Posted by: Armel | April 3, 2008

CAMEROON: Hundreds of Billions cfa NEEDED !!!

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I recently wrote this about the Financial Crisis facing the Cameroon Government:  

Where exactly is the money Paul Biya promised is going to come from? We heard time and time again the Economy and Finances Ministry come out and state that it was virtually impossible (Currently) to raise the Gov’t workers salaries based on the numbers at their disposal. Essimi Menye told the parliament on two different occasions that it was going to take some time and other adjustments, if there was to be any kind of increase of gov’t spending on payroll.

But starting April 1st, housing allowance for State employees will also be raised, customs duties will be suspended on some imported basic commodities like fish, milk, rice, flour and wheat. In addition, the customs duty on imported cement and clinker will be reduced. All of it at the same time! How can all this drastic reduction in gov’t revenues be implemented while raising the State expenditures?                                               

As in Accounting ”…Everything should be SQUARE..”: if the annual budget has already been allocated, where will they find the resources to offset this additional spending that was not accounted for -at the time the annual budget was voted- to begin with? It’s all good news, but as we should remember, this square has to be closed somewhere.

The actors of the private sector should be nervous right now. Because it would not be surprising to see a series of raises in taxes. They might do it trough the TVA, the Corporate Tax, the Revenue Tax, the Income Tax etc.. Let’s just hope the local business men & entrepreneurs won’t have to foot the bill for this stunt.

It now appears that in order to finance all these extra expenditures, the Gov’t need an additional 110 billions cfa !! The Prime Minister even suspended the purchase of service vehicles in the State account. But that still won’t be enough ! There has to be another way to compensate for those billions. In the previous post, I said that the money might possibly come from additional taxes on local businesses or revenue taxes.

Someone sent me the link to this interview of the Head of the IMF Dominique Strauss-Kahn that sort of confirm that view. In the interview, the Top gun at the IMF says he believes that in case of a crisis -like this one- , while a country can abolish import duties on essential commodities such as rice, flour etc…(like Cameroon did), they compensate for the lost revenues by raising taxes on local merchants and businesses.

Will Cameroon prove the IMF wrong this time??

Armel Njeunou

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