## ASSESSING THE SCOPE FOR DOMESTIC REVENUE MOBILIZATION

## Source details

**Canonical URL:** [ASSESSING THE SCOPE FOR DOMESTIC REVENUE MOBILIZATION](https://www.imf.org/-/media/files/publications/cr/2022/english/1civea2022002.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2022/english/1civea2022002.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2022/english/1civea2022002.pdf.json)

---

### A. International comparison of Côte d’Ivoire’s tax revenue performance
- Tax revenue reached 13 percent of GDP for 2021 but remains below the WAEMU convergence target of 20 percent of GDP (IMF 2021).
- Between 2008 and 2020, Côte d’Ivoire’s tax revenue performance was below average levels in:
  - sub-Saharan Africa,
  - low income developing countries,
  - emerging markets.
- Underperformance drivers:
  - pervasive tax exemptions in key growth sectors (agribusiness, construction, transportation),
  - low level of indirect taxation,
  - non-compliance.
- Successful measures in other countries include:
  - improvements in tax compliance (risk-based audits, registration, filing, payment, reporting, including via digitalization),
  - reduction/elimination of exemptions, tax holidays, and other tax incentives—particularly for VAT, corporate income taxes (CIT), and other goods and services taxes.
- Emphasis on VAT: many countries focus on indirect taxation, especially VAT, due to its broad base and higher collection efficiency (Akitoby et al 2020).
- Political economy note: tax reform is inherently political and benefits from inclusive consultation and effective communication emphasizing socially useful spending financed by reforms.

### B. General diagnosis of the tax system
- Direct taxation
  - Personal Income Tax (PIT)
    - System is complex: juxtaposes a schedular system (fiscalité cédulaire) with taxation of total income (impôt global sur le revenu).
    - Family allowance (le quotient familial) and tax exemptions/abatements of 20 percent and 15 percent apply.
    - Abattement forfaitaire design is regressive; higher tax brackets receive sharper tax reductions (Leduc, S. et al 2020).
    - Article 120 of the General Tax Code levies a 1.5 percent proportional tax on labor income.
  - Business Profit Tax (BPT)
    - Revenue performance and fairness weakened by numerous tax exemptions, a generous investment code, and informality (IMF 2021).
    - Note: Côte d’Ivoire’s General Tax Code does not have a corporate income tax (CIT) per se, but BPT is used interchangeably with CIT in this analysis.
  - Property Taxes
    - Property tax revenue was 0.54 percent of GDP in 2018.
    - Benchmark for property tax revenue is generally considered 1 percent of GDP by experts.
- Indirect taxation
  - Value Added Tax (VAT)
    - VAT revenues at 3 percent of GDP, about half of what non-oil frontier markets collect.
    - VAT C-efficiency ratio is low at 0.2 (2019).
    - Causes: VAT exemptions (construction, grains, oilseeds industries), reduced rates, and weak compliance.
  - Excise Taxes
    - Excise tax revenue has remained around or below 1 percent of GDP for 2007–2019.
    - International potential ranges from 1 percent of GDP in LICs to 2.5 percent of GDP in advanced countries (Abdel-Kader and de Mooij 2020).
    - Recommended focus goods: tobacco, alcohol, fuel, possibly passenger vehicles.
    - Article 359 of the General Tax Code provides a reduced VAT rate on petroleum products (noted as inconsistent with excise rationale).
    - Alignment with WAEMU directives recommended to reduce incentives for illegal trafficking.
    - Earmarked excise taxes limit flexibility:
      - Article 1085: special tax of 5 percent on tobacco for sports; revenue earmarking: 50 percent to Ivoirian Federation of football; 35 percent to other sports federations; 15 percent to socio-sports infrastructure project unit.
      - Article 1133: special tax of 2 percent additional solidarity excise tax to fight AIDS and smoking; revenue earmarking: 70 percent to National Foundation against AIDS (Fonds National de Lutte contre le SIDA) and 30 percent to national program against alcoholism, tobacco, and other addictions.
- Tax administration
  - Significant efforts to strengthen administration and digitalization have been made.
  - Revenue administration reforms require organizational change and staff retraining.
  - Improvement in administration alone is insufficient if policy framework remains fragmented and opportunities for avoidance/evasion persist.

