surcharges;,were not generally understood by them and in 1969 the Democratic Party pledged itself.to reform ifche Tax Structure* Accordingly, in 1970, a'fiscal raview team submitted a report strongly recommending that new legislation should be introduced rather, than making further amendments to the 1959 Proclamation, As a result of "thiB-Report,'two--. ■ working parties-were set up and met between November .1971 and June 1972, The first Working party made a.series';of-practical- recommendations to the Minister.<?f Finance and-Development Planning-and: the;, second working, party - th2 .Income, Tax '.:

Law Revision-Committee'. - considered ,the policy .aspects, of the-new legislation^ . Govei-nment,;'having'studied the proposals,- accepted.or. modified them .and then, sought the assistance of the international Monetary. Fund and.an expert legal; .,.

was seconded to draft the ~"""

Revenue Considerations . . ■ . i- ■ ■ ■ ; .: ■ ■- ■ . .• f / • . ...■■ . ." .; • ...

Botswana in presently collecting about 15. per .cent .of its.annual revenue. ^

from income taxation. ..

- With -the: development: plans for...Botswana rec[uiring increas.ed.revenues &$■?.., the forecast;of a^fall in the receipts from.customs, excise and sales duties,'it^

has becomG..necefcsaiy'to-..ensure,:that;-receipts /from direct taxation are.:increasedv;

progressively-■ - ="■-. T-"- . ■ ".-:1. ■::*. . * •■..-.■ , -.-:: ■."■■■ "

Econoinic Cohsideya-bioiis . " ■':•;•-: /. . ■ ■ . . - . -. ,..<;$ ...

However, in: statements of public-policy ..the Governmeni.of;! Botswana'ha^./. [.^

streGSed-that-droome taxation was not,,t.o\.be regarded^ as^.Jh^p^.means of, ra>s.tng reveivjerbiit was meant'to regulate-the economy,of-Botswana.'^? j&'.*o rvchiqye "the-^

goal-of'-development., The Act accordingly provides fo£incentives .to stimulate;

investment'in the private; sector by raaintainj.ng Company, rate, of tax at 30 ^er. cent aiid; G-ih^rou^'Capital Allowances to^ encourage the deve?-opmGnt of industry and,, tourism^ In ^acVv- Capital expendi-bjire can be vo-itten off .over, a period" of ten. . years, To; encouxige building of; housesr:an, allow^ce, of R100Q will^be given .in; _ respect of each houBe built for an employee* To encourage ,;the training of local ci-ii^ons. an allowance of 12*5 per cent of the approved cost of training wall be allowed to; all companies. In addition, the Government is prepared to enter, into ' spocial- Tax'Agreements for Mining.ventures... To raax-imisG the domestic employment

of savings,1 "interest from Post Office Savings and .local Building Societies .is

- 2 -

freed"from tax, whilst Botswana residents will be taxed on dividends and interest received from a source outside Botswana but within the currency area of which

Botswana forms part. To ensure equitable distribution of benefits, the income

tax threshold was lifted by giving new personal reliefs of R1200 for single

persons and R2400 for married persons, thereby giving relief to those in the low- income brackets whilst increasing the top rate from 65 per cent to 75 per cent.

To give further incentives to rural development, an increase from R4000 to R5000 in the .-allowance for each house built ''on'"farms for employees has been given.

The married women'in Botswana are encouraged to play their part in develop-:,

ment'by'the provision 'in the Act to treat their remuneration from employment as

if they were single,r-if ■ it is to their-advantage. .Finally, to encourage home

ownership, interest';on loans which was' limited to those-from a local Building

Society has been extended to cover loan interest from>any recognized-financial

institution which lends money for' this purpose.

Administrative Considerations ...

In order to minimize the effort to assess personal /taxation and..so allow more

e'ffort to be concentrated.on areas generating more-return, the Act has simplified

the Allowances and made the Act more easily-understood by taxpayers. Recognizing that many taxpayers have difficulty in completing returns and .maintaining business

records, provision has been made for these to be in Setswana or English, and-the

Government is to introduce a campaign of taxpayer education.

To ensure maximum collection, a system of withholding taxes is introduced from dividends and from contracts carried out in Botswana. . .

Development and Investment in Botswana

Special care has been taken to give Botswana the maximum benefit from the exploitation of her natural- resources especially minerals. Special-tax incen tives have: been given to approved business" developments geared to substantial

citizen employment and participation. The Act provides in Section VIII for

Development Approval Orders (a type of Pioneer Industry Concession) which the

Minister of Finance Development Planning may prescribe for which additional tax

relief will be given at the Minister's determination, nowever, the. Minister will have regard in granting Development Approval Orders to the number of Botswana

citizens who will be employed andthe capacities in which they, will be employed,

facilities for training and imparting skills to them; any provisions-made to ..

replace non-resident, employees by citizens; participation by: citizens in the.

management; degree of investment in "the business of capital owned by Botswana

citizens';-the area in-which the proposed development will toei carried on; and any effect .which the proposed projec.t might; bev expected to-have on stimulating the

development of.other economic, industrial or commercial^activities'in Botswana, whether in the business or otherwise-or- in;reducing the -price of consumer

good's'or services in Botswana; " " ' ■'■ ■■• " ■■■■•■ ■' ■;

The act in Part VIII also give;s: the Minister powers to "make,.Tax Agreements;.,

(which must be' ratified' by-Act of Parliament) with a person to vary, the-.provisions

of the Income Tax Act in so far as the^ imposition of tax or to.regulate the.

imposition of tax and may exempt dividends: and. interests, paid-by .that person Or to relieve ^such-person-.from any responsibilities,.-duties-.ox liabilities under. .-.=

this.-section; • " : : ■ .^ ... .; . .-..■•■■ . . :•■: :■..'.

Special reliefs have been given for the cost of developing farms, mines, : / industries and businesses.

Investment- Allowances' ■ . • . -.. . .-;.• *. ■■ ■

r-?; A'deduction of fifteen/per cent is'allowed on the erection of.industrial - buildings or the improvement to such: industrial.buildings in', respect .of the cost . of such-erection or improvement: in ;the..tax. year in which-the-.building is-first*

used;for the business-or in ihe'icase of - improvements, when, completed.-- An allowance of 25 per cent is.deductedi from .chargeable..income.of the'business in respect of expenditure', incurred, on new or unused plant and. machinery used! solely, for, the!■-.>;\

purpose1* of the'1 business, and shall be allowed-, in, the tax. year in->.which. this '.plant,. •

machinery is first used. . ■ ' ..■■■.,

In addition to this Investment Allowance, an Annual Allowance on Industrial, r;.

Buildings, v/ill be allowed in the tax year it is first used. In the case of piant

and1 machinery,r? a'deduction from the'business" chargeable "income of. an annual,■:.'■, allowance, on: such-expenditure, incurred in that, tax-year of the:, whole or .such!, pro-.-/

pbrtion^bf-the"expenditure incurred as' the. person may choose.. ■= "•. ..:.■■-.■ .- ■-■v-~

Residential accommodation for employees has been amended to allow a deduction from: business-chargeable income of • the-.'expenditure- incurred on thererection of dwelling;houses-for employees of such'business-to a^ maximum', of R5000 in the case . of. farming businessmen and H1000 in: the case of-1 any-other, business-.in; relation to each dwelling house. ' ''•■-': ■■ '•"■■'•■■.••■' ■■ -

Farming " ' ■ ■•■•". .:..'.-■:..■

In'the" case of farming business,1 .deductions from: assessable, income .willvbe allowed for-'any■'expenditure-incurred in that''tax-year on: -.k-.-.•*-.:. '■::■ -"'.-%■:: "■'.

