Minister of Finance, Louis Paul Motaze
By Akama Monica Eboh
Finance Minister Louis Paul Motazé has presented a bill in the National Assembly on local tax aiming to provide significant financial resources to the country’s municipalities.
Known as the”Local Development Tax” the innovation is part of the local taxation reform to reinforce decentralization.
“The new sources of funding identified will help increase the financial resources of local councils by CFA126.4 billion,” the Minister told parliamentarians explained.
This amount is intended to supplement the resources already collected by the tax authorities for the country’s decentralized local authorities (CTDs), which amounted to CFA261 billion in 2023, representing 7.3% of the state’s own resources. “The goal of the bill is to double this amount, bringing it to at least 16% of the state’s own resources,” Motazé added.
To achieve this, the proposed bill includes several reforms. One key reform is the introduction of a simplified general tax (IGS) for businesses with annual revenue below CFA50 million. According to Minister Motazé, this tax will replace the current lump-sum tax and simplified tax regime, and it is expected to generate an additional CFA50 billion per year.
The bill also proposes the extension of municipal surcharges to excise duties, special income tax, and registration fees for public contracts. This measure is expected to provide CTDs with an additional CFA43 billion annually. Furthermore, the reform includes an increase in the special excise duty rate from 0.5% to 1% to help fund waste collection and treatment, which is expected to generate CFA20 billion more.
“This ambitious reform is, above all, a commitment to modernize the local tax administration, making it more effective and better connected to the realities of our CTDs,” the Finance Minister stated. To ensure the quick and effective allocation of resources to the CTDs, the government plans adjustments in the management of the Treasury Single Account. These include providing each CTD revenue collector with a bank identification linked to the Treasury Single Account at the Bank of Central African States (BEAC). This system will allow each unit to manage its own expenses autonomously and mobilize local tax resources, subject to the approval of the central Treasury accountant.
“This tax will be collected in exchange for basic services provided to the population, such as public lighting, sanitation, garbage collection, ambulance services, water supply, and electrification. The revenue from the Local Development Tax will primarily fund infrastructure projects,” the Minister said.
The tax will be deducted from the basic salaries of workers in both public and private sectors, ranging from CFA3,000 to CFA30,000 annually, depending on income levels.
For example, workers earning basic salaries between CFA62,000 and CFA75,000 will have an annual deduction of CFA3,000, equivalent to CFA250 per month. Those earning between CFA75,001 and CFA100,000 will contribute CFA6,000 annually or CFA500 monthly. Base salaries from CFA100,001 to CFA125,000 will incur an annual deduction of CFA9,000, or CFA750 monthly. Salaries between CFA125,001 and CFA150,000 will see a yearly deduction of CFA12,000, equal to CFA1,000 per month. The highest deduction, CFA30,000 annually (CFA2,500 per month), will apply to those earning over CFA500,000 per month.
The government argues that this tax, along with others outlined in the bill, aims to strengthen decentralization by providing municipalities with additional financial resources. According to the Finance Minister, this local taxation reform is expected to generate CFA126.4 billion in additional revenue for municipalities.
In 2023, municipalities collected CFA261 billion, representing 7.3% of the state’s own resources. The government’s goal is to double this amount, increasing it to at least 16% of state resources.
“This bill reflects our ambition to ensure a stronger financial base for decentralized local governments,” said Finance Minister Louis-Paul Motazé during the presentation.