Foreign investors often wonder about the Ivorian fiscal system, most notably concerning the value-added tax (VAT). The most common issues cited are those related to the scope of the tax’s application, the exemptions and deductions, and above all, the refund system.
Much like other countries, the Ivorian VAT is a neutral impersonal tax on turnover. In current form, the VAT is an adaptation of the local tax on turnover implemented in Côte d’Ivoire in 1950 and later turned into the VAT under a second fiscal reform in 1959. For nearly two decades, it has been governed by community dispositions that influence domestic rules. Other than employment or agriculture activities that are clearly excluded, VAT is applicable in principal to all economic activities, accounting for the reality of operations, regardless of the quality or legal statute of the person carrying them out. The activities liable to VAT include sale and delivery of imported or locally acquired goods, and the import and delivery of goods to oneself. All activities are taxable that are related to the delivery of goods, to others or to oneself, as well as services rendered to third parties and to oneself.
While the mechanism has largely been redesigned in the past few years, several other indirect taxes in addition to VAT exist, including excise duties. Operations linked to banking or financial activities, and more generally to the exchange of value and money, are subject to such taxes, with the exception of leasing operations that remain subject to the VAT. Insurance operations are exclusively subject to the scope of the tax on insurance contracts. The common VAT rate in Côte d’Ivoire is 18%, with a reduced rate of 9% required on certain goods, such as milk, pasta products and petroleum products, in an effort to fight against inflation and high living costs. The VAT borne by companies is, in principal, deductible, provided they are not legally excluded or depending on their own fiscal situation.
Generally, tax revenues registered by the Ivorian Treasury under VAT have experienced strong growth during the last decade, becoming one of the main earners of state revenue. Its returns virtually doubled between 2002 and 2012, though its share of state revenues dropped in that period from 21% to 16%. However, phenomena such as fraud, the persistence of an informal sector and the lukewarm success of standardised invoicing, negatively impact VAT revenues, which do not seem proportional to the real level of economic activity.
Despite its lead role, the Ivorian VAT system has suffered from numerous dysfunctions in the view of partners for development and community institutions. The most cited concerns are the multiplicity of exemptions on products and services; taxation of interests and banking services subject to the tax on banking operations; inadaptability of the current refund mechanism on VAT credits; and grey areas in the sectoral application of exemptions. The banking sector – much like in countries such as Burkina Faso and Niger – seeks to make its activities subject to VAT in case of absence of a right to deduct, allowing them to deduct the VAT on the acquisition of goods and services. The Professional Banking Association has supported this idea, while maintaining the 10% rate found for the tax on banking operations.
Another shortcoming is the inadaptability of the current VAT credit refund mechanism. Challenging factors include procedure complexity, burdensome administration, recurrent carry-over of credits and the high probability of undergoing fiscal monitoring following a refund request. Mining operators also cite lack of clarity on exemptions and VAT attestation, despite its recently being reduced to once a year. In sum, while VAT maintains a lead role in taxation, to be more efficient it should be applied to a larger operational base, while adjusting exemptions and improving the refund system.
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