By Kini Nsom & Clovis Atatah.
Cameroonians will soon begin grappling with the ills of in flation following an increase in taxes. The 2005 draft budget proposes an increase in the Value Added Tax, VAT, from 17 percent to 17.5 percent. This means that consumers in the country will be hunched with a heavier burden, as the tax increase will inevitably lead to rising prices.
Prime Minister Ephraim Inoni announced an increase in taxes on December 13, as he presented government’s socio-economic financial and cultural programme for 2005.
The prices of beer, tobacco, meat etc, will increase, following the tax hike. In the same vein, the issuance of passports, residence permits and windscreen licences will be more expensive.
Taxes will be collected on sawn wood, to check revenue losses, owing to the processing carried out in the informal sector.
In an attempt to justify the tax increase, PM Inoni said it was government’s bid to improve on the performance level of non-oil revenue.
But observers hold that such a move was predictable, given that Cameroon failed to reach the completion point of the Highly Indebted Poor Countries Initiative, HIPC-I. This means that the country will no longer benefit from the very significant debt cancellation.
The Post gathered that until government charts a new agenda with the Bretton Woods, it was incumbent on them to raise taxes, so as to resume payment of the country’s external debts.
Addressing MPs, PM Inoni said the 2005 draft budget that stands at FCFA 1 721 billion, was tailored to provide adequate social amenities for Cameroonians and make life comfortable. He said additional tax revenue will be allocated to priority sectors, such as the settling of domestic debts, in order to preserve the confidence of business people.
The 2005 budget draft proposal, FCFA 1721 billion indicates an increase of FCFA 104 billion from that of 2004. Underscoring the pertinence of these figures, Inoni said, the focus was on achieving a realistic macro-economic balance.
Such projections, he went on, are pointing at an annual economic growth rate of 4.9 percent, while the annual inflation rate is expected to be confined to two percent.
Besides, an external account deficit of about two percent of the Gross Domestic Product, GDP, is expected.
Self-generated resources, are estimated at FCFA 1.526.5 billion as compared to FCFA 1.447 billion in 2004, making an increase of FCFA 79.5 billion in absolute terms, making 88.7% of the budget.
Thus, non-oil revenue is expected to fetch a circa FCFA 1.188.5 billion. FCFA 338 billion is expected to come from oil revenue.
To make up this amount, the National Hydro Carbon Corporation, SNH, will provide FCFA 282.3 billion while FCFA 55.7 billion will come from oil company taxes. External financing is estimated at FCFA 194.5 billion.
The 2005 proposed budget allocates 50.9 percent to running expenditure as against 55.66 percent in 2004. Again, 20 percent stands for investment expenditure as against 16 percent in 2004. An estimated 28.61 percent of the 2005 budget will be used in settling debts. Staff expenses have increased from FCFA 455 billion to FCFA 475 billion, representing an increase of FCFA 20 billion.
The budgetary projections keep public investment expenditure at FCFA 352.5 billion as against FCFA 270 billion for the current year. It thus indicates an increase of FCFA 82.5 billion.
The Prime Minister stated that a global package of FCFA 73 billion is allocated to the HIPC-I expenditure programme as compared to FCFA 90 billion for the current year.
An estimated amount of FCFA 492.4 billion has been allocated for public debt; indicating an increase of 45.4 billion in absolute terms. Debt servicing therefore, takes up 28.61 percent of the budget.
It was within this context that the Prime Minister said if Cameroon reaches the HIPC-I completion point, it would be relieved of such a big debt burden. Such a move, he went on, would accelerate the fight against poverty.
The Head of Government said government was discussing with the Bretton Wood institutions, to seek possible ways of enabling the country to reach the HIPC-I completion point, as soon as possible.
He cited the privatisation of the telecommunication company, CAMTEL, the Cameroon Water Corporation, SNEC, and other sectors of the Cameroon Development Corporation, CDC, as a crucial angle in the reforms that will turn the country’s economy around.
Plans were afoot to recruit a consultant that will deliver Cameroon Airlines, CAMAIR, to a successful privatisation, he added. The Prime Minister also promised that the text of application for the investment charter would be issued.
On the sphere of rural development, the PM enumerated reforms that would stimulate agriculture, especially the cultivation of food and cash crops. He said government was determined to improve on the road infrastructure in the country.
In this light, the work will include the repairing of the Yaounde-Ayos and the Mutengene-Kumba roads. Besides, government is expected to repair some 22.824 kms of roads.
The Prime Minister was emphatic that the Education and Health sectors will be given a new kiss of life. Attention, he said, would be focused on the fight against HIV/AIDS and the amelioration of the working conditions of teachers.
He said government was committed more than ever before, to accelerate youth employment and foster gender equality, with particular interest in the education of the girl child. More so, he added, more Cameroonians will have access to potable water and other basic necessities.
On the political sphere, he said: “The relevant legislation will be completed with the drafting of the texts of application relative to the new laws on decentralisation”.
According to him, government will begin putting in place the follow-up bodies as stipulated in the law and the commission studies on the implementation of decentralisation.
He concluded that for such dreams to become reality, Cameroonians must make collective efforts.
It is a disgrace to cameroonians that at this period of the so called great ambition,the country is still experiencing high prices of goods.Its reALLY A DISGRACE TO THE COUNTRY.Today we are talking of unemployment and poverty of which alot has to be done.But what has been done so far.Now they want to add prices of goods.Cameroonians them selves should think about it.
Posted by: divine | Saturday, 18 December 2004 at 12:12 PM
The good thing here is that whether you are in the opposition or in the CPDM, the high prices due in the most part to the regime’s mismanaged and misplaced Economic policies shall affect most Cameroonians( The common man) in like manner. Things will change the day we start using our votes wisely.
Frankline Kimbeng
Louisiana, USA
Posted by: Kimbeng Frankline | Saturday, 18 December 2004 at 05:35 PM
How does a tax increase result in inflation? Does an increasse in price mean inflation? No!
The only time an increase in price signals inflation in when there is also an increase in income. In other words, inflation is defined as " too much money chasing very few goods." If the inflation rate in the country now stands at 2% as stated, that is almost counted as zero percent because it is insignificant. The tax hike being talked of is a value added tax, one that does not affect every product. Its impact is also going to be limited, affecting those customers opting to continue the consumption of the products in question. The higher price you pay reflects the additional costs incured in processing the product from a primary product to a secondary one. For example, if you chose to buy canned pineapples from a supermarket instead of from a local farmer, the price you pay reflects the farmer's selling price, wages paid at the cannery, cost of cans and inventory carry costs. Should a surchage be imposed on canned pineapples, the price of pineapples will not automatically increase. The farmer is still selling at his/her price. Inflation has not occured. Just a price increase in a given sector of the economy.
It is therefore very important that the population is well informed of the impacts of fiscal policy being implemented by the government. Telling them that inflation is on the way as a result of an anticipated tax increase can actually lead to hoarding and unecessary price increases when there is really nothing to be concerned.
Posted by: Che Sunday (Dr.) | Sunday, 19 December 2004 at 03:22 PM
Guys, Just wondering if someone is not getting things wrong here. I've always known that VAT or TVA is 18.7% and not 17%. Now it is moving up to 19.5%. Could you kindly verify if I am mistaken.
cheers
Sly
Posted by: Sly Peekay | Monday, 20 December 2004 at 07:51 AM