(i) eradication, of noxious plants ' -- ..->f"-*- (ii) prevention of soil erosion

(iii) dipping tanks . )■„.,,.,,.,,.;

(iv) sinking of boreholes and wells, provision of piping and-'pumping'-plant's'--1- ■

,. ■- .-.,. or the construction of dams, tanksrand reservoirs ,for the. conservation

'*,1C. '-.-" of water, or irrigation phanne'ls^land* wafer furrows '. . . ", " . -,..,.-

''" (v) the erection of fences, yards and crushers ." '.' ■ ;. .^ . _ -.."."'.

(vi) the erection of buildings used in farming operations (other than

dwelling houses) .... • ...

(vii) the establishment of trees, plantations, orchards, vineyards ■

(yiii) the building.of roads, bridges, or airstrips, used .i.a.connexion

"'V : '" farming, operations .. ' '.'" " .':../ /- " (j -.-..v:'* -., 3- -- , ■' :--»'*?

(ix) the carrying of electric power^ from,.main, transmission ,}.ines to farm.. , apparatus and the erection of buildings or structures connected with the generation of power

(x) the making of fire—breaks and any other works of a capital nature which in the opinion of the Commissioner of Taxes are reasonably associated

with the classes of expenditure enumerated in (i) to (x).

/

In addition to these deductions/ the person carrying on the business of farm ing will -be entitled.to the.'Annual.-Allowances in. the, tax year in. which the plant and machinery was purchased or at a rate chosen by the person on the business.

Mining-.. ' < -

Prom the business chargeable income of any person for any tax year carrying on the business of mining, a deduction will be made from his business assessable.•:

income of an allowance known as mining capital allowance. This allowance will"be"""

ascertained^'by dividing this capital expenditure." .by a number equal to the estimated number of-whole years during which mining.operations, may be expected to continue,.

The Commissioner who;-may consult with-the. Mining Commissioner will determine the

•■'life of the mine", and may be reviewed.by the Commissioner upon request by the.-, person carrying: on-thei business, of mining at-the. end of ■ the^tax year in which pjay material1 alteration in- circumstances may have .occur.ed, Where' the life of the. miner is,-estimated to* exceed thirty years,the deduction will.be. ascertained by dividing -

the capital cost by thirty. . . , •. .

Training , .■..„•-. * . ;

Jr.-..- .-■.•■■ . . ■'..".

Provision has been.made in the Act to.encourage training of Botswana citizens hy-giving.a deduction from the chargeable income;of any company carrying on-busi—l ness in Botswana of an amount equal to 125 per cent if-any.expenditure is. incurred, in that tax year on:

(i)'. approved, education (not being.primary, or•secondary education) -or train-. ,

;.ing of-'any personbeing a citizen Who-As employed by or bounded to'.the...

company as.an-approved.educational,.professional or-vocational training establishment or

(ii) the employment in Botswana of an approved training officer wholly,

engaged in approved vocational training of citizens. . - To1 qualify for-this .special training.deduction, the.company roust apply to the Minister of Finance for.approval-of;the education, training or-vocational or', training establishment or for the approval of the employment of a full time train

ing officer. ... ..

Personal Income Tax . ' '

The hew Act" of 1973 has completely dhange'd'the old system'of personal reliefs, dual rate rebates and surcharge and has rationalized the allowances. The existing allowances are the following:

A Household Allowance _ .'"'''

Of R2400 for a married person and Rl200'for a single person which is appor tioned by reason of alteration of marital status during a tax year, or by death or divorce or arrival or departure from "Botswana.

-.5 -

An Education Allowance , ■ ■■ ,- , : ■ ■• -:;

: r-.i Upto.a maiimuni,of K600 for. expenditure borne ,out.of .a; person's. chargeable income'-incurred.in -payment..of rfees^pr, the'.full. time education of: any, person .to ,

a school ? .CoUegi)-.urdye:^sity. or i, other educational ^establishment.,,...,, . ^ .'■_;

.:-,c!,:The,.Governipeut hers .have provided-, f?r--

student-, n.6;b:neceseaxilj; a'child.of..a;,married:,pe.rsono

A Medical Allowance

;j;The full expenditure incurred by a,.person,from his chargeable, income for the f&es:J:ofr;.a:me.dicai,fund and in...addition, the .-expenditure;, incurred pyer pO in,^,- payment 1pf;JmedicaL.,expenses;.to :a.doctor, .dentist-or-nursing -home..for.ythe/treatment of rllnessjbivcont'iflement: together, with;-the.-cost of-drugs prescrfbedrby^^ra^dfcal

practitioner.;..■■;■: ■-;,-. . ..-.. ■-■"•. . -,, -; .•• \, ■ .-■ • '■, ■*;■-.■■ *--. ■■"■ ;■.-.■■-.;</■ -*■;.,.-.• i-.i.y.

.u::-jO.4.:.i -^y.ti ;i-^'r--: t. :, • ■■■ ■ ■■.■'■■: '., .:-.--.-'-■ :- • i ■'■■'.j, :■■ . .■ri>..-. ■■: >., " . ■>., ;- •::.:■

An Insurance AllovJance

t1!.;.'.1) :\-v> - ;;-/!-•. *;. ' ,: .-..■ ..■-■.■-■ .!■-.■ -. - ;::.:,•■. :• . a ':.-■,■.■- '■■ ".:■•-. ir .. -.J. .';*.: . .L :■>.'■.

;■■ Up1 :tbL--.a- jnaxiraum.. of E3op.,.for- .expe^turei^curred^by .a .pers.Qn>:, 'borne- out .of..,, his: chai-seable^'%come :for:.th.3 future; -bep.efit[-.qf hijnselfr his, wife and\,chi3.dren.;;or

(i) current contributions to an approved benefit fund or approved" super-

"..'*! -X.1-":.'.•.'annuaiti6n'*fUiidi-' -.-..'I';.-' -.■■.•■ (; ; ~i'M.'-' ■.••■ .-.- M ■ :»-.^ -..-. i ■ ■: s'1-

-!;.' (;ii)r;:--as ■premiums. ,f:or insurance on; his. life-pr the rlife. of hj.p .wifej,^ 3;-.,-,j::,

~-1tf"iii)^. as;pxemipjns':against -sickness, acqident;.insurance;.- :... ,,,.. v !.-.1;>:';.-j. ,;,b,u

■■.;(iv!);..', as premiu.iis':f.or..'retirement, annuijty insurance;. ; . -..3.;/, ■■. . i--;;;;: **? '-Hi}a

.-•*# (.v) ..■as current oontributions-.Ao ^any-na^ipnal-^su^ance^fund esjt^blish.ed.Vb^:

■.■"":£:'•:;?: luvr ■off.,;any:--coi.uitry in.'so,.far. as those ■.contributionB relate. to:futur:e^:;

superanim^tion benefits.. *::iw*y;-5.H ■■s.i>c.