### C. Recent tax measures in Côte d’Ivoire (2020–2022 highlights)
- Overall increase
  - DGI indicates a 20.8 percent increase in tax revenues from 2020 to 2021.
  - Contributors to the increase:
    - tax policy efforts: FCFA 59.6 billion (about 5.2 percentage points of the increase),
    - enhanced tax administration: FCFA 163.3 billion (about 14.6 percentage points of the increase),
    - tax arrears collection related to COVID-19 measures: FCFA 11.2 billion (about 0.2 percentage points of the increase).
- Tax policy measures
  - Rationalizing exemptions
    - 2019 government plan generated additional revenues in 2021 of around FCFA 18 billion (about $ 30 million) by eliminating investment-related exemptions (e.g., LONACI) and public subsidies to APEX-CI.
  - Property tax enhancements
    - Cadaster inventory (2018–2021) increased taxable plots from 504,171 (30 percent) to 1,371,332 (69 percent) countrywide.
    - Abidjan: from 240,141 (60 percent) to 360,183 (82 percent).
    - Interior: from 264,030 (21 percent) to 1,011,149 (65 percent).
    - Land Registry audits (buildings >2 levels in Abidjan) in 2021: assessed rights (droits constatés liquides) FCFA 1,256,558,696, of which FCFA 637,530,454 was recovered (50.7 percent).
  - Excise taxes
    - Tobacco excise increased from 39 percent (FCFA 8,346.80 million) to 40 percent (FCFA 8,127.15 million) in 2022, with an estimated revenue gain of FCFA 219.65 million (about $0.3 million).
    - Excise on cosmetic products adjusted (reduced from 50 percent to 15 percent) in Annexe Fiscale of 2022 finance law to conform to WAEMU directives.
- Tax administration modernization
  - Electronic tax declaration (E-tax) and payment mandatory for all taxpayers of net business profits under standard rules beginning April 1, 2020 (Arrêté No. 0054/MPMBPE, March 10, 2000).
  - Single taxpayer identification number (STIN) issued to new businesses; majority of medium-size and large enterprises re-registered with new STIN.
  - New IT system SIGICI deployed in last quarter of 2020 for audit data, real-time tracking of tax obligations, and decision support.
  - Digital cadaster (E-Cadastre) instituted since 2019; integration of 78,000 new taxable parcels; lots taxed increased by 14 percent from 556,130 parcels in 2020 to 634,148 parcels in 2021.
  - Property taxes collected increased by 12 percent from FCFA 164.5 billion (2020) to FCFA 189.4 billion (2021). (An increase in 2020-21 of about FCFA 25 billion or about $40 million or about 0.06 percent GDP).
  - Electronic Land Register (LIFE) in operation since 2017 increased revenue from land conservation:
    - FCFA 58.2 billion (2018) to FCFA 81 billion (2020) to FCFA 106.1 billion (2021). (An increase in 2020-21 of about FCFA 25 billion or about $40 million or about 0.06 percent of GDP).
  - Additional 2022 measures envisaged: digitalized VAT administration; digitalized tax audits; deployment of telecommunication information flow control device.
    - Tax authorities estimate additional revenues from these measures at FCFA 75 billion (about $120 million).

