Herculean task for tax administration in 2016

On 31st December 2015 President Paul Biya in his traditional year end message to the nation, announced a drop in pump prices of fuel and an increase in family allowances for state functionaries. However, Cameroonians are still wondering how the government will support these “New Year gifts” from the Head of State. Yet, commentators admit that the two presidential measures are timely and most welcome especially because they are meant to improve the living conditions of Cameroonians.

But the question some commentators are asking is why did the President wait for the National Assembly to examine and adopt the 2016 budget, and then he even went ahead and promulgated it on 21 December 2015, before making these very pertinent announcements.

In fact, it intrigues many that such decisions that have a great impact on the state budget had to be taken without the consent of the representatives of the people - members of National Assembly and Senate. Some informed observers say it is one of the ways President Biya demonstrates his absolute constitutional powers.

Though it is not yet known by how much family allowances would be increased, we at least know by how much fuel prices have been reduced: 20 FCFA on Super and 25 FCFA on Gasoil. Sources at the Hydrocarbons Prices Stabilization Fund, CSPH say this reduction is commensurate to the VAT imposed on the price structure of fuel.

But we also know that in 2015, VAT generated over 115 billion FCFA. That is why knowledgeable observers are wondering how the tax administration will make do without this very important revenue source that is, if it must meet its budgetary target for 2016. Besides, the DG of Taxation, Mopa Fatoing and his team are expected to generate the additional budgetary resources needed to support the increase of family allowances, apart from producing money needed to finance the war on Boko Haram and the running of the government.

One point is clear namely that, to generate the 4 234 billion FCFA needed to finance the 2016 state budget and consolidate the much-vaunted resilience of the economy, the government is counting essentially on revenue from taxes, apart from the public debt and revenues from the petroleum sector. But petroleum revenues are witnessing a downward spiral since over a year now, and remarks by IMF experts indicate that the downward trend may prolong, even up to 2019.

In 2015 petroleum resources generated revenue estimated at 502 billion FCFA, down from the annual forecast of 750 billion. And this was despite an increase in production of close to 25%.

The 2016 budget projects $40.4 as the price of a barrel of oil. But as at last week the price of a barrel had dropped to less than $33 in the international market. And there are indications it will drop even more, to even less than 30 dollars by 2017. This certainly does not augur well for Cameroon and her Cemac sister countries in 2016.

To make good the expected budgetary lag therefore, the government will have no option than to resort to borrowing from outside. And this will only worsen an already cumbersome debt burden. And we may add that borrowing from external sources is at the risk of shylock interest rates. Only recently the government went cap-in-hand seeking Eurobond worth 750 billion FCFA in the international finance market. Even though she succeeded in obtaining barely half of this amount, the interest rate was far from attractive: close to 10%.

It should be mentioned that most of the on going big projects in the country are financed with funds borrowed from abroad, most often at cut throat interest rates. Already voices are beginning to be raised as to why the frenzy of indebting the country to this extent, especially given that some of the funds borrowed are not even put to appropriate use that is if they are used for the purposes they were intended. Recently the government contracted a loan of $2.8 billion, but the money has continued to lie fallow at the Caisse Autonome d’Amortissement CAA, we learnt.

But to finance the state budget in 2016, the government also counts greatly on its traditional revenue sources – Taxation and Customs. Fortunately the Tax Department appears to be ready and poised for the challenge that is, if its performance in 2015 is anything to go by. Of a target objective of 1 403 billion last year, the taxation department produced 1 540 billion, a surplus of 147 billion. For 2016, its objective is fixed at 1 554 billion. Observers say however herculean the target might be, it will not daunt Mopa Fatoing and his team, especially giving the dynamism and resilience they demonstrated in 2015.

Thanks to sweeping reforms in payments procedure (essentially through bank transfer), as well as the recent reorganization of the sector that saw the creation of medium-size tax offices in all ten regions of the country, it is widely believed that the taxation department’s target for 2016 would be met if not beaten. However, one fact needs be restated here and it is that the tax department has a herculean task in 2016 that is, if it must support the resilience much-vaunted by Biya and only last week by Christine Lagarde.

But the government will not only rely on the tax department for its budgetary needs in 2016; the customs department will have to give invaluable support. Acclaimed over the passed recent years for its remarkable annual performances, it suffered a setback in 2015 perhaps due to the departure of its emblematic DG, Minette Libom Li Likeng. It is however hoped that the appointment of Edwin Fongod Nuvaga, a cut-steeped-and-dried technocrat, as the new director general of customs, this administration can once more live up to its bidding of old.