It is to be noted that the payments of premiums for i-i

only be allowed v.'hera payments of the benefits are maae'i

;tha'-t -'of -'iihe--:curi?onc3:-.are£.-of v;h.ich Botswana:forms partv

-a person other -..xhan-.a public:;servant,v(-to ^wh^ .a.housing .allowance .i^ ..

pai'd)^p6ys--:irii'erost -to;.a-Building rSociety^.or..other tfi^cAal^.-iJ^ti^tion^reoo^

■-by the; Commissioner as-an^institutio'nrw^ose.^sijiesB1.includeB.4he^lendi»g of rmoney f6^'--:bhe--raur-clia3e-:6f <bomes and .the.-Cpmmissionerjis :satisfied.:that .the-.-rate :of interest

does>not" -differ, substantially from -normal comraereiai rates,, sucb. person.wi_l> be;

. entitled,.io.tii .deduction in.respec.t of that interest, ^ V. ;. . . . '..../.;.;;

Income of a resident married woman from emplpvmen^^spurces ■will;be...taxed.?as though she were a single woman if it is to the husband's advantage so long as such

employment ■■-income is-;not received by her, frora.her- husband. - ,..p.v.'.-i ■; •-: : :.

.:.;;M- -Special- relief s .have, been .given from/the cost;, of-developing farms, .mines,.,,■■:

industrie's-;arid-businesses-as. follows;;'.. :'.''• '. . ■■: v . . . :*. ,:■..■■.■ - "ri."jv?b

Investment Allowances ' ; r^_

''' A deduction of' fifteen per cent will be allowed on the erection of industrial .■"

"buildings or'tne Imprbvomen't to such1 industrial buildings in respect of the cost,

of such erectionor improvement-in the tax year in which the building is first-:

aisod for the iusiness or in the case of improvements, when completed* An allowance of 25 per "cent" will" bededucted-from chargeable"income of the business in^respeot of expenditure incurred on new or unusbd-plant and machinery used solely for the purpose of the business and shall be allowed in the tax year in which this plant machinery is first used*

*i • - -. ■ -. ..■•-".

..'In addition to this Investment-Allowance, an'Annual Allowance on Industrial

Buildings'will be allowed' in the tax year it is first used or improvements- com--I

ple'ted at the'rate of 10 per cent for that year and in the nine-tax years next

following. In" the-case of"plant and machinery, a deduction from the-.business

chargeable income of an annual allowance on such expenditure incurred in that tax year of the whole or such proportion of the expenditure as the person may choose.

Residential accommodation for employees has been amended to allow a deduction from ^business chargeable 'income-'of: the expenditure" incurred on the erection of dwelling'houses for employees of such" business to a maximum of R500CK in the case of farming business and R1000 in the case of any other business in relation .to; ■ each dwelling house*

It is to be noted that the lifting.of the income tax threshold to R1200 for single persons and R2400 for married persons will render some 35 per cent .of the

individuals assessed to tax in; 1972/73 "to .be no longer liable and thus give re- .

lief to these smaller wage earners1,1 most of whom live in. rural areas. Also to make the; burden-of' taxation more equitable, the top rate of tax has been lifted from 65 per cent to 75 per cent for those whose taxable income, is over R256OO

per annum.

^"Income Tax Appeals Committee-'" i]}- ' ■ ■

One of the changes in the, new act is the introduction of Tax Appeals Committee.

The Government realizing the high cost to a taxpayer in making an appeal to the High Court particularly where the amount of tax in-dispute is comparatively.snail but where the taxpayer feels he has a reasonable case to seek a change of deter mination by the Commissioner, -have-included the. formation_of Income Tax Appeals Committees.. The-membership of 'aii Income-Tax Appeals Committee shall be selected :from a' number of-suitable persons appointed-by the Minister.who may amend the list

periodically•'' The Chairman will-be-a Magistrate appointed by the Minister after due consultation, with the' Chief;"Justice,- "and the District Commissioner of the

district in which the appellant resides together with three other members chosen

■from the list of those appointed*' ' "■■ ■ ■ - . ' :: . ■ At any meeting of-an Appeal-Committee-four members shall form .a quorum but one of the four must be the chairman and in the event of a division of opinion, the decisio'ri'of the'majority-shall prevail, provided that in the event of an equal division of opinion, the chairman shall have .a second' vote ■. The. members of the

committee,other, than.the chairman and District Commissioner. shallvreceive such allowance as. the-Minister- may. .prescribe. . : -.

. The intention is.-to-iprovJ.de a cheap., method of haying, anjappe.al heard: as both the taxpayer-and Commissioner must bear their'own costs but nothing prevents;. -.

either party to appual to the High Co\irt from any decision of the Appeals. Committee.

Powers are given to this court uf appeal to summon any person..who, may 'be able.-to ..

give evidence ar< . to produce books or documents which may "3-in.his posse'ssioru. .,,.-;.

All sessions are private but evidence ia- itaken^ on > oath,. .and the '.court- will.-.have Eimilar powers-as a subordinate court- with regard .to.,punishment .-.for contempt- and . ■ the Chief justice may,moke rules of court to regulate the procedure*.of:. Appeals-;,..-,

Committees- .-■■■■■ : . '■■ . = .--.- :

Mineral Rights;?^ ■ :.-■■■ . ■. -. ■ ■ . , . ■ -.,-..

Consideration leading to the Act. are as follows:?,--- . . : , . ., /, ..-■

-.,*"-. 7_{. ■. ,} " :._{-t .} . _" "_' ' ' ' .' *_{■- " "} " _{r ■ -*}■ J-' . . ' "*' : _{-.,-_■}v **i .""■ ■ ._, ' ' *_{■ - m} ' - -■. ' -■■■■■■

In'Bptswana:-there are approximately, ten .thousand, five hundred-square: kilor- , t.vv metres of. land'in. which.mineral, rights.-ai'c- still: privately owned.: "These,con- -. ..;- cessions were-granted in 1905 and 1911 and have thus been in private hands ,

for over 60 years and the Eotswana 3overnment has not made: any, demand to .expropriate or purchase-theEe-mineral..rights- .. However,. the Government::realizes, that ^iti-;isr-.

essentia3Ufor.:-tlie>d6rglopmeut of-^Botswana', that;, the, persons owning., these, ^mineral: .;cj .-■

rights maiee'-i vigorous efforts- to1, pro&peci:1 and" where-possible -proceed; with;: a raining.; i.;

prograjnme-.irt -the earns' way'"As those- mining rcompanie.s 'have done* in state Owned; o:r-=-- mineral -opi^h-ts' areas.- In fact., rather.:-than; prospect.^and, mine,., much of ■. the:.trans4:....i.

actions have" :been speculative', in theBe^privat.'ely-'Owned'.right:. areas-and it«.'W"asv '•:-.-'..■;.;;

necessary■ to introduoo fiscal means sovthat-Governmentxould at least obtain s.omer■>

return from these valuable areasc Thus an act to tax these mineral 'rigb/ts ...areas.- . was introduced in 197?• . ■' ■' - ■ ■ ■"■ - ■ -■-. -::" --' "■ " " - '-■■-*