### D. Suggested domestic revenue mobilization policy recommendations
- Tax policy recommendations
  - Personal Income Tax (PIT)
    - Adopt a simplified dual income tax system and improve progressivity:
      - Abandon the IGR (impôt global sur le revenu).
      - Rely on redesigned PIT schedules applying to wages and salaries (progressive rates) and profit income from mobile and immobile capital at flat rates.
      - Expected benefits: facilitate administration and increase transparency.
    - Eliminate the 20 percent and 15 percent tax reduction (abattement forfaitaire) for labor income:
      - These reductions complicate the system and reduce progressivity.
      - Integrate reductions into a revised progressive tax schedule (new tax bracket and rates).
  - Repeal the family allowance (le quotient familial) and/or replace with a tax credit
    - Reform proposal: replace quotient familial with per-child tax credit of—say—around FCFA 50,000 per child up to a maximum given number of children (amount can be anchored to inflation) (Leduc et al 2020).
    - Rationale:
      - Quotient familial is a reduction in taxable income and is regressive: it subsidizes richer families more than poorer ones.
      - A tax credit of a set amount per child would be neither regressive nor progressive — it offers identical tax subsidies independent of family income.
    - Use of savings:
      - Savings from repealing the family allowance can help finance the child tax credit scheme or go into a general government fund to improve social spending to assist low-income families without tax liability or sufficient taxable income to qualify for the child tax credit.
    - Example: Senegal repealed the quotient familial in 2012, replacing it with a child tax credit (Akitoby, B.; Honda, J.; Miyamoto, H.; Primus, K; and Sy, M. 2018).
  - Other PIT and labor tax measures
    - Eliminate the 1.5 percent proportional tax on labor income (Article 120 of General Tax Code). This additional tax can be folded into a new tax schedule without any revenue loss.
    - Rationalize taxation of income from mobile and immobile capital through taxation at proportional and moderate rates (for instance, one for interest and one for dividends, capital gains, and rental income). This would facilitate scaling back tax exemptions.
  - Business Profit Tax (BPT)
    - Adopt a competitive BPT regime in the General Tax Code and eliminate tax preferences from other instruments (e.g., investment code, discretionary tax exemption conventions, etc.).
    - Removing some tax exemptions could yield about 0.3 percent of GDP in tax revenue (IMF 2021).
    - Recommendation to remove scope in the investment code to sign conventions with discretionary tax exemption to enhance revenues, transparency, and level the playing field.
    - Where incentives are granted, they should be offered in the General Tax Code and consist of cost-based incentives (e.g., accelerated depreciation of capital assets, tax credits for targeted capital and labor costs) as opposed to profit-based incentives (tax holiday or reduced tax rate) (IMF 2015).
  - Extractive industries
    - Reassess whether the taxation system for extractive industry is in line with prevailing international benchmarks.
  - Property taxes
    - Establish fixed rights to registration of land transaction. Effective registration of property sales and the on-going introduction of an online cadaster should support property tax collection capacity in the medium term.
    - Segment the property tax base according to revenue potential to ease tax administration by focusing on highest revenue potential segments (World Bank 2019).
  - Value Added Tax (VAT)
    - Enhance VAT design: registration threshold, broad base, and a single rate (Abdel-Kader and de Mooij 2020).
    - Given rising inflation, increasing consumption taxes may not be socially desirable now, but appropriateness should be continuously assessed as the situation improves.
    - Broaden the VAT tax base by widening scope to agriculture, transportation, construction, real estate, foreign supplies of digital services, and telecommunications. VAT-exempt sectors such as grains and oilseeds industries represent about five percent of GDP (IMF 2019).
    - Progressively eliminate tax exemptions to converge with WAEMU directives, including drastically limiting the scope for discretionary exemptions in the investment code.
    - Streamline and rationalize reduced VAT rates: since 2009, certain products (milk, production materials for solar energy, petroleum products, etc.) have been subject to a reduced VAT rate of nine percent. Multiple reduced rates risk revenue loss and complicate administration.
    - Reconsider merits of adopting a reduced VAT rate on petroleum products.
    - Remove legal restrictions on VAT refunds. Restrictions on refund of VAT credits included in Article 382 of the General Tax Code should be removed to promote VAT neutrality (World Bank 2019).
  - Excise taxes
    - Align excise tax rates, including on alcohol and tobacco, to conform to WAEMU regional standards to help boost tax revenues and ensure proper functioning of regional markets.
    - Consolidate various excise taxes into a single levy and reduce earmarking of revenues; pool revenues to enable government allocation based on priorities.
- Tax policy reform sequencing
  - Sequence reforms sensibly as reforms span broad areas, require several years, and need groundwork to avoid abrupt adjustment.
    - Implement VAT and excise tax reforms first since consumption-based taxes are relatively easier to administer, with careful assessment of social impact and gradual implementation.
    - Pursue property tax reform in tandem with progress on cadaster registry and valuation of property.
    - Personal income tax (PIT) reform requires significant ex-ante analysis on potential revenue gains, distributional impact, and incentive implications for labor market and informality; prepare analysis over a few years to support gradual implementation and changes to tax forms and withholding systems.
- Tax administration reforms (to sustain over the medium term)
  - Modernize tax and customs administration:
    - Consolidate a binding VAT threshold (when multiple thresholds exist).
    - Dematerialize customs clearance procedures through digitalization.
    - Simplify/strengthen monitoring of transit and special procedures.
    - Optimize control of merchandise monetary values.
  - Digitalize tax administration:
    - Ensure compliance with electronic tax payments.
    - Enhance capacity to collect and analyze tax data.
    - Fully implement a single taxpayer identification number (STIN).
    - Secure digital transactions and extract performance indicators.
  - Modernize human resources management:
    - Redesign managerial procedures and staff evaluation guidance.
    - Enhance skills and competencies of staff.
    - Improve communication and relationships with taxpayers.

