## Government Revenue and Tax Composition Trends, 2007–24

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---

### A. Introduction and Policy Context
- Growth rebounded to 3.5 percent in 2024.
- Public debt was moderate at 43 percent of GDP.
- Debt service is projected to absorb about 17 percent of tax revenues over the next three years.
- Central government tax revenue reached 12.3 percent of GDP in 2024, compared to 11.5 percent a decade ago.
- Cameroon is currently assessed at high risk of debt distress; two key indicators—external debt service-to-revenue and external debt service-to-exports—exceed thresholds under the IMF’s baseline scenario.
- Objective: examine options to strengthen domestic revenue mobilization, analyze tax revenue potential, review fiscal cost and effectiveness of tax expenditures, and develop reform scenarios combining tax policy and administration reforms using cross-country benchmarking and stochastic frontier methods.

### B. Stylized Facts: Revenue Structure and Fiscal Space
- Revenue structure dominated by tax revenues; indirect taxes (primarily VAT and excise duties) form the largest share.
- Taxes on goods and services account for the bulk of tax revenue; PIT contributes a relatively small portion; CIT is significant but smaller than indirect taxes.
- Oil-related revenue (CIT from oil companies and SNH royalties) reached about 2 percent of GDP in 2024.
- Non-oil revenue remained relatively stable at 12–13 percent of GDP over time.
- Tax mix implications:
  - Heavy reliance on consumption taxes suggests scope to broaden the direct tax base.
  - Exemptions (notably in VAT and investment regimes) reduce the effective tax base and limit revenue productivity.
- Fiscal space constraints noted: without substantial tax collection increases, risks to financing infrastructure, education, and health.

### C. Tax Revenue Performance and Comparative Benchmarks
- Central-government tax-to-GDP ratio: about 12 percent of GDP.
  - Comparator averages: around 15 percent for Sub‑Saharan Africa (SSA) and 16 percent for lower‑middle‑income countries (LMICs).
- When local government revenues from decentralization are included, the tax-to-GDP ratio increases to around 14 percent of GDP (coverage note for consistency).
- Composition, 2024:
  - Taxes on goods and services: about 6 percent of GDP.
  - PIT: approximately 1 percent of GDP.
  - CIT: approximately 2.5 percent of GDP.
  - International trade taxes: about 13 percent of total tax revenue (below SSA average of 18 percent, above LMIC level of 11 percent).
- Income tax productivity:
  - CIT rate: 30 percent.
  - CIT productivity: about 0.08; medians: 0.10 for SSA and 0.12 for LMICs.
  - PIT productivity: around 0.03; peer medians: 0.06–0.07 for SSA and LMICs.
- VAT productivity:
  - VAT C-efficiency ratio: around 25 percent.
  - CEMAC median: comparable; SSA average: 23 percent; LMIC average: 52 percent.
  - High-performing examples: Zambia 47 percent, Tanzania 31 percent.

### D. Tax Administration: Achievements and Operational Challenges
- Recent reforms (2023–25 Tax System Modernization Plan; medium-term revenue mobilization strategy):
  - Mandatory e-filing, e-payment, and e-invoicing.
  - Digital tools: Harmony taxpayer management system; One-Time Password (OTP) authentication; E-Billing.
  - VAT filers rose from 14,000 to 22,000 in 2024.
  - Creation of a formal risk management committee and a three-year compliance plan.
  - Automated cross-checking of third-party data and mobile payment options.
- Operational challenges and indicators:
  - VAT filing compliance around 73 percent in 2024 (compared to over 90 percent for large taxpayers).
  - CIT and PIT compliance estimated to be lower than VAT compliance for large taxpayers.
  - Arrears older than 12 months represent a notable share of outstanding liabilities.
  - The 2024 government action plan targeted recovery of at least 15 percent of outstanding tax and customs arrears—starting with the largest 100 unpaid debts.
  - Previous SOE arrears clearance efforts yielded gains of up to 1.5 percent of GDP.
  - VAT refund processing remains largely manual, affecting liquidity and confidence.
  - Audit quality control mechanisms are underdeveloped, creating inconsistent enforcement.

### E. Implications and Areas for Reform
- Priorities to strengthen domestic revenue mobilization:
  - Broaden the tax base by shifting some reliance away from indirect taxes toward direct and property taxes.
  - Rationalize exemptions, especially in VAT and investment regimes, to expand the effective tax base.
  - Improve income tax productivity through taxpayer base broadening, curbing preferential regimes, and bolstering administrative capacity.
  - Continue modernization of tax administration (digitalization, compliance risk management, arrears recovery, VAT refund automation, and audit quality control).
- Expected benefits:
  - Even modest early gains can build momentum for deeper reforms.
  - Comprehensive efforts may deliver substantial and lasting fiscal benefits; scale and timing depend on effective implementation of the reform agenda.

---

### Tax expenditures in Cameroon: magnitude, composition, targeting, and reform options

### Magnitude and composition (2024)
- Total tax expenditures (2024 Tax Expenditures Report): 1.8 percent of GDP and 14.1 percent of non‑oil tax revenue.
- Composition (in percent of total tax expenditures):
  - VAT exemptions: 42.6
  - Customs duty waivers: 40.9
  - Excise reductions: 6.3
  - Corporate income tax incentives: 5.5
  - Personal income tax exemptions: 3.6
  - Registration fee exemptions: (listed in figure)

### Targeting and equity findings
- Only 5–6 percent of the forgone revenue from many VAT exemptions—especially on food—reaches the poorest households.
- More than 40 percent of the forgone revenue accrues to the richest households.
- Broad VAT exemptions often function as untargeted subsidies; targeted approaches (cash transfers or reduced VAT rates on essential goods) could deliver better equity at lower fiscal cost.
- Corporate tax incentives (including CIT holidays and free zone regimes) have shown mixed results; many beneficiary firms might have invested regardless of incentives.
- Recent policy changes introducing tax credits, allowances, rate reductions, and exemptions risk further narrowing the tax base if not tightly targeted, time‑bound, and systematically evaluated.

