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In 2011 when the government carried out a survey to understand Cameroon’s business climate, their aim was to make life easier for business people. Seven years later, with little or no improvements, companies’ taxes have become a major concern among Cameroon business owners. From direct to indirect taxes, the country has over 14 different taxation schemes that directly hit on the economic activities of its populace.  

With this pile of taxes to pay, business owners in Cameroon have over the years, been suffocating. They are now advocating fiscal reforms to enable them to flourish and create more riches for the country. And championing this move is Celestin Tawamba, President of the Groupement Inter-patronal du Cameroun (GICAM).

At 51, industrialist Célestin Tawamba has over 17 years of business experience in an environment where failure is common. Hardworking and ambitious, he became head of the business lobby, GICAM.

Why taxing companies’ turnovers will choke Cameroon’s economy

Célestin Tawamba says taxing on profits will crumble SMEs

Though he, later on, founded a rival group, Entreprises du Cameroun, Tawamba had eventually run unopposed for the presidency in 2017. At GICAM, Tawamba is now pleading the business sector’s case to the government.

“We need a taxation plan which integrates the development strand, not simply one for revenue collection. The tax paradigm needs to change. The government needs to stop taxing companies based on their turnover. Cameroon is one of the few countries in the world which still proceed that way,” Celestin Tawamba said.

This statement must have triggered the outcome of the meeting held on May 28, 2018. There, GICAM handed a proposal to the government, stating that companies’ taxes should be based on the profits, not the turnover.

Celestin Tawamba believes Cameroon’s fiscal system is complex, unjust, and confiscatory; serving as an obstacle to economic development. According to Tawamba, fiscal revenue has since 2013, risen by 66%, while growth rate dropped by 2% during the same period. The result was, companies grew poorer. Hence, there’s an urgent need to return to the former system of taxing the interest instead of the scale of business.

Impact of the tax system on SMEs

According to Celestin Tawamba, taxing companies based on their turnover results in high tax burdens. “It is a heresy to think that the tax burden is feeble in Cameroon. There are companies whose turnover amount billion but, their profit is so low.” The application of the taxation margin (2.2%) on their turnover gives a tax burden of 35-80% in some cases.

Why taxing companies’ turnovers will choke Cameroon’s economy

GICAM’s president hands proposal to the Minister on Cameroon’s tax system

Despite the importance of taxes to the government, overtaxing equally makes SMEs run out of business.

Small and Medium-sized Enterprises (SMEs) form the vast majority of businesses in the country. As a result, they contribute strongly to employment and economic growth. But they face distinct challenges, particularly as concerns access to finance and relatively high tax compliance costs. As such, the government’s range of policy levers including tax policies should support the growth and development of SMEs.

The proposals recommend that policies be targeted to SMEs, which are major employment sources in Cameroon.  The government should also recognize that not all SMEs face the same challenges or have the same growth potentials. Preferential treatment should, therefore, be given to SMEs and the government could avoid imposing additional barriers to SME growth.

We keep fingers crossed as we look forward to the implementation of GICAM’s proposal in the 2019 tax reform.

 

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