### Comparative advantages and medium-term diversification strategy (agriculture and processing)
- Cocoa: market position and value-added constraints
  - Market share in global exports of cocoa beans increased from about 31 percent in 2010 to around 44 percent in 2019.
  - Market share in some semi-processed cocoa products:
    - Cocoa paste: around 24½ percent of global exports.
    - Cocoa butter: about 6½ percent of global exports.
  - Market share for all processed cocoa products taken together: about 3.4 percent in 2019 (down from 4.6 percent in 2010).
  - Constraints to moving up the value-added ladder:
    - Refrigerated transport toward advanced markets is costly.
    - Regional market presents limited demand and is subject to weaknesses in transport connectivity.
  - Opportunity: "large potential for increasing the share of semi-processed exports further."
- Cashew nuts: strong export growth and processing potential
  - Market share (raw and processed cashew nuts) increased from less than 4½ percent of global exports in 2000-04 to close to 14 percent over 2015-19.
  - Côte d’Ivoire still exports about 85 percent of its cashew nuts unprocessed (as raw nuts).
  - Vietnam and India together accounted for more than 94 percent of Côte d’Ivoire’s total cashew nut exports in 2019.
  - Directional differences in export orientation:
    - More than 70 percent (Vietnam) and 50 percent (India) of their cashew nut exports are oriented to advanced countries, compared to about 4 percent for Côte d’Ivoire.
  - Unit values:
    - Vietnam’s average cashew nut unit export price was more than six times higher than the unit value of cashew nut exports (mostly nuts) to Vietnam from Côte d’Ivoire or other origins.
  - Social impact: Cashew nut transformation is labor intensive; unlocking domestic processing capacity would be associated with strong employment creation, especially for women.
  - Note on recent change: Processed cashew nut increased from 9 percent of total cashew nut exports in 2019 to 14 percent in 2021.
- Natural rubber and cotton: comparative advantages and gaps in processing
  - Natural rubber (technically specified rubber, TSR):
    - Market share increased from a stable 3 percent of global exports over 2000-13 to above 8 percent in 2019.
  - Latex (a processed rubber product): market share surged to 6½ percent in 2019 (from almost nil a few years earlier).
  - Natural conditions: Côte d’Ivoire’s harvest yield in natural rubber is one of the highest among dominant global producers.
  - Cotton:
    - Market share increased from 1.2 percent of global exports in 2012 to 2.6 percent in 2019.
    - Most raw cotton is exported raw to Asia for textile production and then reimported to Côte d’Ivoire for printing.
    - Cotton yields are comparable to regional peers with dominant global positions but lower than top global performers, indicating potential to raise productivity.
  - Conclusion: Low extent of processed rubber and cotton exports despite clear comparative advantages points to significant potential to climb the value-added ladder.
- Medium-term strategy: leveraging comparative advantages to diversify and add value
  - Overarching guidance:
    - Capitalize on comparative advantages in agriculture to diversify primary production and add value to agricultural exports.
    - Policies that enable agri-business development will also support higher value-added industrial and service activities.
  - Key horizontal policy priorities:
    - Infrastructure:
      - Improve connectivity to transport, electricity, and communication networks for industrial firms.
      - National Development Plan initiatives to revamp industrial zones are a step in the right direction.
    - Business climate and governance:
      - Streamline bureaucracy.
      - Tackle weaknesses in the regulatory framework and in property rights protection to attract private investment.
    - Human capital:
      - Continue initiatives to improve professional training and upgrade skills within the government’s new social program.
      - Finetune programs in close coordination with the corporate sector.
    - Access to finance:
      - Remove obstacles to financial access, notably by tackling deficiencies in insolvency procedures and strengthening the role of the credit bureau.
    - Trade:
      - Tackle obstacles for regional integration and capitalize on access to the WAEMU and ECOWAS markets to facilitate export diversification.
  - Targeted, industry-focused measures to address market failures
    - Rationale: Coordination failures and learning externalities may preclude development of specialized skills, intermediate inputs, or infrastructure required for higher value-added activities.
    - Examples of targeted interventions:
      - Development of a cashew nut-processing research and training center (authorities’ initiative).
      - Export promotion initiatives to ease informational frictions and help firms meet quality certification standards.
      - Public initiatives to coordinate agents along value chains and consolidate a country-origin brand for Côte d’Ivoire food exports.
    - Design principles for targeted interventions:
      - Focus interventions on export-oriented industries (not individual firms).
      - Maintain competition in the sector.
      - Ensure transparency and proper accountability to prevent government capture.
      - Subject interventions to an appropriate cost-benefit test to ensure an adequate social rate of return.