### Governance, transparency, and recent reforms
- Introduction of annual tax expenditure reports has enhanced transparency.
- Many exemptions have remained without regular review or assessment; some temporary measures have been extended.
- The 2013 Investment Incentives Law reform:
  - Eliminates CIT reductions in favor of tax credits and accelerated depreciation.
  - Limits the duration of incentives.
  - Clarifies eligibility and approval procedures.
  - Expected to reduce tax expenditures and improve administrative efficiency.

---

### Estimating tax revenue potential and efficiency gap

### Methodology
- Stochastic frontier framework estimated on a panel of countries over 2000–2024 using IMF (WEO October 2025), World Bank (WDI and Informal Economy Database (Elgin et al, 2021)), and Transparency International (CPI).

### Key estimates for Cameroon (2024)
- Tax potential estimate for Cameroon (2024): 18.1 percent of GDP.
- Cameroon’s gap to the tax frontier: 6 percentage points of GDP.
- Comparative context: SSA and LMIC median gaps are typically closer to 4 percentage points.
- Interpretation: most of the distance to the frontier reflects efficiency shortfalls (administration, compliance, policy design) rather than structural constraints.

### Stochastic frontier model main findings (model-level)
- Dominant source of cross-country differences: inefficiency dominates, with estimated γ = 0.995.
- Significant coefficients (Table highlights):
  - Final consumption expenditure (% of GDP): 0.006*** (0.002)
  - Broad money (% of GDP): -0.00005*** (0.000007)
  - Agriculture, value added (% of GDP): -0.03206*** (0.0032)
  - Constant: 3.11*** (0.175)
- Sample dimensions:
  - Observations: 2981
  - Number of groups: 138
- Inefficiency and variance parameters:
  - σ_u: 3.28***
  - σ_v: 0.22***
  - λ: 14.6***
  - γ: 0.995***

### Limitations and interpretive cautions
- Cross-country panel analysis limitations: data quality issues, measurement error, omitted variables, potential endogeneity.
- Mitigants: country and year effects, robustness checks; findings are indicative rather than definitive.
- Suggested future work: additional robustness checks and exploration of the broad money–tax revenue relationship.

---

### Policy levers: tax-policy and administration priorities

### VAT
- VAT accounts for over 40 percent of tax revenues.
- Issues: exemptions, complex rate structure, slow refunds.
- Suggested approaches:
  - Narrow VAT exemptions to a short list of basic food items.
  - Consider targeted support for vulnerable households (cash transfers).
  - Move toward a single standard rate.
  - Streamline refund process; complete rollout of mandatory e‑invoicing; expand interoperability and real‑time VAT monitoring.

### PIT and CIT
- PIT collections modest; structure can burden salaried workers; high standard deductions benefit higher earners.
- CIT is complex with multiple rates, special regimes, and generous incentives.
- Possible reforms:
  - Simplify PIT and CIT schedules.
  - Introduce a zero‑rate threshold for PIT; reduce number of PIT brackets.
  - Harmonize tax rates for capital and rental income (example unified rate: 15 percent).
  - Limit special regimes and tax holidays to priority sectors with sunset clauses and performance‑based criteria.
  - Consolidate incentives within the tax code.

### Excises and environmental taxes
- Current structure complex with multiple rates and exemptions.
- Options:
  - Increase rates on tobacco, alcohol, sugary drinks in line with WHO recommendations.
  - Introduce or strengthen carbon and environmental taxes.
  - Harmonize rates between domestic and imported goods; use digital tracking for excisable products.

### Property taxation
- Underdeveloped: narrow base, outdated valuations, constrained enforcement.
- Approaches:
  - Expand property cadaster; update valuation standards (satellite imaging and GIS technology).
  - Implement rental income withholding at source; strengthen enforcement.
  - Improve central–local coordination.

### Administration levers and compliance
- Digitalization progress: e‑filing and e‑payment near‑universal; e‑invoicing rollout in progress for large and medium taxpayers.
- Needed actions:
  - Improve system integration; invest in advanced data analytics; strengthen interoperability between tax and customs; integrate tax and customs data; improve taxpayer registry quality.
- Compliance strategies:
  - Segment taxpayer base by size and risk profile.
  - Expand Large and Medium Taxpayer Offices.
  - Implement a unique taxpayer identification number.
  - Develop compliance improvement plans for each segment.
  - For informal sector: simplified regimes with clear graduation paths; leverage mobile money and digital platforms; shift toward service‑oriented compliance.

### Phased reform roadmap and indicative revenue impacts
- Phase 1 — Quick Wins:
  - Focus: rationalize tax expenditures; accelerate digitalization (e‑invoicing expansion, system integration, real‑time monitoring); eliminate obsolete VAT exemptions and expired/temporary tax incentives.
  - Indicative revenue impact: about 0.5 percent of GDP.
- Phase 2 — Core Package / Medium‑term Reforms:
  - Focus: limit VAT exemptions to essential goods (CEMAC VAT Directive), advance PIT and CIT reforms, pilot property tax modernization.
  - Indicative additional revenue impact: around 2 percent of GDP.
- Phase 3 — Full MTRS / Comprehensive Reforms:
  - Focus: expand property tax nationwide, deploy advanced analytics, institutionalize best practices.
  - Indicative revenue impact over several years: potentially up to 3-5 percent of GDP.

### Risks, monitoring, and governance
- Risks: stakeholder resistance, reform fatigue, capacity constraints.
- Mitigants: proactive management, clear communication, transparency, consistent engagement, demonstration of tangible benefits.
- Suggested KPIs for monitoring: VAT C‑efficiency, CIT and PIT productivity, tax expenditure outturns, e‑filing and e‑invoicing coverage, arrears, liquidity.
- Governance: regular governance reviews and structured reporting; systematic evaluations of exemptions and incentives; clearly defined eligibility lists and beneficiary monitoring.

