Income tax: in Cameroon, the government increases pressure on employees of large companies
The Cameroonian government’s approach to taxation, especially concerning employees of large companies, has been a topic of significant discussion and analysis. A recent report by the Nkafu Policy Institute critically appraises the declaration and payment of taxes in Cameroon, highlighting the complexities and challenges within the system. The report delves into the institutional background, examining the effects of taxation on entrepreneurship and the overall economic environment.
Taxation is a crucial aspect of a country’s fiscal policy, impacting both individuals and businesses. In Cameroon, the tax system has been described as confiscatory by Célestin Tawamba, President of the employers grouping GICAM. This sentiment echoes the concerns raised in the World Bank’s Doing Business report, which has consistently highlighted the high ratio of income taxes imposed on companies in the country.
The introduction of new fiscal measures, effective January 1, 2024, is anticipated to lead to salary reductions for some workers, with projections ranging from 5% to 25% in various companies. These measures include the expansion of the list of in-kind benefits subject to the income tax scale, which is a significant shift in the tax landscape for employees.
The International Monetary Fund (IMF) has also noted the challenges faced by formal large enterprises in Cameroon, pointing out the high overall tax rate and strict limits on tax deductions. These factors contribute to the pressure felt by employees and companies alike, as they navigate the intricacies of the tax system.
The Cameroonian government is taking steps to increase its tax-to-GDP ratio, aiming to reach 13.55% by 2024. While this may indicate a move towards bolstering the nation’s revenue, it also raises questions about the balance between fair taxation and economic growth. The impact of these measures on the industrial sector, entrepreneurship, and individual employees will be critical to monitor in the coming years.
As Cameroon continues to reform its tax system, it is essential to consider the governance perspective, the ease of tax declaration and payment procedures, and the influence of these processes on the country’s economic development. The goal should be to create an equitable tax environment, that encourages investment and supports the prosperity of all citizens. The ongoing dialogue between the government, businesses, and the public will play a vital role in shaping a tax system that aligns with the nation’s aspirations for growth and development.
In a press release dated August 22, the Director of Large Enterprises at the General Directorate of Taxes (DGI), Ali Alhaji Abba, reminded all employees of companies under his department’s portfolio that the deadline for subscribing to and paying personal income tax (IRPP) is set for September 1. He therefore invites those who have not yet fulfilled “this civic duty” to do so “to avoid the inconveniences linked to the sanctions that will be applied to them from September 2, 2024.” The range of sanctions brandished by the tax administration range from a formal notice through the publication of the list of defaulters in the press to the inability to obtain a visa in a diplomatic representation, through the application of a tax fine of 250,000 CFA francs which cannot be remitted and the deactivation of the active file of the DGI, with the consequence of the inability to issue the registration certificate or the tax compliance certificate.
The Cameroonian tax authorities are thus increasing the pressure on this category of taxpayers whose income is easily traceable, in a context where they are biting the dust in their attempt to get their hands on the personal income tax of so-called non-professional taxpayers. This tax targets all persons exercising a non-professional activity or who receive income from abroad, without being attached to any of the tax regimes known to date, namely the withholding tax regime, the simplified actual regime, the actual regime and the regime for non-profit organizations. This tax regime was introduced in the 2024 Finance Act, in force in Cameroon since January 1. It is, strictly speaking, a legal provision that has been restored, in particular through Article 74 bis of the General Tax Code in force, which stipulates that non-professional taxpayers must submit each year to their tax centre to which they are attached, an annual summary declaration of the income they receive. An integral part of the IRPP, the annual summary declaration now appears to be an important lever that the tax administration intends to use as part of its overall revenue mobilization strategy.
To explore the potential of this tax, a simulation can be done at the only divisional tax centre in Center 1, located opposite the Chamber of Agriculture in Yaoundé, which has a rich file of approximately 394,000 active non-professional taxpayers. “You can imagine that if each of these taxpayers were to declare even the modest sum of 10,000 CFA francs, that would amount to approximately 4 billion CFA francs. Multiplied to the scale of the General Directorate of Taxes, which has 14 tax districts in addition to the Directorate of Large Enterprises, this becomes an important niche that the tax administration intends not only to explore but above all to exploit,” explained Emeline Mvogo, head of the regional tax centre in the Center, last March during a training session for taxpayers in her tax district on the annual summary declaration of personal income.
Property tax
This new tax regime constitutes, with the property tax whose collection level has remained well below the potential since its introduction several years ago, a potentially important revenue niche for the DGI, whose budgetary objective is to collect 3100 billion CFA francs in 2024. Following the law, all individuals have until June 30 of each year, the strict deadline, to declare their income. Faced with the reluctance of this category of taxpayers, the Minister of Finance (Minfi), Louis Paul Motaze, extended until September 1, to allow his services to conduct a final awareness-raising phase. For the first deadline of June 30, Emeline Mvogo warned the insolvents by indicating that “the tax administration will take charge of taxing them automatically. And there, bad faith penalties of 100% will be applied to them. We can also go to the supreme sanction which is the pure and simple expulsion from the active file of the DGI. This means that you will not be able to obtain any tax document online, in particular the tax compliance certificate, which is an essential document for carrying out any economic activity.” What will happen after this new deadline? Less than a week before the deadline, the overall situation is in any case marked by very little enthusiasm among non-professional taxpayers to declare their income. We are not far from the fate reserved for the property tax, a tax introduced by the State in 2017 to support decentralized local authorities, but which has been very insufficiently collected to date.