*Source: IMF — Assessing the Scope for Domestic Revenue Mobilization (Côte d’Ivoire), May 31, 2022.*

### References _________________________________________________________________________________ 12

### ASSESSING THE SCOPE FOR DOMESTIC REVENUE MOBILIZATION

### A. International comparison of Côte d’Ivoire’s tax revenue performance
- Tax revenue reached 13 percent of GDP for 2021 but remains below the WAEMU convergence target of 20 percent of GDP (IMF 2021).
- Between 2008 and 2020, Côte d’Ivoire’s tax revenue performance was below average levels in:
  - sub-Saharan Africa,
  - low income developing countries,
  - emerging markets.
- Underperformance drivers:
  - pervasive tax exemptions in key growth sectors (agribusiness, construction, transportation),
  - low level of indirect taxation,
  - non-compliance.
- Successful measures in other countries include:
  - improvements in tax compliance (risk-based audits, registration, filing, payment, reporting, including via digitalization),
  - reduction/elimination of exemptions, tax holidays, and other tax incentives—particularly for VAT, corporate income taxes (CIT), and other goods and services taxes.
- Emphasis on VAT: many countries focus on indirect taxation, especially VAT, due to its broad base and higher collection efficiency (Akitoby et al 2020).
- Political economy note: tax reform is inherently political and benefits from inclusive consultation and effective communication emphasizing socially useful spending financed by reforms.

### B. General diagnosis of the tax system
- Direct taxation
  - Personal Income Tax (PIT)
    - System is complex: juxtaposes a schedular system (fiscalité cédulaire) with taxation of total income (impôt global sur le revenu).
    - Family allowance (le quotient familial) and tax exemptions/abatements of 20 percent and 15 percent apply.
    - Abattement forfaitaire design is regressive; higher tax brackets receive sharper tax reductions (Leduc, S. et al 2020).
    - Article 120 of the General Tax Code levies a 1.5 percent proportional tax on labor income.
  - Business Profit Tax (BPT)
    - Revenue performance and fairness weakened by numerous tax exemptions, a generous investment code, and informality (IMF 2021).
    - Note: Côte d’Ivoire’s General Tax Code does not have a corporate income tax (CIT) per se, but BPT is used interchangeably with CIT in this analysis.
  - Property Taxes
    - Property tax revenue was 0.54 percent of GDP in 2018.
    - Benchmark for property tax revenue is generally considered 1 percent of GDP by experts.
- Indirect taxation
  - Value Added Tax (VAT)
    - VAT revenues at 3 percent of GDP, about half of what non-oil frontier markets collect.
    - VAT C-efficiency ratio is low at 0.2 (2019).
    - Causes: VAT exemptions (construction, grains, oilseeds industries), reduced rates, and weak compliance.
  - Excise Taxes
    - Excise tax revenue has remained around or below 1 percent of GDP for 2007–2019.
    - International potential ranges from 1 percent of GDP in LICs to 2.5 percent of GDP in advanced countries (Abdel-Kader and de Mooij 2020).
    - Recommended focus goods: tobacco, alcohol, fuel, possibly passenger vehicles.
    - Article 359 of the General Tax Code provides a reduced VAT rate on petroleum products (noted as inconsistent with excise rationale).
    - Alignment with WAEMU directives recommended to reduce incentives for illegal trafficking.
    - Earmarked excise taxes limit flexibility:
      - Article 1085: special tax of 5 percent on tobacco for sports; revenue earmarking: 50 percent to Ivoirian Federation of football; 35 percent to other sports federations; 15 percent to socio-sports infrastructure project unit.
      - Article 1133: special tax of 2 percent additional solidarity excise tax to fight AIDS and smoking; revenue earmarking: 70 percent to National Foundation against AIDS (Fonds National de Lutte contre le SIDA) and 30 percent to national program against alcoholism, tobacco, and other addictions.
- Tax administration
  - Significant efforts to strengthen administration and digitalization have been made.
  - Revenue administration reforms require organizational change and staff retraining.
  - Improvement in administration alone is insufficient if policy framework remains fragmented and opportunities for avoidance/evasion persist.