---

### Financial sector, sovereign exposure, NPLs, and public investment efficiency

### Sovereign exposure and NPLs
- Government-related assets rose from 2.3 percent in 2010 to 33 percent in 2021, then stabilized at about 30 percent.
- NPL ratio: rose from 14 percent in December 2020 to 15.2 percent in March 2025.
- NPL coverage by provision improved from 76.5 percent to 87 percent between December 2020 and March 2025.
- Caution: supervisory capacity constraints in CEMAC may result in measurement gaps and underreporting of credit risks.
- Policy implication: high and rising bank exposure to government-related assets, along with significant NPLs, may constrain lending to the private sector and pose risks to financial stability.

### Structural frictions and financial intermediation
- Concentration of credit in large firms and dominance of short-term lending impede SME financing and innovative projects.
- Consequences: high sovereign absorption of liquidity crowds out private investment; elevated NPLs amplify risk aversion and constrain credit supply; dynamics reinforce shallow financial development and low productivity.
- Required reforms: strengthen risk assessment frameworks; broaden credit information systems; diversify financing instruments to reorient financial intermediation toward productive sectors.

### Infrastructure and investment efficiency: indicators and gaps
- Overall infrastructure quality: Cameroon ranked 129th out of 186 countries in 2023.
- Electricity access: 68.2 percent of population in 2024; sample average 87.4 percent (shortfall of 19.2 percentage points).
- Roads and connectivity:
  - 20 percent of population within 2 kilometers of an all-season road (SSA average: 41 percent).
  - 22 percent of roads in good or fair condition.
- Digital connectivity:
  - Mobile cellular subscriptions exceed 90 per 100 people.
  - Fixed broadband penetration about 2.2 subscriptions per 100 people in 2023.
- Public investment and execution:
  - Public investment reached about 6 percent of GDP in 2018.
  - Budget execution rates averaged 89 percent between 2021 and 2025.
  - About 80 percent of the contraction in capex between 2018 and 2025 reflected lower execution of externally financed projects.
- Spending efficiency:
  - Cameroon’s efficiency gap relative to best-performing countries: about 41 percent (SSA average: 44 percent).
  - A 2018 World Bank report: costs of five major infrastructure projects in Cameroon were two to six times higher than comparable projects elsewhere.
  - Assessment of 20 major investments (2012–2020): roughly three quarters experienced delays of at least two years.

### Growth payoffs from closing gaps (empirical findings)
- Regression coefficients (Outcome: ln (GDP pc PPP)):
  - Financial institutions access: 0.545*** (0.157)
  - Financial institutions efficiency: 0.484** (0.194)
  - Electricity access (% of pop): 0.006*** (0.002)
  - Mobile cellular subscriptions (per 100 people): 0.001** (0.001)
  - Fixed broadband subscriptions (per 100 people): 0.007*** (0.002)
  - Number of economies: 88
- Estimated long-run income gains for Cameroon:
  - Closing electricity access gap alone associated with increase in income per capita of about 11 percent (Cameroon electricity access rate 19.2 percentage points below the sample average).
  - Narrowing the 0.31 shortfall in the financial institutions access index associated with long-run income gain of about 17 percent.
  - Jointly, improvements in electricity and financial access imply potential long-term income gains of around 28 percent.
- Conditional gap: actual income per capita in 2024 is about 6 percent below level predicted by observable fundamentals.

### Banking soundness and policy recommendations to reduce sovereign absorption
- Fiscal strategy to lower reliance on domestic banks for deficit financing and ease rollover risks.
- Diversify investor base for government securities toward non-bank actors such as insurers and pension funds; develop longer-term instruments and secondary markets.
- Recapitalization of banks and stronger regulatory oversight to bolster resilience and mitigate sovereign-bank linkages.
- Promote savings and long-term investment vehicles (longer-term insurance and pension products) to support risk-sharing and reduce dependence on short-term funding.

### Credit infrastructure, financial access, and SME support
- Finalize establishment of a credit bureau, SME balance sheet database, and payment incident registry.
- Modernize collateral registries and promote credit enhancement mechanisms.
- Accelerate deployment of financial platforms and digitalization of services.
- Promote financial literacy and consumer protection.
- Operationalize the SME collateral fund (Fonds de Garantie aux PME) and expand guarantee schemes.
- Reform State-owned financing institutions:
  - Transform Crédit Foncier du Cameroun (CFC) into a mortgage financing fund.
  - Convert the SME bank (BCPME) into a guarantee fund for SMEs.
- Streamline foreign exchange procedures to reduce delays and facilitate access to foreign currency.

### Public investment efficiency: priorities across stages
- Create fiscal space and improve budget execution:
  - Reprioritize toward capital spending by curbing inefficient spending and limiting exceptional spending procedures.
  - Strengthen cash planning and multiannual budgeting; ensure timely availability of counterpart funds for externally financed projects.
  - Enhance budget transparency and control of extrabudgetary spending.
- Strengthen public investment management:
  - Translate NDS30 into a prioritized investment strategy supported by a Medium-Term Expenditure Framework and a priority investment budget (BIP).
  - Operationalize the revised Maturation Decree (2025) with detailed guidelines on thresholds and requirements.
  - Streamline procurement processes and oversight mechanisms; clarify responsibilities among control bodies based on risk analysis.
- Enhance transparency and digitalization:
  - Consolidate investment project information through reliable databases; integrate physical and financial progress tracking.
  - Interconnect COLEPS (e-procurement system) with Pridesoft.
  - Leverage IT platforms for project appraisal and performance audits.
- Accelerate infrastructure development and maintenance:
  - Prioritize completion of ongoing energy and transport projects; ensure delivery of complementary infrastructure such as transmission lines.
  - Improve road connectivity and logistics performance; expand rural feeder roads.
  - Institutionalize maintenance budgeting and asset management systems.

