IMF urges overhaul of tax system to encourage investors

The International Monetary Fund last Thursday called on the Gambia government to reform its taxes in order to encourage investors to the country, stressing that fiscal discipline is a must for micro-economic stability.

“Our assessment through the technical assistance of IMF in The Gambia indicated that the tax system is a little bit outdated. There are so many taxes that don’t even yield enough revenue to warrant collecting them,” Meshack Tunee, IMF resident representative to The Gambia told journalists at a press conference held at UN House in Cape Point.

Noting that going through the payment of so many taxes discourages foreign investors, the IMF Gambia official called for an overhaul of the country’s tax system.

“Tax rates are still very high even by regional standards, but it could be lower and made more efficient. It is easier for businesses to spend resources elsewhere in productive investment rather than hiring accountants at exorbitant prices to try to make sure that they don’t pay those high rates, when the taxes are high,” he explained.

These, he went on, are some of the reasons why the IMF is asking for tax reforms in The Gambia, adding that if taxes are high, and are seen not to be just, it would encourage tax evasion.

On fiscal discipline, the IMF country representative revealed that the Gambia governments spent 80% of its revenues on servicing debts, and a large portion of that is consumed by domestic debt.

In its latest report on The Gambian economy released last Thursday, the IMF said despite having received extensive debt relief, The Gambia continues to face a heavy debt burden, especially because of rising domestic debt.

The IMF said as at end-2010, domestic debt had risen to almost 30 percent of GDP with interest on domestic debt consuming an increasing share of government revenues (18 percent of government revenues in 2011, for instance).

“Despite a large reduction in its external debt under the Highly Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) in December 2007, external debt indicators suggest that The Gambia is still at high risk of debt distress,” the statement said.

However, the statement noted that the Gambian economy achieved robust growth with low-to-moderate inflation in recent years, despite the global economic crisis.