### C. Recent tax measures in Côte d’Ivoire (2020–2022 highlights)
- Overall increase
  - DGI indicates a 20.8 percent increase in tax revenues from 2020 to 2021.
  - Contributors to the increase:
    - tax policy efforts: FCFA 59.6 billion (about 5.2 percentage points of the increase),
    - enhanced tax administration: FCFA 163.3 billion (about 14.6 percentage points of the increase),
    - tax arrears collection related to COVID-19 measures: FCFA 11.2 billion (about 0.2 percentage points of the increase).
- Tax policy measures
  - Rationalizing exemptions
    - 2019 government plan generated additional revenues in 2021 of around FCFA 18 billion (about $ 30 million) by eliminating investment-related exemptions (e.g., LONACI) and public subsidies to APEX-CI.
  - Property tax enhancements
    - Cadaster inventory (2018–2021) increased taxable plots from 504,171 (30 percent) to 1,371,332 (69 percent) countrywide.
    - Abidjan: from 240,141 (60 percent) to 360,183 (82 percent).
    - Interior: from 264,030 (21 percent) to 1,011,149 (65 percent).
    - Land Registry audits (buildings >2 levels in Abidjan) in 2021: assessed rights (droits constatés liquides) FCFA 1,256,558,696, of which FCFA 637,530,454 was recovered (50.7 percent).
  - Excise taxes
    - Tobacco excise increased from 39 percent (FCFA 8,346.80 million) to 40 percent (FCFA 8,127.15 million) in 2022, with an estimated revenue gain of FCFA 219.65 million (about $0.3 million).
    - Excise on cosmetic products adjusted (reduced from 50 percent to 15 percent) in Annexe Fiscale of 2022 finance law to conform to WAEMU directives.
- Tax administration modernization
  - Electronic tax declaration (E-tax) and payment mandatory for all taxpayers of net business profits under standard rules beginning April 1, 2020 (Arrêté No. 0054/MPMBPE, March 10, 2000).
  - Single taxpayer identification number (STIN) issued to new businesses; majority of medium-size and large enterprises re-registered with new STIN.
  - New IT system SIGICI deployed in last quarter of 2020 for audit data, real-time tracking of tax obligations, and decision support.
  - Digital cadaster (E-Cadastre) instituted since 2019; integration of 78,000 new taxable parcels; lots taxed increased by 14 percent from 556,130 parcels in 2020 to 634,148 parcels in 2021.
  - Property taxes collected increased by 12 percent from FCFA 164.5 billion (2020) to FCFA 189.4 billion (2021). (An increase in 2020-21 of about FCFA 25 billion or about $40 million or about 0.06 percent GDP).
  - Electronic Land Register (LIFE) in operation since 2017 increased revenue from land conservation:
    - FCFA 58.2 billion (2018) to FCFA 81 billion (2020) to FCFA 106.1 billion (2021). (An increase in 2020-21 of about FCFA 25 billion or about $40 million or about 0.06 percent of GDP).
  - Additional 2022 measures envisaged: digitalized VAT administration; digitalized tax audits; deployment of telecommunication information flow control device.
    - Tax authorities estimate additional revenues from these measures at FCFA 75 billion (about $120 million).

### D. Suggested domestic revenue mobilization policy recommendations
- Tax policy recommendations
  - Personal Income Tax (PIT)
    - Adopt a simplified dual income tax system and improve progressivity:
      - Abandon the IGR (impôt global sur le revenu).
      - Rely on redesigned PIT schedules applying to wages and salaries (progressive rates) and profit income from mobile and immobile capital at flat rates.
      - Expected benefits: facilitate administration and increase transparency.
    - Eliminate the 20 percent and 15 percent tax reduction (abattement forfaitaire) for labor income:
      - These reductions complicate the system and reduce progressivity.
      - Integrate reductions into a revised progressive tax schedule (new tax bracket and rates).

*Source: IMF — Assessing the Scope for Domestic Revenue Mobilization (Côte d’Ivoire), May 31, 2022.*

### 26.      Repeal the family allowance (le quotient familial) and/or replace with a tax credit

### 26.      Repeal the family allowance (le quotient familial) and/or replace with a tax credit

### Reform proposal: Replace quotient familial with per-child tax credit
- Repeal the family allowance (quotient familial) and/or replace with a tax credit of—say—around FCFA 50,000 per child up to a maximum given number of children (amount can be anchored to inflation) (Leduc et al 2020).
- Rationale:
  - The family allowance (quotient familial) is a reduction in taxable income, which is subject to different tax brackets, hence regressive: it subsidizes richer families more than poorer ones.
  - A tax credit of a set amount per child would be neither regressive nor progressive — it offers identical tax subsidies independent of family income.
- Use of savings:
  - Savings from repealing the family allowance can help finance the child tax credit scheme or go into a general government fund to improve social spending to assist low-income families without tax liability or sufficient taxable income to qualify for the child tax credit.
- Example from practice:
  - As part of its tax policy reform, Senegal repealed the quotient familial from its tax code in 2012, replacing it with a child tax credit (Akitoby, B.; Honda, J.; Miyamoto, H.; Primus, K; and Sy, M. 2018).