'."The--act; provides' that- a. tax- o^ -jH40; per.-sguare-. kiloraetre. per.-year1 of .the,.;;area-,'-:'-- ownedby-' a*: person.- orr-lO.per cent ^of"-the*.valuer of ,the:mineral--rights-,wh:ich ever;ds.;,.-:j thehigher. '-In.\;-fcia3.ay it will be: the responsibility of the^holde^of.the mineral.,;:, rights' to..: make - a': rerturn of 'the .value of: these rights.; on:-the-.open?:market .:and- this;^-v value will" riot-: "be cpTestioned'by:-tne' Commissioner».y. The:';Coiiimissioner;.i.uill: then.■■< .:^-.-;

determine t.H.e-rr-^e of-4^a:-c to'be ipaid Lt^" the area, rate orJ.Xh^- .advalorem r,ate,:f. ,r, %/■■

and send outran "assessment.' The rtaxpayer will -be ;able> to .set-off., agaiiist-.his -.i.ti- -.■

liability ■for- tax, all' e:spend.tture-" properly incurred" on-.;approyed>pro.Bpecting, in.:' - the previous yea^sv' ThVis if-a'holder of privately owned..mineral rights expended-* -. j, R4-0 per square kilometre on. approved'prospect ing. in- vther year ■.previous-.to- that-vf-or, . which-'a" return -i-s mo.de r there would be-no tax payable. " Onthsi-othe-r-'hand, if;no> -•■;- prospecting took" pi&c-s ■ "ilicn he would hava- to pay the full' A'aoc-v:/.Thus- it ensures-..-:.

that' some-contpensatioil is received-by the .&tate for the .holder;1 s1 denial to the;-;—-., nation of :theTru.ita of prospectingi - ■■■' * :■.-< . -j .-.'.- . .

The Act goes on to provide that should a private, holder of: mineral' rights, decide to sell a-portion or all of his holding then the Commissioner having a . ■ "

more accurate valu? of the holding can revise his assessment of the mineral . rights tax on all years up to the date of the transaction.

- fc -

The Income-Tax'Act was amended so that in addition to the mineral rights tax, any profit made on' subh transaction would be1 included in gross income and assessed, to income tax in the normal manner. The amended act also provided that any income accruing from the sale of mineral rights was deemed to accrue from a.source in side Botswana-1 " ■ ' ■ .. .•;,.-

Taxation of Non-Residents ■...:■■ .

Taxation of non-residents under the withholding scheme covers three main areas, i.e., remuneration from employment; payments; made on account of contracts, relating to construction companies and, dividends and interest.

Section 57 of the Income Tax Act 1973 lays down that every person who makes

any payment under a contract (a) relating to construction operations; or (b) for

professional services to a non-resident shall deduct tax from such payment if so directed by the Commissioner in accordance with the Eighth Schedule and, for purposes of this section a person including a partnership, to whom any payment is made to which Section 57 applies, unless the contrary is proved, shall be presumed to be non-resident if such payment is made to an'address outside Botswana.

In the first case y it was envisaged that1," with-large-scale development pror- ceeding at a very rapid'rate, .much of the private sector professional services ..- would of necessity, be undertaken by non-resident persons,i.e*., engineers, con

sultants, architects, etc., not on a contract .of employment and, in order to . arrive at a fair distribution of the burden, a levy on these, fees would withhold twenty per cent of the gross amount1. "As.non-residents, these persons do not qualify for any personal reliefs and. -therefore the withholding is a straight forward deduction from the gross amount. . ...

Secondly, for the same economic reasons, it is obvious that much of the con struction work on the large-scale developments will be undertaken by non-resident contractors. However, in-the case-of payments to contractors for constructional purposes, a minimum figure of R5000 was fixed, up to which amount no tax would be deducted; This means that for a single, contract or-a series of contracts in the period, if the amount of the contract or series of contracts exceeds R5000, the . person entering into such contract or contracts must inform.the Commissioner and may be required to withhold 20 per.cent of the gross figure. The gross payment to the contractor shall be reduced by so.much of.the payment as is shown to re- present.the direct cost to any other person for the supply,of materials for use in carrying out ,the construction operations and the-withholding tax will be calculated on thai; balance. Obviously, in these, cases the Commissioner has the powers to-make a" direction of the amount of-;tax to-be withheld and.this will be adjusted at the termination of the contract or series of contracts. The Commis sioner also has powers to vary.the direction:given or cancel the direction and accept such security for payment of the tax as seems.reasonable.

To administer these two parts.of the.;withholding tax scheme, the Act pro vides tha^t: . '•■ ■ ■■ ': ■-'■■'- ■^-.■(iiji.'i..- ■.-..-. '■ .-;.. ■

Payments to non-resident employees (i.e., these payments made to non residents not"-being paid under-a contract of. employment) _and. contracts exceeding R5600"must:be notified in writing to,, the Commissioner within _ ■ ■ 30 days 6fv entering into any contract1 as to the nature'bf^the contract<<V or contracts, likely duration,.the name-and. address of ;;the.non-resident and, the amount payable' under.the contract. The^Commissioner'may; • . . _ direct that tax will be deducted at twenty per cent- orf any. figure he

. - may consider reasonable in the case of constru'ct'i'oti operations. The ' ^ ''" '■ persori paying amounts, to such nonresidents will, then deduct the tax and

issiie-a certificate on. the prescribedform, showing" amount:paid and the

;tax/deducted;- This tax deducted or deductible is payable within 15 ,/. -

days after the- end of the month in.which the tax was deducted.or deduct- ■ ible and each person making such payments must keep a record for the tax period showing the gross amount payable, and the amount of tax deducted

for future departmental inspection.

Obviously, there must be enforcement of this deduction and the Act provides that, firstly, should the tax deducted or deductible not be paid within the 15 days following the month end in which payment was made, then an interest of 2 per cent per month or part of a month will be added for the period it remains unpaid.

This interest will be payable by the employer, not the contractor. Both the tax and interest can be sued for in the normal method through Court Action. Also, the Act provides that any failure to deduct tax as directed will render the person who should have deducted this tax personally liable for the tax which should have been deducted, except that where there are sufficient funds available to recover the tax from the non-resident, then the Commissioner may absolve the person who

should have deducted from his liability.

Notwithstanding that tax has been deducted from the payment to the non-re sident, the non-resident is not relieved from furnishing a tax return or any

other obligations of the Act.

Payments of Dividends and Interest to Non-Residents

Every person who pays interest or, being a resident company pays a dividend to a non-resident, must deduct tax at the rate of 15 per cent except in the case of trivial sums of interest where the Commissioner is satisfied that it would be reasonable to direct that it should not be withheld. This deduction is a final charge which applies to companies and all other persons and relieves the recipient

from any further obligation in respect of these payments.

When making a payment of a dividend or interest to a non-resident, a certifi cate must be given to the non-resident showing the gross amount of the payment and the tax deducted, and the person making the payment must keep a record of all such paymentE and tax deducted there from for inspection by the Department for each ta:: year. Again, an annual return must be furnished to the Commissioner within fifteen days after the end of the tax year showing the amount of tax

deducted during the year and the amount paid over. Any tax deducted must be

paid over to the Commissioner within fifteen days after the end of the tax year

showingi-.-bhe:aino{uifof tax deducted during; the.. ye;ai-^d-the amount paid to-the.