### Conclusion: potential gains and priorities
- Cameroon can accelerate growth and living standards by addressing structural bottlenecks in finance and infrastructure.
- Reforms to deepen financial intermediation and strengthen public investment efficiency can unlock private-sector dynamism and enhance competitiveness.
- Empirical estimates suggest narrowing financial and infrastructure gaps could raise long-term income per capita by 28 to 45 percent.
- Priorities: strengthen banking soundness, modernize credit infrastructure, promote financial inclusion, improve public investment management across planning to maintenance, and implement complementary measures (land reform, predictable business environment).

*Source: CAMEROON, INTERNATIONAL MONETARY FUND*

### 1. Government Revenue and Tax Composition Trends, 2007–24 ________________________ 5

### 1. Government Revenue and Tax Composition Trends, 2007–24

### A. Introduction and Policy Context
- Growth rebounded to 3.5 percent in 2024.
- Public debt was moderate at 43 percent of GDP.
- Debt service is projected to absorb about 17 percent of tax revenues over the next three years.
- Central government tax revenue reached 12.3 percent of GDP in 2024, compared to 11.5 percent a decade ago.
- Cameroon is currently assessed at high risk of debt distress; two key indicators—external debt service-to-revenue and external debt service-to-exports—exceed thresholds under the IMF’s baseline scenario.
- Objective: examine options to strengthen domestic revenue mobilization, analyze tax revenue potential, review fiscal cost and effectiveness of tax expenditures, and develop reform scenarios combining tax policy and administration reforms using cross-country benchmarking and stochastic frontier methods.

### B. Stylized Facts: Revenue Structure and Fiscal Space
- Revenue structure dominated by tax revenues; indirect taxes (primarily VAT and excise duties) form the largest share.
- Taxes on goods and services account for the bulk of tax revenue; PIT contributes a relatively small portion; CIT is significant but smaller than indirect taxes.
- Oil-related revenue (CIT from oil companies and SNH royalties) reached about 2 percent of GDP in 2024.
- Non-oil revenue remained relatively stable at 12–13 percent of GDP over time.
- Tax mix implications:
  - Heavy reliance on consumption taxes suggests scope to broaden the direct tax base.
  - Exemptions (notably in VAT and investment regimes) reduce the effective tax base and limit revenue productivity.
- Fiscal space constraints noted: without substantial tax collection increases, risks to financing infrastructure, education, and health.

### C. Tax Revenue Performance and Comparative Benchmarks
- Cameroon’s central-government tax-to-GDP ratio: about 12 percent of GDP.
  - Comparator averages: around 15 percent for Sub‑Saharan Africa (SSA) and 16 percent for lower‑middle‑income countries (LMICs).
- When local government revenues from decentralization are included, the tax-to-GDP ratio increases to around 14 percent of GDP (coverage note for consistency).
- Composition, 2024:
  - Taxes on goods and services: about 6 percent of GDP.
  - PIT: approximately 1 percent of GDP.
  - CIT: approximately 2.5 percent of GDP.
  - International trade taxes: about 13 percent of total tax revenue (below SSA average of 18 percent, above LMIC level of 11 percent).
- Income tax productivity:
  - CIT rate: 30 percent.
  - CIT productivity: about 0.08 (CIT revenue divided by product of CIT rate and GDP); medians: 0.10 for SSA and 0.12 for LMICs.
  - PIT productivity: around 0.03; peer medians: 0.06–0.07 for SSA and LMICs.
- VAT productivity:
  - VAT C-efficiency ratio: around 25 percent.
  - CEMAC median: comparable; SSA average: 23 percent; LMIC average: 52 percent.
  - High-performing examples: Zambia 47 percent, Tanzania 31 percent.

### D. Tax Administration: Achievements and Operational Challenges
- Reforms under the 2023–25 Tax System Modernization Plan and the authorities’ medium-term revenue mobilization strategy include:
  - Mandatory e-filing, e-payment, and e-invoicing.
  - Digital tools: Harmony taxpayer management system; One-Time Password (OTP) authentication; E-Billing.
  - Expanded taxpayer registry: VAT filers rose from 14,000 to 22,000 in 2024.
  - Creation of a formal risk management committee and a three-year compliance plan.
  - Automated cross-checking of third-party data and mobile payment options.
- Operational challenges:
  - VAT filing compliance around 73 percent in 2024 (compared to over 90 percent for large taxpayers).
  - CIT and PIT compliance estimated to be lower than VAT compliance for large taxpayers.
  - International best practice typically targets compliance rates above 90 percent across major tax types.
  - Arrears older than 12 months represent a notable share of outstanding liabilities.
  - The 2024 government action plan targeted recovery of at least 15 percent of outstanding tax and customs arrears—starting with the largest 100 unpaid debts.
  - Previous SOE arrears clearance efforts yielded gains of up to 1.5 percent of GDP.
  - VAT refund processing remains largely manual, affecting liquidity and confidence.
  - Audit quality control mechanisms are underdeveloped, creating inconsistent enforcement.

### E. Implications and Areas for Reform (as identified in the text)
- Priorities to strengthen domestic revenue mobilization:
  - Broaden the tax base by shifting some reliance away from indirect taxes toward direct and property taxes.
  - Rationalize exemptions, especially in VAT and investment regimes, to expand the effective tax base.
  - Improve income tax productivity through taxpayer base broadening, curbing preferential regimes, and bolstering administrative capacity.
  - Continue modernization of tax administration (digitalization, compliance risk management, arrears recovery, VAT refund automation, and audit quality control).
- Expected benefits:
  - Even modest early gains can build momentum for deeper reforms.
  - Comprehensive efforts may deliver substantial and lasting fiscal benefits; scale and timing depend on effective implementation of the reform agenda.

