The
president of The Gambia Chamber of Commerce and Industry (GCCI) has said
that Africa’s hard-earned economic gains over the past decade are at
serious risk because of the current global financial and economic
crisis.
Bai Matarr Drammeh made this remark Tuesday at a one-day Economic Outreach Seminar on Tax Reforms in The Gambia jointly organised by the International Monetary Fund (IMF), the Ministry of Finance and Economic Affairs(MoFEA) and the GCCI at the Kairaba Beach Hotel in Kololi.
The GCCI prezy, who doubles as the president of Federation of West African Chambers of Commerce and Industry (FEWACCI) said that like the rest of the world, the continent is feeling the impact if the global financial and economic crisis and that the economic slowdown is also likely to increase credit risk and non-performing assets, weakening the balance sheets of financial institutions and corporations.
He said the demand for exports in Africa has fallen; commodity prices declined and remittance flows may be weakening. He added: “The tighter global credit and investors risk aversion have led portfolio flows to reverse, deterred foreign direct investment in our countries and made trade finance more costly.
The squeeze on the financial flows implies that the continent will once again rely greatly on the multilateral financial institutions, that is the IMF, the World Bank and the African Development Bank.”
Harping on the importance of tax to the economy, the GCCI boss said taxes account for almost all of government revenue in most African countries. He explained that increasing tax revenue can have a significant impact on improving domestic resource mobilisation, provided it does so without discouraging private economic activity. “Public revenue should be mobilised in a way that preserves incentives for private sector actors to work and save,” he noted.
He further noted that Africa loses significant amounts of its own much-needed resources through capital flight. He stated that the estimates of capital flight from Africa vary considerably -according to the African Union US$148 billion leaves the continent every year because of corruption.
“Other researchers have estimated that Africa has suffered a net accumulated outflow, including loss of interest earnings amounting to over US$600 billion since 1975.
Most analysts agree that the outflows of illicit money originating in Africa tend to be permanent, indicating that between 80%-90% of such flows remain outside the continent,” he further stated.
After giving the breakdown of challenges confronting the African continent on trade and economic-related activities, Drammeh observed and suggested the need to help African countries to retain and tax the profits attributable to them from multinationals to increase transparency and to implement internationally agreed standards on exchange of information to counter tax evasion and other abuses.
He spoke of the need to develop a renewed focus on enhancing domestic revenues through broadly-based taxation, alongside higher aid flows at least in the medium-term.
For his part, Mod Secka, the permanent secretary, Ministry of Finance and Economic Affairs explained that the reforms aim to improve effectiveness and efficiency of tax policies for improved domestic revenue mobilisation and creation of better investment climate.
Since then, he said there has been great improvement in resource mobilisation. He used the opportunity to inform the gathering that the government of The Gambia over the past five years has introduced a number of public financial management (PFM) reforms.
“These reforms are expected to promote macroeconomic stability, improve revenue mobilisation, promote efficiency in resource allocation, provide information on stock of arrears and the public debt, ensure integrity in the budget process and improve resource management and financial stability,” PS Secka added.
He disclosed that in its efforts to modernise and strengthen the tax system for improved domestic resource mobilisation in support of national development, the government has made a commitment to replace the existing sales tax with value added tax (VAT) by 2013.
According to him, this provides a great opportunity to widen tax base, as the VAT is seen as more broad-based revenue enhancing consumption tax than the current sales tax, which applies to limited domestic supplies of goods and services and imports.
Other speakers at the meeting, which was characterised by a question and answer session included the IMF resident representative, Meshack T. Tjirongo, and David Dunn, IMF’s Mission chief.
Bai Matarr Drammeh made this remark Tuesday at a one-day Economic Outreach Seminar on Tax Reforms in The Gambia jointly organised by the International Monetary Fund (IMF), the Ministry of Finance and Economic Affairs(MoFEA) and the GCCI at the Kairaba Beach Hotel in Kololi.
The GCCI prezy, who doubles as the president of Federation of West African Chambers of Commerce and Industry (FEWACCI) said that like the rest of the world, the continent is feeling the impact if the global financial and economic crisis and that the economic slowdown is also likely to increase credit risk and non-performing assets, weakening the balance sheets of financial institutions and corporations.
He said the demand for exports in Africa has fallen; commodity prices declined and remittance flows may be weakening. He added: “The tighter global credit and investors risk aversion have led portfolio flows to reverse, deterred foreign direct investment in our countries and made trade finance more costly.
The squeeze on the financial flows implies that the continent will once again rely greatly on the multilateral financial institutions, that is the IMF, the World Bank and the African Development Bank.”
Harping on the importance of tax to the economy, the GCCI boss said taxes account for almost all of government revenue in most African countries. He explained that increasing tax revenue can have a significant impact on improving domestic resource mobilisation, provided it does so without discouraging private economic activity. “Public revenue should be mobilised in a way that preserves incentives for private sector actors to work and save,” he noted.
He further noted that Africa loses significant amounts of its own much-needed resources through capital flight. He stated that the estimates of capital flight from Africa vary considerably -according to the African Union US$148 billion leaves the continent every year because of corruption.
“Other researchers have estimated that Africa has suffered a net accumulated outflow, including loss of interest earnings amounting to over US$600 billion since 1975.
Most analysts agree that the outflows of illicit money originating in Africa tend to be permanent, indicating that between 80%-90% of such flows remain outside the continent,” he further stated.
After giving the breakdown of challenges confronting the African continent on trade and economic-related activities, Drammeh observed and suggested the need to help African countries to retain and tax the profits attributable to them from multinationals to increase transparency and to implement internationally agreed standards on exchange of information to counter tax evasion and other abuses.
He spoke of the need to develop a renewed focus on enhancing domestic revenues through broadly-based taxation, alongside higher aid flows at least in the medium-term.
For his part, Mod Secka, the permanent secretary, Ministry of Finance and Economic Affairs explained that the reforms aim to improve effectiveness and efficiency of tax policies for improved domestic revenue mobilisation and creation of better investment climate.
Since then, he said there has been great improvement in resource mobilisation. He used the opportunity to inform the gathering that the government of The Gambia over the past five years has introduced a number of public financial management (PFM) reforms.
“These reforms are expected to promote macroeconomic stability, improve revenue mobilisation, promote efficiency in resource allocation, provide information on stock of arrears and the public debt, ensure integrity in the budget process and improve resource management and financial stability,” PS Secka added.
He disclosed that in its efforts to modernise and strengthen the tax system for improved domestic resource mobilisation in support of national development, the government has made a commitment to replace the existing sales tax with value added tax (VAT) by 2013.
According to him, this provides a great opportunity to widen tax base, as the VAT is seen as more broad-based revenue enhancing consumption tax than the current sales tax, which applies to limited domestic supplies of goods and services and imports.
Other speakers at the meeting, which was characterised by a question and answer session included the IMF resident representative, Meshack T. Tjirongo, and David Dunn, IMF’s Mission chief.
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