Commissioner witnin fifteen days, after'tne-ena of-the month in~which payments of dividends or interest'were", made. Failure^t6;do ■so;.wili^attpafit:a-.penalty of 2 per cent for each month, or part of "month it remains unpaid. 'Failure to make this deduction of. tax will": render the payer liable personally for the tax.

penalties-he should;"have deducted..1 ;: , .' "■'' ..". \'r/ '7V

.r/

The DepartmenV hk-B undertaken a mea^ir^ of taxpayer education on the subject

of these withholding taxes and one of'our-.aims-; 5.6 to''ensure that" this type of

publicity and meetings twith. employers; wiU go a long way to ,reduce the number

of delinquent taxpayers and to make if easier for them to- comply with the .Act.

Prepared by:

Mr. E. Ndikumasr".Vn Assistant Director

of Taxation

Ministry of Finance B.P. 915- : ■"

Burundi

Bujumbura . ■

THiil TAXATION LAV OF BURUNDI

' I have the high honour to submit to you the problems raised by the

tax law of Burundi. . * ...

T.his account .vri.ll not be a statement of theory nor an over-technical

commentary', Wi simply a practical summary .which. I hcpo vill give you

an idea of the tax law of Burundio . ;

For convenience I will divide it into the following sections:

The history of Burundi tax law The present taxation system Income tax

Heal 'tax

Minimum personal tax

Cattle tax . . . .

Transaction tax _ .

HISTORY ' ■■■!■■.;;■

Before the decree of 20 January 1960 on income tax in Rwanda—Urundi, taxation in Burundi was governed by the taxation system of the Ruanda- Urundi section of the Belgian Congo.

The decree of 20 January 196O reformed the tax system, which sinoe

then has consisted of: ,--.,.

(i) income tax (retained from the previous sys^am);

rents tax . . ,, ._ .„.. . \

movable property tax on income from capital investment

* ' tax on professional incomes

minimum personal tax on individualsj

. (ii) additional profits tax, no longer levied after 1 July A$62*

wh.en independence of Burundi iras proclaimed;

(iii) special surtax on share companies, levied only in i960

and 1961 ;' . [

(iv) personal tax on income from (1) buildings; (2) land and

(3) vehicles* . .< .

• -These three bases were restored in 1964 and made the chief source . of the real taxa A fourth tax base, workers and employees was restored in September 1968 in a different form. Fifthly, the existing special Cattle tax was retained.

- 12

Prom 1960 to 1962 the taxation system was changed only in details.

In 1963 the Ruanda-Urundi revenue department was abolished and the tax

systems of the two countries were changed. Most of the new tax struc ture of Burundi was laid down by the Income Tax Act of 21 September 1963, and by the Acts of 17 February 1964 on the "real" tax. the minimum

personal tax and the cattle tax. These basic statutes were chiefly

amended, especially in relation to income tax, by the Orders of 5 November 1966 and 30 December 1967='

These Orders were intended to improve and strengthen tax inspection,

to simplify the liability of some taxpayers, and to improve the assess

ment and collection of the professional tax. '

In view of the current economic situation it did not seem advisable to introduce any new taxes. Likewise, any increase in th3 ra^os of

the existing taxes would have harmed the economy in that period of ' ' recession. If not preceded by an improvement of assessment and collec tion, it would inevitably have discouraged honest taxpayers and increased the injustice caused ~oy poor yield and massive fraud.

The Government therefore decided to reform the tax system, and

began in November 1966 to strengthen supervision and speed up collec

tion by:

(i) shortening from six months to three the time allowed companies

for submitting their declarationsj

(ii) shortening to 20 from 45 days the time allowed for replying .. .

to notices from inspectoral

(iii) extension by one year of- the period during which accounts might be inspected (income accruing in 1963 could be inspected until 31 December 1967);

(iv) increasing the responsibility of tax advisers and taxpayers

by requiring counter-signature of declarations;

(v) compulsory disclosure of companies' accounts, indispensable

for the verification of purchases, sales and gross profitsj

(vi) introduction of a general power to inspect and demand disclosure

of documents by individuals and by public and private cor porations, and especially to inspect Government offices and banks and credit institutions, which are bound to provide all information concerning the opening and closing of their

Customers' accounts; and-to inspect accounts of wholesalers and manufacturers covering all sales wholesale and between

firms, and so on;

(vii) stiffening of penalties against persons guilty of fraud and

their accomplices (single and daily fines, imprisonment etc.)j

(viii) .amendment .o.f .the system of increase of tax for failure to pay ..(.simplified calculation and effective collection of additional

■ tax);., . ■,: .,.-.■;. .. . ,-

(ix) auendment of the system,of increase for delay in.paymsnt;

(x) . reduction of time allowed for payment of tax:.payment of

advance instalments (by 1 February and 1 May) ...of tax listed

..for collection, each .equal to one-third .of the tax-assessed.

for the previous year; the balance to be paid in the month* .

when the tax is due.

These legislative measures were'accompanied by an"administrative re-organization, A national, staff of-inspectors was .enrolled,, their numbers, were increased,, and. their theoretical and practical knowledge _;.

and their, ,procodure of verification and se.arch in official departments -r and private ■Undertakings .were improved. Comparative statements of ...

balances,, operating accounts, and. profit, and loss accounts jwer.e .made. for.,., each, .establishment to improve, their supervision and make "comparison ...

possible. be.tween businesses of .like nature -and importance* These

statements, were also "used for statistical', purposes and* to provide sound . evidence: to support a decision oh whether "a" new-tax law should-be_ ,V:.

introduced. The Ministry of Finance" did everything possible to prevent

these meaeures from being too unpopular while making them" really capable

of doing fiscal justice without slowing the economy. . . ..;

THE-,PRESENT TAXATION -SYSTEM- . , . ...

All-possible steps have been taken to prevent double taxation,. and-, the-.law:, enacts .what we have, called the fiscal, isolation-of Burundi".

Our country refrains from taxing[proifits. and income arising abroad, _. ...

but likewise .cannot, take account of .losses,suffered,-, abroad by undertakings

wi£h branches; in;Burundi.\ No^distinctipn is made .between" foreign" and national undertakings. Foreign'cbmpanies merelyhave to keep special

accounts for business conducted by their Burundi branches.

The present tax system is simple and the rates are very moderate.""

Private investments are guaranteed and tax exemptions may be,granted to undertakings in accordance with the provisions of the Investments Code as .amended by the legislative decree of 25 August. .1.967 to .adapt

"it to-,tne.-new.conditions of the national economy.. These exemptions are designed to allow fre'e.r movement of private .capital and "direct it.

to the' economy1s most productive sectors.

INCOME TAX ... - ..

The law of 21 September 1.9-63, .as amended and amplified.by the order

of 5 November 1966 and the legislative'decrees of 30 December 1967 and

10 September 196.8, sets out these taxes under the .following heads.:

"-(a) Rents tax ... ;. . ; , .

The tax base is limited to income from real property in Burundi.