*Prepared by Bahrom Shukurov, Islom Urolov, and Céline Thévenot. March 9, 2026.*

### 14. Tax expenditures in Cameroon aim to achieve important policy objectives, but their

### 14. Tax expenditures in Cameroon aim to achieve important policy objectives, but their

### Tax expenditures: magnitude, composition, and targeting
- Total tax expenditures (2024 Tax Expenditures Report): 1.8 percent of GDP and 14.1 percent of non‑oil tax revenue.
- Composition (in percent of total tax expenditures):
  - VAT exemptions: 42.6
  - Customs duty waivers: 40.9
  - Excise reductions: 6.3
  - Corporate income tax incentives: 5.5
  - Personal income tax exemptions: 3.6
  - Registration fee exemptions: (listed in figure)
- Targeting and equity findings:
  - Only 5–6 percent of the forgone revenue from many VAT exemptions—especially on food—reaches the poorest households.
  - More than 40 percent of the forgone revenue accrues to the richest households.
  - Broad VAT exemptions often function as untargeted subsidies; targeted approaches (cash transfers or reduced VAT rates on essential goods) could deliver better equity at lower fiscal cost.
- Corporate tax incentives (including CIT holidays and free zone regimes) have shown mixed results; evaluations suggest many beneficiary firms might have invested regardless of incentives.
- Recent policy changes introducing tax credits, allowances, rate reductions, and exemptions risk further narrowing the tax base if not tightly targeted, time‑bound, and systematically evaluated.

### Governance, transparency, and recent reforms
- Introduction of annual tax expenditure reports has enhanced transparency.
- Many exemptions have remained without regular review or assessment; some temporary measures have been extended.
- The 2013 Investment Incentives Law reform:
  - Eliminates CIT reductions in favor of tax credits and accelerated depreciation.
  - Limits the duration of incentives.
  - Clarifies eligibility and approval procedures.
  - Expected to reduce tax expenditures and improve administrative efficiency.

### Estimating tax revenue potential and efficiency gap
- Methodology: stochastic frontier framework estimated on a panel of countries over 2000–2024 using IMF (WEO October 2025), World Bank (WDI and Informal Economy Database (Elgin et al, 2021)), and Transparency International (CPI).
- Tax potential estimate for Cameroon (2024): 18.1 percent of GDP.
- Cameroon’s gap to the tax frontier: 6 percentage points of GDP.
- Comparative context: SSA and LMIC median gaps are typically closer to 4 percentage points.
- Interpretation: most of the distance to the frontier reflects efficiency shortfalls (administration, compliance, policy design) rather than structural constraints.

### Policy levers: tax-policy options and priorities
- VAT:
  - VAT accounts for over 40 percent of tax revenues.
  - Issues: exemptions, complex rate structure, slow refunds.
  - Suggested approaches: narrow VAT exemptions to a short list of basic food items; consider targeted support for vulnerable households (cash transfers); move toward a single standard rate; streamline refund process; complete rollout of mandatory e‑invoicing and expand interoperability and real‑time VAT monitoring.
- Personal Income Tax (PIT) and Corporate Income Tax (CIT):
  - PIT collections modest; structure can burden salaried workers; high standard deductions benefit higher earners.
  - CIT is complex with multiple rates, special regimes, and generous incentives.
  - Possible reforms: simplify PIT and CIT schedules; introduce a zero‑rate threshold for PIT; reduce number of PIT brackets; harmonize tax rates for capital and rental income (example unified rate: 15 percent); limit special regimes and tax holidays to priority sectors with sunset clauses and performance‑based criteria; consolidate incentives within the tax code.
- Excises:
  - Current structure complex with multiple rates and exemptions.
  - Options: align excise policy with health and environmental objectives (increase rates on tobacco, alcohol, sugary drinks in line with WHO recommendations); introduce or strengthen carbon and environmental taxes; harmonize rates between domestic and imported goods; use digital tracking for excisable products.
- Property taxation:
  - Underdeveloped tax with narrow base, outdated valuations, constrained enforcement.
  - Approaches: expand property cadaster, update valuation standards (satellite imaging and GIS technology), implement rental income withholding at source, strengthen enforcement, improve central–local coordination.
- Other developments: taxing non‑resident digital firms, broadening VAT bases, strengthening excises, expanding property taxation, and introducing environmental levies.

### Administration levers: modernization and compliance
- Digitalization progress: e‑filing and e‑payment near‑universal adoption; e‑invoicing rollout in progress for large and medium taxpayers.
- Needed actions: improve system integration, invest in advanced data analytics, strengthen interoperability between tax and customs, integrate tax and customs data, improve taxpayer registry quality.
- Compliance strategies:
  - Segment taxpayer base by size and risk profile.
  - Expand Large and Medium Taxpayer Offices.
  - Implement a unique taxpayer identification number.
  - Develop compliance improvement plans for each segment.
  - For informal sector: simplified regimes with clear graduation paths; leverage mobile money and digital platforms; shift toward service‑oriented compliance to encourage formalization.

### Phased reform roadmap and indicative revenue impacts
- Phase 1 — Quick Wins:
  - Focus: rationalize tax expenditures; accelerate digitalization (e‑invoicing expansion, system integration, real‑time monitoring); eliminate obsolete VAT exemptions and expired/temporary tax incentives.
  - Indicative revenue impact: about 0.5 percent of GDP.
- Phase 2 — Core Package / Medium‑term Reforms:
  - Focus: limit VAT exemptions to essential goods (CEMAC VAT Directive), advance PIT and CIT reforms, pilot property tax modernization.
  - Indicative additional revenue impact: around 2 percent of GDP.
- Phase 3 — Full MTRS / Comprehensive Reforms:
  - Focus: expand property tax nationwide, deploy advanced analytics, institutionalize best practices.
  - Indicative revenue impact over several years: potentially up to 3-5 percent of GDP.

### Risks, monitoring, and implementation considerations
- Risks to implementation: stakeholder resistance, reform fatigue, capacity constraints.
- Mitigants: proactive management, clear communication, transparency, consistent engagement, demonstration of tangible benefits.
- Suggested KPIs for monitoring: VAT C‑efficiency, CIT and PIT productivity, tax expenditure outturns, e‑filing and e‑invoicing coverage, arrears, liquidity.
- Governance: regular governance reviews and structured reporting; systematic evaluations of exemptions and incentives; clearly defined eligibility lists and beneficiary monitoring.