### Other personal income tax and labor tax measures
- Eliminate the 1.5 percent proportional tax on labor income (Article 120 of General Tax Code). This additional tax can be folded into a new tax schedule without any revenue loss.
- Rationalize taxation of income from mobile and immobile capital through taxation at proportional and moderate rates (for instance, one for interest and one for dividends, capital gains, and rental income). This would facilitate scaling back tax exemptions.

### Business Profit Tax (BPT) recommendations
- Adopt a competitive BPT regime in the General Tax Code and eliminate tax preferences from other instruments (e.g., investment code, discretionary tax exemption conventions, etc.).
- Removing some tax exemptions could yield about 0.3 percent of GDP in tax revenue (IMF 2021).
- Recommendation to remove scope in the investment code to sign conventions with discretionary tax exemption to enhance revenues, transparency, and level the playing field.
- Where incentives are granted, they should be offered in the General Tax Code and consist of cost-based incentives (e.g., accelerated depreciation of capital assets, tax credits for targeted capital and labor costs) as opposed to profit-based incentives (tax holiday or reduced tax rate) (IMF 2015).

### Extractive industries
- Reassess whether the taxation system for extractive industry is in line with prevailing international benchmarks.

### Property taxes
- Establish fixed rights to registration of land transaction. Effective registration of property sales and the on-going introduction of an online cadaster should support property tax collection capacity in the medium term.
- Segment the property tax base according to revenue potential to ease tax administration by focusing on highest revenue potential segments (World Bank 2019).

### Value Added Tax (VAT)
- Enhance VAT design: registration threshold, broad base, and a single rate (Abdel-Kader and de Mooij 2020).
- Given rising inflation, increasing consumption taxes may not be socially desirable now, but appropriateness should be continuously assessed as the situation improves.
- Broaden the VAT tax base by widening scope to agriculture, transportation, construction, real estate, foreign supplies of digital services, and telecommunications. VAT-exempt sectors such as grains and oilseeds industries represent about five percent of GDP (IMF 2019).
- Progressively eliminate tax exemptions to converge with WAEMU directives, including drastically limiting the scope for discretionary exemptions in the investment code.
- Streamline and rationalize reduced VAT rates: since 2009, certain products (milk, production materials for solar energy, petroleum products, etc.) have been subject to a reduced VAT rate of nine percent. Multiple reduced rates risk revenue loss and complicate administration.
- Reconsider merits of adopting a reduced VAT rate on petroleum products.
- Remove legal restrictions on VAT refunds. Restrictions on refund of VAT credits included in Article 382 of the General Tax Code should be removed to promote VAT neutrality (World Bank 2019).

### Excise taxes
- Align excise tax rates, including on alcohol and tobacco, to conform to WAEMU regional standards to help boost tax revenues and ensure proper functioning of regional markets.
- Consolidate various excise taxes into a single levy and reduce earmarking of revenues; pool revenues to enable government allocation based on priorities.

### Tax policy reform sequencing
- Sequence reforms sensibly as reforms span broad areas, require several years, and need groundwork to avoid abrupt adjustment.
  - Implement VAT and excise tax reforms first since consumption-based taxes are relatively easier to administer, with careful assessment of social impact and gradual implementation.
  - Pursue property tax reform in tandem with progress on cadaster registry and valuation of property.
  - Personal income tax (PIT) reform requires significant ex-ante analysis on potential revenue gains, distributional impact, and incentive implications for labor market and informality; prepare analysis over a few years to support gradual implementation and changes to tax forms and withholding systems.

### Tax administration reforms (to sustain over the medium term)
- Modernize tax and customs administration:
  - Consolidate a binding VAT threshold (when multiple thresholds exist).
  - Dematerialize customs clearance procedures through digitalization.
  - Simplify/strengthen monitoring of transit and special procedures.
  - Optimize control of merchandise monetary values.
- Digitalize tax administration:
  - Ensure compliance with electronic tax payments.
  - Enhance capacity to collect and analyze tax data.
  - Fully implement a single taxpayer identification number (STIN).
  - Secure digital transactions and extract performance indicators.
- Modernize human resources management:
  - Redesign managerial procedures and staff evaluation guidance.
  - Enhance skills and competencies of staff.
  - Improve communication and relationships with taxpayers.