The taxed income is the gross income less charges valued at an inclusive

The .tax is owed by the ^onners and the recipients of the net profits, and'its rate.is progressive. Its first stage is 200,000 francs, taxed at 20'per cent. Its second is from 200,001 to 400 francs,.taxed at 25 per oent; its third from 400,001 to 600,000 francs, taxed-at 30 per cent; and its fourth from 600,001 to 800,000 francs, taxed at 35 per cent. Any further profit pays 40 per cent.''

Since 1 February 1967 new buildings have been exempt:from tax

until '31 .December of .the.secojid year after their'completion. This provision is intended to. favour new construction. Tax is levied on rent paid both to firms and to individual's;

(b). Tax on income from securities . .

This tax is levied on. income from shares,,"bonds, loans for ' professional .purposes, percentages, and attendance vouchers issued to directors. The payers are companies and individuals.;..paying yields of securities. It becomes payable when income is paid'of placed at the beneficiary1s disposal. This provision applies to companies formed

under national law: those with their head office and chief administrative establishment in' Burundi. The income from the movable property of

foreign companies taxed in Burundi. is,.assessed at a flat 50 per cent of the income"subject in Burundi"to professional "or'rent tax, which is always 20 per oent.

(c) Tax on professional income

The base of this tax is profits of industrial, commercial, handicraft, agricultural or real-property undertakings; remuneration of various kinds;

profits of liberal professions, and all other profits. Tax is due on all company operations carried out in Burundi, appreciation of invested assets, and increases of value received or accounted. Tax is levied on net income: that is, gross income less deductible charges. The same applies to quotas,^attendance vouchers and other perquisites of members of the boards of limited companies.

Remuneration

(a) Gross remuneration includes:

Salaries, wages, emoluments, premiums and all other payments; pensions

unless exempt; and the cash vaiue of free lodging at"a .fixed rate of

ten per cent of all remuneration, and of perquisites other than lodging.

Deductible changes comprise payments actually made for annuities, pensions and sickness or unemployment insurance; and all medical and.. . . surgical :fees and cost of medicines paid by an employed person for himself, his. w^fe "and children, maintained by him.: ... ...r

Profits from liberal professions are taxed gross lees professional expenses, which in the absence of evidence are fixed at:-. 25per cent of receipts but may not exceed 300,000 francs. . . . .

Special provisions -. ,. . ■ ■ ■

Profits earned in common by members of a family -living together, ,..,,, may not be divided among them. Thus the professional" incomes of .a.husband and wife are deemed to be"the. husband's, irrespective of the form of •, ,..

their marriage o ' ' ' ... .. . _

Foreign companies are liable to tax on profits m:-.de by their permanent or fixed Burundi branches,' in application of the principles of territoriality of tax and equality of tax liability with domestic

companies 0 -■

Tax rate

A company pays tax on the first million francs of its income at 30 per cent, and on further income at 40 per cent'. An individual's,

tax i^t,e; is. progressive from 5: per cent on the lowest incomes to.'!'

40 per cent;.,,on incomes of over; a million francs, reduced"'by 5 per cent., ';.

up to 1,705 francs, in respect.of each of' the first four dependants. ';''/

Quantum of tax ... ■ ■ ' ' - ■ ' '; .

Persons liable.to pay a fixed:tax must submit before 1 March'of *'"'" .?/

each year. tb.e special declaration-laid'down by article'33 as amended.' '"

Individuals must sign their-declarations before ■ 1 April or within three"; '"' :

months af^e.r ^the end of tho.lr. accounting year. ' " ' . L *,.'""

The taxation authority .may fix the- tax due if the declaration: 'is'.'.. ',[',.■, sent. :in;..out;, of. time- or not. at- a-llij or if a foreign company' doe's not' ''. ""

submit a special account of .its dealings in' Burundi; or if; evidenoe ' *"'

supporting information required, or an answer, is not sent in within. - the proper, period;... or an account is submitted in irregular form.:" -';

Amendment of assessment .of-tax, since -1966 ■ ■' ; '■ ' \;'^ .'

Assessment and inspection are performed by tax inspectors; .Tax is-

assessed in. accordance with declaratLons signed'by persons liable tp!t'ax»

The taxable g3ins of .taxpayers who keep regular accounts are .determined-.]

in accordance, with the.ir. actual gains,- those of others with .an assessment made by the authority under its statutory powers. Since T967 provider^

of services or accommodation whose turnover does not exceed five million, and other.taxpayers ten..million, "francs a year "may simply be charged ,the

professional Juax* This-measure has reduced the number of verifications

needed,.and has brought in more income tax. : ' , . -.

Introduction of the fixed-tax system followed the measures taken in October 1966 to strengthen inspection and profitably applied,,in. 1967.

They consisted .chiefly in the enactment■of a general power Vb inspect

andvrequire disclosure of documents by corporations and individuals. _■

:6 -

At present fixed taxes are very efficiently imposed, and the

compilation of files had made it possible to identify and tax most of "

the population who ought to pay. The results of the examination of accounts.made in 1967 by inspectors -trained by the Revenue College of 'Burundi have been appreciable, thanks to the information on imports provided by the Customs and the Bank of the Republic. The technical difficulties of correctly determining taxable profits have obviously not been entirely overcome, and mucVi remains to be done, since tax payers do"not always keep the statutory accounts^correctly or at all.

Tax collection

The tax lists are drawn up by the Receiver of Taxes and brought " - into force by the Director's signature. Since 1 January 1967 a system "

has been m force of payment of instalments in .advance on tax computed according to the list. The persons/bound to pay these taxes must, now pay of the*r own accord into" .the account of the Receiver who has drawn- up the list for the previous year, two instalments in advance eaoh representing one-third of the sums listed -for collection during the "

previous year whether contested or not. The first instalment must be paid before 1 February and the second before 1 May. These instalments"., will be deducted from the tax assessed against the taxpayer during the ' same year, and the balance must be paid by the first day of-the month- following that of dispatch of the notice based on the list. The tax-' ■ payer may on his own responsibility withhold the second instalment \ . if the income he has declared before 1 April is such that'the first '- ■ instalment paid already covers two-thirds of the tax he owes for the current year. If the instalments paid exceed the whole of the tax

due from Mm for the year, he may recofer the excess, by writing a request to the Director of Taxes within the last two months of the year,

h™ ^fau^ers may be charged an, extra ten per cent of sums outstand ing after the expiry of the legal time-limit. This fine was not

claimed systematically in 1967, but the threat produced-payment in full

sLt«S afaT ins*alments' This neW system of collection has given the

State, at a time.of year .when tax returns are usually scanty, budgetary receipts covering its ordinary working expenses, so tb,t it has not needed to borrow The collection of advance instalments has been an

^L rC°nVenient ^ ^ * '

: Foreign companies and other taxpayers who are neither domiciled nor resident-m Burundi bUt keep one or/more establishments here are , dj°+haVe a representative who is held jointly responsible for pay-

T^ ta*eVnd fines including those of t

, j+ is held jointly responsible for pay-

wTthn^t ta*eVnd fines' including those of a taxpayer who leaves Burundi

without providing enough security to satisfy the, authorities.

fvinS.uP business is liable jointly with its successor' • .'