### Conclusion: outlook and priorities
- Cameroon faces persistent efficiency gaps but significant opportunities to raise domestic revenue sustainably and equitably.
- Priorities: rationalize tax expenditures, broaden the tax base, modernize tax administration, sequence reforms from quick wins to comprehensive modernization, and maintain strong governance and stakeholder engagement to realize revenue gains.

*Source: CAMEROON, INTERNATIONAL MONETARY FUND*

### Annex I. Estimating Tax Potential

### Annex I. Estimating Tax Potential

### Stochastic frontier model specification
- Functional form:
  - ln(TaxRev_it) = 훽0 + 훽1 ln(X_it) + v_it − u_it
- Definitions:
  - ln(TaxRev_it): natural logarithm of the tax-to-GDP ratio in country i and year t.
  - X_it: vector of explanatory variables including the share of agriculture in value added, broad money, final consumption expenditure, inflation, and natural resource rents.
  - v_it: two-sided symmetric error term, v_it ~ N(0, σ_v^2).
  - u_it: one-sided non-negative inefficiency term representing shortfalls in tax collection, u_it ~ N+(μ, σ_u^2) (truncated-normal).
- Estimation features:
  - True random effects to allow time-invariant country heterogeneity uncorrelated with explanatory variables.
  - Standard errors clustered at the country level to account for serial correlation.
  - Year dummy variables included to control for common global shocks and trends.

### Tax potential and tax effort metrics
- Interpretation:
  - The stochastic frontier represents the maximum attainable tax-to-GDP ratio given structural characteristics.
  - Predicted frontier values provide estimates of tax potential.
- Tax Effort:
  - Tax Effort_it = exp(−u_it)
  - Values closer to 1 indicate higher efficiency in tax collection relative to potential.

### Main empirical findings (model-level)
- Structural relationships:
  - Higher share of agriculture in value added is associated with lower tax revenue (reflects informality and exemptions).
  - Inflation is negatively associated with tax revenue (real base erosion, administrative lags, amplified compliance challenges).
  - Final consumption expenditure is positively and significantly associated with tax revenue (importance of consumption-based taxation such as VAT).
  - Broad money (% of GDP) shows a negative coefficient in the sample; interpreted cautiously as reflecting sample characteristics rather than a definitive structural relationship.
- Dominant source of cross-country differences:
  - Inefficiency dominates cross-country differences in tax performance, with estimated γ = 0.995, indicating most deviations from the frontier are attributable to revenue-collection inefficiencies rather than underlying fundamentals.
- Caveat on broad money:
  - Broad money may reflect liquidity or monetary expansion and may not capture quality/depth of financial intermediation; robustness checks using alternative proxies (e.g., private-sector credit) and specifications yield similar qualitative results but further research is warranted.

### Table 1: Stochastic Frontier Model Estimates (Cameroon)
- Sample dimensions:
  - Observations: 2981
  - Number of groups: 138
- Estimated coefficients and standard errors (note significance levels in table):
  - Final consumption expenditure (% of GDP): 0.006*** (0.002)
  - Inflation, consumer prices (annual %): -0.0009 (0.001)
  - Broad money (% of GDP): -0.00005*** (0.000007)
  - Agriculture, value added (% of GDP): -0.03206*** (0.0032)
  - Total natural resources rents (% of GDP): 0.00327 (0.0059)
  - Constant: 3.11*** (0.175)
- Year dummies (selected entries reported in table):
  - Year dummy_2: -0.083** (0.033)
  - Year dummy_3: -0.088* (0.046)
  - Year dummy_4: -0.078** (0.038)
  - Year dummy_5: -0.095** (0.038)
  - Year dummy_7: -0.046 (0.041)
  - Year dummy_10: -0.012*** (0.042)
  - Year dummy_11: -0.095** (0.042)
  - Year dummy_17: -0.094** (0.046)
  - Year dummy_19: -0.084* (0.046)
  - Year dummy_21: -0.091** (0.045)
  - (Additional year dummies up to Year dummy_25 are reported in the table with coefficients and standard errors.)
- Inefficiency and variance parameters:
  - σ_u: 3.28*** 
  - σ_v: 0.22*** 
  - λ: 14.6*** 
  - γ: 0.995***

### Limitations and interpretive cautions
- Cross-country panel analysis limitations:
  - Potential influence of data quality issues, measurement error, and omitted variables not captured by the model.
  - Potential endogeneity between some explanatory variables and tax revenue cannot be fully ruled out.
- Mitigating steps reported:
  - Use of country and year effects and robustness checks help mitigate concerns, but findings are indicative rather than definitive.
- Suggested future work:
  - Further exploration of limitations and additional robustness checks to disentangle observed associations (for example, the broad money–tax revenue relationship).

*Annex I. Estimating Tax Potential (from the provided IMF content).*

### 9.      Sovereign exposure remains significant, and NPLs stand at relatively high levels.

### 9. Sovereign exposure remains significant, and NPLs stand at relatively high levels.

### Sovereign exposure and non-performing loans (NPLs)
- The proportion of government-related assets—primarily government securities—increased from 2.3 percent in 2010 to 33 percent in 2021, then stabilizing at about 30 percent.
- The proportion of non-performing loans (NPLs) in gross loans rose from 14 percent in December 2020 to 15.2 percent in March 2025.
- NPL coverage by provision improved from 76.5 percent to 87 percent between December 2020 and March 2025.
- Caution: NPL indicators in the CEMAC region should be interpreted with caution, as supervisory capacity constraints—especially in loan classification and provisioning—may result in measurement gaps and underreporting of credit risks.
- Policy implication: A high and rising level of bank exposure to government-related assets, along with significant non-performing loans, may impose constraints on lending to the private sector and pose ongoing risks to financial stability.