*International Monetary Fund — Côte d’Ivoire: Tax policy and administration reform recommendations (excerpts).*

### 6.      While Côte d’Ivoire has a comparative advantage and a dominant market

### 6.      While Côte d’Ivoire has a comparative advantage and a dominant market

### Cocoa: market position and value-added constraints
- Market share in global exports of cocoa beans increased from about 31 percent in 2010 to around 44 percent in 2019.
- Market share in some semi-processed cocoa products:
  - Cocoa paste: around 24½ percent of global exports.
  - Cocoa butter: about 6½ percent of global exports.
- Market share for all processed cocoa products taken together: about 3.4 percent in 2019 (down from 4.6 percent in 2010).
- Constraints to moving up the value-added ladder:
  - Refrigerated transport toward advanced markets is costly.
  - Regional market presents limited demand and is subject to weaknesses in transport connectivity.
- Opportunity: "large potential for increasing the share of semi-processed exports further."

### Cashew nuts: strong export growth and processing potential
- Market share (raw and processed cashew nuts) increased from less than 4½ percent of global exports in 2000-04 to close to 14 percent over 2015-19.
- Côte d’Ivoire still exports about 85 percent of its cashew nuts unprocessed (as raw nuts).
- Vietnam and India together accounted for more than 94 percent of Côte d’Ivoire’s total cashew nut exports in 2019.
- Directional differences in export orientation:
  - More than 70 percent (Vietnam) and 50 percent (India) of their cashew nut exports are oriented to advanced countries, compared to about 4 percent for Côte d’Ivoire.
- Unit values:
  - Vietnam’s average cashew nut unit export price was more than six times higher than the unit value of cashew nut exports (mostly nuts) to Vietnam from Côte d’Ivoire or other origins.
- Social impact: Cashew nut transformation is labor intensive; unlocking domestic processing capacity would be associated with strong employment creation, especially for women.
- Note on recent change: Processed cashew nut increased from 9 percent of total cashew nut exports in 2019 to 14 percent in 2021.

### Natural rubber and cotton: comparative advantages and gaps in processing
- Natural rubber (technically specified rubber, TSR):
  - Market share increased from a stable 3 percent of global exports over 2000-13 to above 8 percent in 2019.
- Latex (a processed rubber product): market share surged to 6½ percent in 2019 (from almost nil a few years earlier).
- Natural conditions: Côte d’Ivoire’s harvest yield in natural rubber is one of the highest among dominant global producers.
- Cotton:
  - Market share increased from 1.2 percent of global exports in 2012 to 2.6 percent in 2019.
  - Most raw cotton is exported raw to Asia for textile production and then reimported to Côte d’Ivoire for printing.
  - Cotton yields are comparable to regional peers with dominant global positions but lower than top global performers, indicating potential to raise productivity.
- Conclusion: Low extent of processed rubber and cotton exports despite clear comparative advantages points to significant potential to climb the value-added ladder.

### Medium-term strategy: leveraging comparative advantages to diversify and add value
- Overarching guidance:
  - Capitalize on comparative advantages in agriculture to diversify primary production and add value to agricultural exports.
  - Policies that enable agri-business development will also support higher value-added industrial and service activities.

- Key horizontal policy priorities:
  - Infrastructure:
    - Improve connectivity to transport, electricity, and communication networks for industrial firms.
    - National Development Plan initiatives to revamp industrial zones are a step in the right direction.
  - Business climate and governance:
    - Streamline bureaucracy.
    - Tackle weaknesses in the regulatory framework and in property rights protection to attract private investment.
  - Human capital:
    - Continue initiatives to improve professional training and upgrade skills within the government’s new social program.
    - Finetune programs in close coordination with the corporate sector.
  - Access to finance:
    - Remove obstacles to financial access, notably by tackling deficiencies in insolvency procedures and strengthening the role of the credit bureau.
  - Trade:
    - Tackle obstacles for regional integration and capitalize on access to the WAEMU and ECOWAS markets to facilitate export diversification.

### Targeted, industry-focused measures to address market failures
- Rationale: Coordination failures and learning externalities may preclude development of specialized skills, intermediate inputs, or infrastructure required for higher value-added activities.
- Examples of targeted interventions:
  - Development of a cashew nut-processing research and training center (authorities’ initiative).
  - Export promotion initiatives to ease informational frictions and help firms meet quality certification standards.
  - Public initiatives to coordinate agents along value chains and consolidate a country-origin brand for Côte d’Ivoire food exports.
- Design principles for targeted interventions:
  - Focus interventions on export-oriented industries (not individual firms).
  - Maintain competition in the sector.
  - Ensure transparency and proper accountability to prevent government capture.
  - Subject interventions to an appropriate cost-benefit test to ensure an adequate social rate of return.

*Source: COMTRADE; and IMF staff calculations.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1civea2022002.pdf_