^L!L *" on" P™ms it has made in the. twelve months, immediately

after hflate'o^r Claims must be submitted not later than three months

SL ! according to the list, after the date of its payment. J 6 n°tlCe baSed On the list 0I>' where the tax is not

or" firms who buy: for resale or render services. It is invoiced at manufacture and every stage of distribution, wholesale, semi-wholesale

and retail. . ... ,

It has been, shown to bring in by its repetition a considerable return in sj :.te of its low rate. It is charged on c ish payments, but a taxpayer keeping regular accounts may opt for payment in accordance with his invoices. The person .responsible for payment is.the one who

makes out each invoice.

The following transactions are exempted: transfers by administrative departments, discounts of the Bank of the Republic, purchases and sales of currency, coffee, cotton, tea, hides (the chief exports),I'-sales, of • ■ liquid fuel, and lubricants, exports of transformed and re-exports of

unchanged products. ' ....

The iax rate is 2 per cent on'mbst taxable transactions and S per cent on transactions affecting land whether'built-up or -not.

Collection ■ ■ .,..•..-■

The tax must 'be declared arid, paid to the Receiver of Taxes- "within ^ . fifteen days of an occasional sale' or, in other cases, of the end of the quarter/' Payinent to1-t£eReceiver of Taxes of tax paid in ca3h ;does not raise a": serious-^ inspection problem; " Inspectors' of' the Taxation' Depart-' ment need, to intervene only to verify the amount of'the tax arid i£s> •". ■ ' due payment, which they can do at the same time as incometax insp'ecti'on-, so that the transactions tax has not cost much more in qualified staff.'

A register of arrears is kept to deal with non-declaration,dlti ^

payment.of incorrect declaration," for which offences tne'tax'Us increased

by

That, then, is a summary.of the present Burundi tax law.. Vie axe considering whether'we should'soon raise tlie rates of some exi'sting_

taxes or ihfrbnuce others so as'to1'increase the yiel':. ''.' T '. '

Prepared by:

M.. Andre" Titty

Deputy Director of Taxes Ministry of Finance

B.P. 1613

Yaounde Cameroon

THE MAIN FEATURES OF THE TAXATION SYSTEM AND ITS ROLE IN MOBILIZING RESOURCES FOR DEVELOPMENT

i. introduction

The taxation system in Cameroon developed slowly when the country was a Trust Territory, and no great changes occurred in it during that period. Linked with the Administering Authority1s own taxation system for the purposes.of financial centralization, it closely resembled it.

Three important events were to give it a new shape.

Firstly, the attainment of independence on 1 January i960 gave rise to a considerable change, in. that a distinction was now drawn between the taxation of corporate bodies' and the taxation of individuals and the tax on transactions was introduced, though this was greatly reduced in scope when Cameroon became a member of the 'Central African Customs'

and Economic Union (CACEU) and was wholly abolished with the 1973 t.~;.:

reform.

Secondly, the reunification of the two Cameroons (ex-French and

ex-British) and the retention in the western sector of the Nigerian

system, which was not suited to economic development.

Thirdly, the establishment of the United Republic and the consequent tax reform in 1973, with a single, statutory tax system designed to

eliminate the distortions caused by two different systems.

While the selection of taxes and the establishment of the rules for the bases of their assessment were determined by the financial imperatives governing the proper administration of the State, they also made provision for the government's desire to promote the country's economic develop ment in the form of a better distribution of resources designed to improve its citizens' standard of living.

It is true, of course, that the selection is not based, as it is in most developed countries, on fundamentals in the management of State

policy. Inherited as it was from the Trusteeship system, its main basis

is a policy of directing public revenue and expenditure towards making a favourable impact on the general level of incomes, prices and employment.

The aim is to manage revenue and expenditure as a whole bo as to attain the general objectives, i.e. all the parameters essential for economic

development•

Real tax

■ 'This tax, which replaced the personal tax, was- introduced by the order of 5 November 1966 and-the Legislative Decree of 10 September 196§* It. improves- on the personal tax, some1 sections of which did not yield enough.' It has brought the Treasury considerable extra revenue and has made a very positive- psychological impression on the public by abolishing four existing taxes.

For the time being the real tax has three divisions:

(a) Land tax

This tax is based- on the aroa of built-up and-open parcels of land in Burundi. ISxemptionG from it may be granted" under the Invest ment Code- Thus exemption of .tax .on.new buildings is granted for1 two years from..:!. January of. the year following their completion. It . is paid by the owner. The rate per square metre of built-up land is pegged at 30 francs in Bujumbura Commune,.20'francs in'Gitega Commune, and 10 francs in other communes. On unbuilt-up land it is one frano

in Bujumbura Commune only. :..■'_

-Period of taxation . . ' ■ . ,*.-■■■

...Tax is due for the:whole.-year on-the area existing on 1 January', of the.tax year. Change^of ownership during the year does'not entitle

to relief. : .. ■ ; ' ' " . ~ \f

■Signature of declarations . • ' ■

Declarations must be signed- before 1 April of the tax year for plots owned by the taxpayer on 1 January. Unless notice to the,contrary is given by the taxpayer before 1 January of the tax year, the mos-fr - recent declarations are valid for the succeeding years. Persons liable to land-tax-must;, sign a declaration for-each commune. Declaration forms.;.are distributed to-.taxpayers iri-good'-time by the Taxation V Department;-but non-receipt does not^exempt a taxpayer from signing1 "' a declaration within the prescribed time-limit-.

Vehicle tax ■ -

Tax base .,-.■... ■

• %;...

Vehicles used for the tsansport of persons, goods or other objects It must be paid by individuals or firms using one or more vehicle and.

not exempted by the statute. The rate of tax on each vehicle depends- on its weight or engine power.

Tax period

Tax is due. for the whole year from the1 -person who■is owner on 1 January.. If the use of the vehicle begins after January, tax is due only for the-numh.er of: months remaining-before 31 - December.

Every month begun,counts as a whole month. Where the taxpayer ceases use during the year, he.is relieved of tax for-the period "

succeeding the month in which use ceasedo * ■'..■•

Declarations to be signed

A declaration must be signed before each vehicle.is used. It is valid for subsequent years. Where use of a vehicle ceases, a declaration.-must be.snnt to the 'Receiver of Taxos within fifteen .aays,, Where a rvehiole is replaced, the taxpayer must make a "

declaration to that.effect to the Receiver or-his deputy. He " '"'•' is bound, to pay tax .before starting to use the new vehiclec

(c)

g on. remuneration

Base of tax . . : . .

Remuneration equalling at least 2;5OO francs a-'month attracts professional tax under article 27 of the Income Tax Act of 21 September lyoj. It is payable.by individuals, communities, companies and other legal persons paying remuneration. The tax rate is 5-per cent. <• : ' It is recovered by undemanded payments to the Receiver of Taxes • within ten days after the month during which the taxable remuneration has been paid. The inspectors of tax have opened-.registers of tax unpaid, not paid in full or paid out of time. The Act imposing this tax car.e into force in September 1968. ■. : .

MIHIMPM PERSONAL' TAX '■'■,", . .. ■ " '

This tax is payable.by.j.adult.individuals actually resident'in- Burundi... In a way it, is lump-sum tax on peasants'- incomes; On a l ' proposal by the Ministry of.Finance, it was fixed at 550-800 frac'cs •

a year, ' •■■■.'

