On December 5, 2022, Cameroon’s National Assembly approved the Finance Law for the year 2023. The particularity of this document is that it contains several innovations including those related to the taxation of businesses and households. In addition to the tax exemptions proposed to boost the productive sector, the government has also given itself some leeway to increase tax revenues. Given the unfavorable global economic situation, marked by the war in Ukraine and the sharp fluctuations in commodity prices on the world markets, the government wishes to ensure the sustainability of public finances. Given the country’s commitment to promoting economic freedom and to benefiting greatly from the African continental free trade area, this article aims to analyze the implications of these fiscal innovations on the competitiveness of the national economy. Such an analysis aims to draw the attention of the public authorities to the risks associated with the tax increases planned for the year 2023. The paper is structured in three main points: the presentation of main fiscal innovations for the year 2023 in Cameroon (1), the effects of these fiscal innovations, particularly tax increases, on the competitiveness of the Cameroonian economy (2), and the risks associated with these tax increases for achieving the objectives of the new national development strategy 2020-2030 (NDS30) (3).
Main Fiscal Innovations for the Year 2023 in Cameroon
Among the fiscal innovations for the year 2023 in Cameroon are those relating to the “removal of exemptions on imports of locally manufactured products or those with local substitutes, as well as those detrimental to the development of certain sectors, in order to encourage their local production and competitiveness”. The government also plans to offer five years of tax exemptions to certain farmers in the exploitation phase; a 30% tax discount over three years on local beverage production duties in the event of local purchase of raw materials; and a 50% discount on the monthly advance payment and income tax, to name but a few.
In addition to these fiscal advantages contained in the 2023 finance law, the Cameroonian government has taken the initiative to make fiscal provisions to compensate for the losses linked to the exemptions retained. Among these provisions, the State plans to set the price of a fiscal stamp at 1500 CFA francs, i.e., an increase of 50% compared to the price in 2022 and 100% compared to the price in 2005 (Article 547). We also note an increase in the tax stamp affixed to national driving licenses and their duplicates as well as to certificates of capacity for the driving of certain urban vehicles, now set at CFAF 10,000, an increase of 50% compared to 2022 (Article 550).
In addition to the increase in the price of the stamp, it is also planned to increase the cost of the car tax sticker, depending on the amount of horsepower. By way of illustration, for vehicles with 2 to 7 horsepower (HP), the motor vehicle stamp duty has risen from CFAF 15,000 to CFAF 30,000, and that of vehicles with 8 to 13 HP, previously set at CFAF 25,000 in 2022, has risen to CFAF 50,000, i.e., an increase of 100% for each of these categories of vehicles in one year (Article 597B). These increases in the price of motor vehicle stickers (to which could be added the cost of insurance company services), combined with the sharp fluctuations in fuel prices, the special tax on the sale of petroleum products (Article 229 new) and the recent increase in the price of vehicle inspections, are not without consequences for economic activity and the objectives set by the government in the NDS30.
In addition to the increase in the price of tax stamps, which will undoubtedly affect the cost of obtaining a land title, the Cameroonian government is also planning to revise the tariffs of fees relating to state, cadastral and land operations listed in Article 19 of Ordinance No. 74/1 of 6 July 1974 to establish the land tenure system (Article 14 new). All these changes are not without consequences on the competitiveness of the national economy.
The Implications of the 2023 Fiscal Increases on the Competitiveness of the Economy
It is obvious that the fiscal increases for the year 2023 in Cameroon will affect the competitiveness of the Cameroonian economy through two main channels: the transport channel and the administrative channel.
The Transport Channel
Many studies indicate that transport facilitates economic activity and innovation by linking people and businesses to opportunities and expertise (Savy, 2017; Bahri, 2022). In Cameroon, much of the agricultural production is done in rural areas and requires vehicles to transport the farm products to urban areas and large markets. In other words, vehicles facilitate the movement of people and goods safely and efficiently and provide access to new economic opportunities. The transport industry in all sectors supports hundreds of thousands of jobs. However, any increase in the price of transport would result in a more than proportionate increase in the price of consumer goods. The government’s approach to increasing car stickers’ taxes, in a context of already high fuel price fluctuations, is likely to slow down the efficient operation of transport networks, the development of the private sector and economic growth.
The Administrative Channel
The fiscal increases forecasted in the 2023 State Budget will also affect the competitiveness of the national economy via the administrative channel. This channel is used to constitute files for the formalization of companies, land registration and real estate matters, which require no less than one fiscal stamp. The increase in the cost of this stamp would undeniably contribute to keeping many businesses in the informal sector. However, these businesses would have generated more tax revenue if less austerity measures had been put in place to facilitate their formalization and/or their access to land ownership.
The Risks of Fiscal Increases on Cameroon’s Development Objectives
In implementing the NDS30 in November 2020, the government of Cameroon set itself three specific objectives: (i) to achieve economic growth in double digits, (ii) to reach the threshold of 25% of manufacturing production as a share of GDP, and (iii) to reduce poverty to less than 10% by 2035. To achieve this, the government intends to develop the productive sector, which accounts for more than 90% of businesses still trapped in the informal sector.
However, the fiscal measures planned for 2023 are at odds with the government’s desire to continue the modernization of land and property management provided for in the NDS30. The government has promised to promote the development of connected, inclusive and resilient cities that are conducive to business competitiveness, as well as access to land and property ownership.
By increasing the price of the fiscal stamp, the Cameroonian government is forcing the private sector to become more dynamic by tightening the conditions for formalizing businesses or accessing land. The holding of a land title is very often the guarantee required by credit institutions to grant loans to businesses. The high cost of the fiscal stamps required to apply for a land title, combined with the high level of corruption generally observed in this sector, will only complicate the already very difficult economic situation.
Moreover, the projected high tariffs in the transport sector further complicate Cameroon’s vision of having a critical mass of ‘national champion’ companies representing flagships or leaders in key sectors of the national economy.
Despite the current economic situation, which is somewhat favorable to the collection of sufficient tax revenues to ensure the state’s livelihood and to finance the planned development projects, the government’s decisions to increase the prices of the fiscal stamp and the car sticker taxes in 2023 might be harmful to the economy.he main reason is that these decisions will contribute to the predominance of the informal sector.
On the other hand, the removal of fiscal stamps, particularly on documents used to formalize a business, or the reduction in the number of stamps required to register a property, would contribute more effectively to broadening the tax base. This would enable the government to achieve its 2030 objectives, particularly that of reaching the threshold of 25% of manufacturing production in the gross domestic product (GDP).
Jean Cedric Kouam is the Senior Policy Analyst, Deputy Director-Economics Affairs Division and the Head of Fiscal and Monetary Policy Sub-section at the Nkafu policy Institute. He holds a doctorate in economic policy and analysis (monetary and financial macroeconomics) from the University of Dschang in Cameroon. Since obtaining the Diploma of Advanced Studies in Mathematical Economics and Econometrics at the University of Yaoundé II in 2012, he has provided courses in economics, finance, and macroeconomic modeling in several private higher schools in Cameroon.