### Structural frictions weakening financial intermediation
- Persistent concentration of credit in large firms and dominance of short-term lending reflect banks’ inability to adequately assess borrower risk and manage long-term exposures.
- Consequences:
  - SMEs and innovative projects are left without financing to scale.
  - High sovereign absorption of liquidity crowds out private investment.
  - Elevated NPLs amplify risk aversion and constrain credit supply.
  - These dynamics reinforce shallow financial development and perpetuate low productivity.
- Required reforms (to be detailed in Section E): strengthen risk assessment frameworks, broaden credit information systems, diversify financing instruments to reorient financial intermediation toward productive sectors.

### Infrastructure and investment efficiency: key constraints and data
- Overall infrastructure quality:
  - Cameroon ranked 129th out of 186 countries in 2023 on overall infrastructure quality.
  - Comparator benchmarks: Kenya 56th and Indonesia 27th in 2023.
- Electricity:
  - In 2024, 68.2 percent of Cameroon’s population had access to electricity, compared with a sample average of 87.4 percent (a shortfall of 19.2 percentage points).
  - Substantial investments (Memve'ele and Nachtigal hydropower) expanded generation capacity, but transmission and supporting infrastructure deficiencies limit effective integration.
- Roads and connectivity:
  - Only 20 percent of the population lives within 2 kilometers of an all-season road, compared with the Sub-Saharan Africa average of 41 percent.
  - Only 22 percent of roads are in good or fair condition.
  - Logistics performance along key corridors to Chad and the Central African Republic is characterized by high transport costs and long transit times.
- Digital connectivity:
  - Mobile cellular subscriptions now exceed 90 per 100 people.
  - Peer economies reached about 120 subscriptions per 100 people in 2023.
  - Fixed broadband penetration about 2.2 subscriptions per 100 people in 2023.
  - Broadband infrastructure concentrated in major urban centers; high costs, limited backbone coverage, and reliability challenges persist.
- Public investment and execution:
  - Public investment increased during GESP, reaching about 6 percent of GDP in 2018.
  - Between 2021 and 2025, budget execution rates averaged 89 percent.
  - Between 2018 and 2025, about 80 percent of the contraction in capex reflected lower execution of externally financed projects.
  - Implementation bottlenecks: complex procedural requirements for external finance, lengthy approval and disbursement timelines, limited counterpart funds, capacity constraints in project management units, slow land acquisition and resettlement processes, and security challenges.
- Spending efficiency and project outcomes:
  - Cameroon’s efficiency gap relative to the best-performing countries is about 41 percent, compared with the Sub-Saharan Africa average of 44 percent.
  - A 2018 World Bank report found the cost of five major infrastructure projects in Cameroon was two to six times higher than for comparable projects elsewhere.
  - An assessment of 20 major investments implemented between 2012 and 2020 showed that roughly three quarters experienced delays of at least two years.

### Growth payoffs from financial and infrastructure improvements (empirical findings)
- Empirical approach:
  - Panel of 88 economies over 1995–2020 (Annex I); country-fixed-effects model with five-year averages for infrastructure and financial development variables; robust standard errors clustered at the country level.
  - Controls include human capital (lagged five years), demographics, trade openness, terms of trade, inflation (lagged one year), geography and natural resource indicators, and conflict dummies.
- Key regression coefficients (Outcome: ln (GDP pc PPP)):
  - Financial institutions access: 0.545*** (0.157)
  - Financial institutions efficiency: 0.484** (0.194)
  - Electricity access (% of pop): 0.006*** (0.002)
  - Mobile cellular subscriptions (per 100 people): 0.001** (0.001)
  - Fixed broadband subscriptions (per 100 people): 0.007*** (0.002)
  - Number of economies: 88
- Estimated long-run income gains for Cameroon from closing gaps:
  - Closing the electricity access gap alone associated with an increase in income per capita of about 11 percent (Cameroon electricity access rate 19.2 percentage points below the sample average).
  - Narrowing the 0.31 shortfall in the financial institutions access index associated with a long-run income gain of about 17 percent.
  - Jointly, improvements in electricity and financial access imply potential long-term income gains of around 28 percent.
- Conditional gap:
  - Cameroon’s actual income per capita in 2024 is about 6 percent below the level predicted by observable fundamentals, reflecting residual efficiency constraints (policy implementation, regulatory effectiveness, governance, resource allocation).
- Policy implication:
  - Realizing long-term income gains depends on implementation capacity; a dual reform agenda is needed: strengthen financial sector access and efficiency, accelerate infrastructure development, and address institutional and operational bottlenecks so higher inputs translate into durable income gains.

*Source: IMF staff calculations and analysis as presented in the chapter.*

### 1. Strengthen Banking Soundness and Reduce Sovereign Absorption

### 1. Strengthen Banking Soundness and Reduce Sovereign Absorption

### Banking soundness and sovereign exposure
- High sovereign exposure and elevated NPLs constrain banks’ ability to lend to the private sector.
- Reducing these pressures calls for:
  - Fiscal strategy to lower reliance on domestic banks for deficit financing and ease rollover risks.
  - Diversification of the investor base for government securities toward non-bank actors such as insurers and pension funds, complemented by development of longer-term instruments and secondary markets.
  - Recapitalization of banks and stronger regulatory oversight to bolster resilience and mitigate sovereign-bank linkages, including meeting regional financing needs within CEMAC.
  - Promoting savings and long-term investment vehicles such as longer-term insurance and pension products to support risk-sharing and reduce dependence on short-term funding.

### Improve Risk Assessment and Credit Infrastructure
- Problem: dominance of short-term lending and concentration of credit in large firms due to banks’ limited ability to evaluate SME risk and manage long-term exposures.
- Key measures:
  - Finalize the establishment of a credit bureau, SME balance sheet database, and payment incident registry to improve transparency and reduce information asymmetries, helping curb NPLs and strengthen financial stability.
  - Modernize collateral registries and promote credit enhancement mechanisms, enabling SMEs to access longer-term financing.
  - Accelerate deployment of financial platforms and digitalization of services to lower transaction costs and broaden outreach.