CATTLE TAX ■ / . ,.

This tax is payable by a person possessing taxable cattle on 1 January of the tar. year. Since 1967 its rate has been 130 francs

a h3£C_B . . :

TRANSACTION.TAX . - - - ... .

The Government of Burundi, noticing that many countries had increased their budgetary resources by imposing indirect taxes and in paroscular taxes on production and turnover, introduced in 1968 a transactions tax previously planned for 1967, which seemed easier to assess and collect. It is a recurring tax on all sales of personal and real property, supplies of goods and services, and generally on

business of all kinds conducted habitually or occasionally by individuals

-•-The volume of :tax collections for the State and local authorities

has risen appreciably, from 18,322 million francs in "1962—63 to

60,191 millions in 1972-73, an increase of 41,869 million francs.

The breakdown of the increase is: . . ■-

... . . million :franos

customs' duties." - "» '31,574

' direct an4-similar taxation. .,<...; ■. .'• 9,697

registration fees and" stamp duties . ' * 2,309'

The main reasons for tnis increase are:

(i) a considerable rise in imports; "" ' '_

(ii) harmonization of customs duties with'the *

common external tariff of the countries members of CACEU; -■■.'-... . ' .. ■

(iii) improved rules for the assessment of direct

taxes and the reor&anization'of the

inland revenue departments ' .

Tax'revenue rose from about" 12*65 per cent of GNP in ^1962—63.,to 20.43 per cent in 1971-72, i'.e.""by an average" rate of O.97 percent '■"' ';

yearly."1 ■ ' ■ ' ' ' ..,.,■.,■.,..,-.

(1 '• ' ■

It should be noted that the tax burden set out above looks excessive simply because the indirect taxation, much-of which'is passed 'on".-to.-' ,' the consumer, has been included in the total«

The tax revenue, estimated.for 1973-74 .amounts to.67j662 million", -•

francs accounting for some 90 per cent of the total revenue.-:' ... . ••■• u' Since-.there are no institutional arrangements .for savings, "one., of the. main functions of budgetary policy.\is simultaneously..to 'mobilize ' resources .for consumption and,, investment .by. the- public sector, and to . : . ■ swell the. .total supply of. capital-ac.cumul-.ation-to..meet .-general ^invest- . ■ ment needs-.. The fact, that the-State- participates in some^quite'.l'arge- -'.

companies and. finances some investments .undoubtedly, helps .to mitigate; ■- ■ the risks of private enterprise and certainly contributes to lower- ■. ' ■ . costs and a better distribution of resources*.

The budget. lor. the financial year 1975-74 provideo. a goqd^illustra tion of this policyj it includes, an allocation of. 12,300 .million francs for investment expenditure, broken down into:

,_.,.. . . million francs. ■ ..- ;>

infrastruc'tural works; ...

participation in corporate ■ cap?, talv.. °....

grants and subsidies^....; o...u...

indebtedness on public investment..

h

2, 822

772 "

406 ••

300 -;

- 22 -

-' Generally speaking, Caroeroonian taxation is governed by .two main

aims: ■ . " , ■ -, .

(a) financial productivity to enable the State to mobilize as

large resources as possible in order both to meet'the growing costs of operating public services and to procure funds for its investment policy as defined in the first

five-year development plan (1960-65), i-e. to double per capita

income in twenty years, entailing an average yearly increase of 5*5 per cent in GNP and 3 per cent in' per capita income.

State investment was to amount to 53>OOO million fr.ahcs in this period, a figure which was to rise to 82,500 million francs under the second plan and 400,000 million.francs under the third. Allocating tax revenue to financing investment thus gives concrete shape to the national drive toward development;

(b) economic management by encouraging capital accumulation and

offering incentives to the spirit of enterprise.' With

this in view, the Cameroohian tax system is designed"to safe guard productive capital and promote its growth by tax

reductions and exemptions.

It may be said, therefore, that while taxation was originally designed to. procure revenue for the State, it is now, in view of development requirements, also designed to give the economy effective protection,

II. GENERAL .SUKVIff OF THE TAXATION SYSTEM .IN CAMEROON

The taxation system in Cameroon, like that in most developing countries, is regressive.. It ■ is based on indirect taxation, and

especially on customs duties* '" ; ;

Direct taxes can only, bring in scanty revenue owing to tKe low ■ standard of living; for only a few people- can be assessed for them and in some cases-.they encounter economic, political or psychological - l resistance. Though ^their yield has increased since independence, at

present they account for only .about 16 per cent of; total revenue,1 as against "74" per cent for.indirect^ taxes, which account as follows for^

the total: ■ . . . ... ■ .

(i) oustoms duties, about 65 per cent;

. :(ii); L registration fees and stamp duties, about 4»8 per cent;

(iii) domestic turnover tax, about 4»2 per cent. . ■ ■ .*

Though indirect, taxes are used for economic purposes in some

cases, they are"mostly designed to gather revenue in developing countries, since they are.intended primarily to provide the government-with the

resources it needs. Such taxes fall, on foodstuffs consumed in the ordinary course of commerce, and legislation must therefore be wary of their impact on trade.. It has to safeguard the government's

legitimate interests but at the same time avoid hampering the oountry's economic''activity«'

The indirect taxes at present levied in Cameroon fall into two

major groups, one relating to material transactions (such' as customs duties, taxes on consumption or carriage and turnover taxes), the other to legal transactions-(such as' registration fees).'

In Cameroon, as elsewhere, leoislatibni is confronted with a number of practical problems, Such as:' '

(i) The scope of taxation,i«e- the technical bases f.or-.tax. .

collection;

(ii) The methods of taxing the selected bases:

(a) the definition of the items taxable; »■.. . . ■■-.;.> ..

(b)' the tax basis .and assessment, and within.them the- . ■ .. identification of,the transaction which.'generates'.tax .. -

liability, the determination of the base for. taxation, :j..v the definition of the tax and the calculation of its rate - . .and

(c) the collection of the taxes once, they rare imposed.- ---. ■ (iii) Apportioning- the various taxes and.duties in aocordanoe ■ jJ

with; the, item.assessed and the nature, of the tax. .or., duty. ; -■ ■ Though these problems seem at first sight to be purely-.a; matters;.!. ■>

of fiscal technique, they also have to pay due regard to political, economic and social considerations^, •. . . ■ ■ ' ... :.

The Cameroonian,taxation system.will .be^ outlined in substanoe ■: ■ -A^

under two main..heads: .. - . . ■ . .■.'■=..•■ ■'. >■..-"

(i) the basis, assessment and collection of the taxes; '■. ■ ■ ■•":'■*

(ii) . .tax claims and dispute^, . . ■ . , . -■ .'■. .

A. The basis, assessment and payment of taxes,, duties ^aqd fees I. Direct taxes and similar charges

The increased yield-from .direct taxation..since 1960 is due to:

(a) the distinction drawn between taxes;on corporate' bodies^

and taxes on .individuals; . -.. ; . ... ■ •. .-.■.-'.-

(b) the tightening up of the rules for assessment;

(c) the re-organization of the revenue department with the

establishment of the national corps of inspectors and accountants,.