However, Mr President, while tax administration may be efficient, tax policy must also be just. And justice in taxation is anchored on one foundational principle: equity.
The Fundamental Rule of Taxation: Equity
In classical public finance theory—dating back to Adam Smith’s Canons of Taxation—equity stands as a cardinal principle. Equity requires that:
1. Taxpayers in similar circumstances should be treated similarly (horizontal equity); and
2. Those with greater capacity to pay should contribute proportionately more (vertical equity).
Taxation is not merely about raising revenue. It is about maintaining social balance, economic competitiveness, and confidence in the fiscal system. When taxation departs from equity, it distorts incentives, weakens private sector growth, and creates perceptions of unfairness that undermine compliance culture.
The Present Imbalance
Mr President, there is a structural inequity in the current taxation framework as formulated by the Ministry of Finance and Economic Affairs:
• Public sector employees are taxed primarily on Basic Salary.
• Private sector employees, however, are taxed on Gross Income, inclusive of fringe benefits such as housing allowances, transport allowances, utility benefits, and other employment-related benefits. This creates a clear asymmetry.
Two professionals performing comparable functions—one in the public sector and one in the private sector—may face different effective tax burdens solely due to structural classification of compensation. This is neither horizontally equitable nor economically neutral.
The Economic Implications
The consequences of this imbalance are not theoretical. They are real:
1. Distortion of Labour Markets
Private sector employers are placed at a structural disadvantage when attempting to attract and retain talent. Gross-income taxation increases the tax wedge on private employment, effectively making private sector compensation more expensive.
2. Penalisation of Formal Private Enterprise
The private sector already bears corporate income tax, PAYE administration burdens, social security contributions, and regulatory compliance costs. When employees in the private sector face a higher effective tax base, it indirectly discourages formalisation and growth.
3. Perception of Policy Bias
The public sector is funded by tax revenue generated largely from private economic activity. When tax structures appear to disadvantage the very sector generating that revenue, it risks eroding trust in fiscal governance.
The Broader Development Context
Mr President, your administration has consistently emphasised private sector-led growth, youth employment, investment promotion, industrialisation, and Diaspora engagement. Yet taxation policy must align with that vision.
If The Gambia seeks to attract foreign direct investment, encourage diaspora capital return, formalise SMEs, and expand manufacturing and services, then fiscal neutrality between public and private employment must be preserved. Taxation should not inadvertently discourage entrepreneurship or private employment creation.
International Best Practice
Across comparable emerging markets, governments typically adopt one of two approaches: Tax uniformity, or Standardised benefit valuation rules.
1. Tax uniformity: All employees—public and private—taxed on the same definition of taxable income; or
2. Standardised benefit valuation rules: Clear, equitable, and transparent treatment of fringe benefits across sectors.
The key principle is consistency. A system where one sector is taxed on basic pay and another on full compensation creates structural imbalance.
The Way Forward
Mr President, this is not a call for reduced revenue mobilisation - the GRA must continue its commendable performance. Rather, this is a call for policy refinement.
A technical review could consider: harmonising the taxable income base across sectors; standardising the treatment of fringe benefits; conducting an impact assessment on labour market competitiveness; consulting both public service unions and private sector associations, and ensuring reforms are revenue-neutral but equity-enhancing. Such reforms would strengthen confidence without undermining fiscal stability.
Taxation as a Social Contract
At its core, taxation is not merely a fiscal instrument—it is a social contract between Government and citizens. Employers invest confidently when policies are predictable and equitable.
Mr President, equity in taxation is not generosity. It is sound economic management.
Let us commend the GRA for efficient collection. It is an institution that actually deserves commendation in all aspects. The GRA is achieving its objective remarkably due to the political will as alluded to by the Commissioner General. As a result of the successful implementation of the Authority’s reforms, we have seen countries including Nigeria and Sierra Leone coming to The Gambia for study tour.
Good day!
The Point editorial