### Expand Financial Access and Inclusion
- Demand-side reforms are critical; financial access is a key channel through which financial development supports growth.
- Cameroon’s financial inclusion strategy (2023–2027) provides an important foundation; priorities emphasize implementation gaps and complementary measures:
  - Promote financial literacy and consumer protection, particularly for SMEs, micro-enterprises and individuals.
  - Support innovation and digital finance, including mobile banking and fintech solutions, to reach rural and informal sectors.
  - Develop alternative financing channels beyond banks, such as leasing, factoring, and venture capital, to diversify sources of credit.

### Targeted Support for SMEs
- SMEs are central to private-sector dynamism and a more inclusive growth trajectory but face structural barriers to finance.
- Policy priorities:
  - Operationalize the SME collateral fund (Fonds de Garantie aux PME) and expand guarantee schemes.
  - Strengthen SME–large firm linkages through regulations on payment deadlines and subcontracting practices.
  - Encourage supplier credit and diaspora financing, as outlined in the SND-30 roadmap, to mobilize additional resources.

### Institutional and Operational Reforms
- Reform State-owned financing institutions to make public intervention more effective and reduce fiscal risks:
  - Transform Crédit Foncier du Cameroun (CFC) into a mortgage financing fund.
  - Convert the SME bank (BCPME) into a guarantee fund for SMEs.
- Streamline foreign exchange procedures to reduce delays and facilitate access to foreign currency for businesses in need.
- Effective implementation of regulation-related measures will require close coordination with regional institutions responsible for banking regulation and supervision, reflecting Cameroon’s membership in the CEMAC monetary union.

### Policy recommendations summary (banking and finance)
- Strengthen banking soundness via recapitalization and regulatory oversight.
- Reduce sovereign absorption by diversifying government securities investors and developing longer-term instruments and secondary markets.
- Improve credit information infrastructure (credit bureau, SME balance sheet database, payment incident registry).
- Promote financial inclusion, digital finance, and alternative financing channels.
- Reform State-owned financing institutions and streamline FX procedures.

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### Policy Recommendations to Boost Public Investment Efficiency

### 1. Create Fiscal Space and Improve Budget Execution
- Problem: Persistent under-execution of capital budgets and spending overruns in current expenditure crowd out resources for investment.
- Key measures:
  - Reprioritize budget allocations toward capital spending by curbing inefficient spending and limiting exceptional spending procedures.
  - Strengthen cash planning and multiannual budgeting to reinforce cash management and ensure timely availability of counterpart funds to optimize externally financed projects.
  - Enhance budget transparency and control of extrabudgetary spending to safeguard fiscal discipline and maintain space for priority infrastructure.

### 2. Strengthen Public Investment Management Across All Stages
- Objective: improve planning, maturation, implementation and monitoring and evaluation.
- Priorities:
  - Translate the National Development Strategy (NDS30) into a prioritized investment strategy, supported by a Medium-Term Expenditure Framework and a clear expenditure trajectory. This 2020 PIMA mission recommendation involves preparing a priority investment budget (BIP) made up of key projects, estimating their costs, and prioritizing them within existing budgetary instruments.
  - Operationalize the revised Maturation Decree (2025) by issuing detailed guidelines on thresholds and requirements for small, medium, and mega projects. The publication of this decree marked a significant improvement for the maturation stage.
  - Streamline procurement processes and oversight mechanisms, reducing duplication and clarifying responsibilities among control bodies based on risk analysis. With strong guidelines of the Maturation Decree, the rules for coordination of large and mega projects could be further clarified. Reviewing and streamlining regulations, processes, and stakeholders can help to reduce delays, costs, and management and budgetary risks at every stage of public investment management, especially those related to public procurement.

### 3. Enhance Transparency and Digitalization to Tackle Bottlenecks in Execution
- Actions:
  - Consolidate investment project information through reliable databases and integrate physical and financial progress tracking. The database on investments projects implemented in 2019 could help in this direction and strengthen the link with budgetary process.
  - Interconnect COLEPS (e-procurement system) with Pridesoft to strengthen transparency in tender publication, contract awards, and execution.
  - Leverage IT platforms for project appraisal and performance audits to ensure cost savings and accountability.

### 4. Accelerate Infrastructure Development and Maintenance
- Infrastructure gaps in electricity, roads, and digital connectivity remain binding constraints on competitiveness.
- Policy actions:
  - Prioritize completion of ongoing energy and transport projects, ensuring timely delivery of complementary infrastructure such as transmission lines.
  - Improve road connectivity and logistics performance, particularly along regional corridors, while expanding rural access through feeder roads.
  - Institutionalize maintenance budgeting and asset management systems to safeguard the durability of public investments.

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### Conclusion and Potential Gains
- Cameroon has an opportunity to accelerate growth and improve living standards by addressing structural bottlenecks in finance and infrastructure.
- Reforms to deepen financial intermediation and strengthen public investment efficiency can unlock private-sector dynamism and enhance competitiveness.
- Expanding access to credit, improving risk assessment, and reducing sovereign absorption of liquidity will enable firms to invest and innovate.
- Closing infrastructure gaps and institutionalizing efficient investment processes will reduce costs and improve connectivity.
- Empirical estimates suggest that narrowing financial and infrastructure gaps could raise long-term income per capita by 28 to 45 percent.
- Cameroon’s income remains below the level implied by its fundamentals, indicating that better efficiency and governance could deliver higher returns.
- Priorities include strengthening banking soundness, modernizing credit infrastructure, promoting financial inclusion, and improving public investment management across all stages—from planning to execution and maintenance. Complementary measures such as land reform and a more predictable business environment will further amplify the impact.

*Source: 1. Strengthen Banking Soundness and Reduce Sovereign Absorption (PDF chapter).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1cmrea2026002-source-pdf.pdf_