## _cr0946

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---

### Introduction
- Since joining the Franc Zone in 1979, Comoros has operated a conventional peg to the French franc and the euro and retains its own currency and central bank while following safeguards on monetary financing of government financial operations.
- Recent shocks and policy environment:
  - Trend decline in the world price of vanilla, Comoros’s main export.
  - Unprecedented increases in international food and petroleum prices.
  - Surge in remittances and steady real appreciation of the euro-pegged national currency.
  - Constant political instability and dilapidated infrastructure have constrained institutional capacity and private investment.
- Key summary findings:
  - At end-2007 the real effective exchange rate (REER) was broadly in line with its equilibrium value as determined by economic fundamentals.
  - A substantial narrowing of the underlying current account deficit—in the range of 8–12 percent of GDP—may have been needed at end-2007 to ensure consistency with the norm current account deficit, requiring a real depreciation of the exchange rate of about 4–7 percent.
  - Comoros fares poorly on structural competitiveness grounds compared to other low-income small states in the region and within the Franc Zone, underscoring the need for wide-ranging structural reforms.
- Performance metrics:
  - Real GDP growth averaged 2.1 percent for 2000–07, and per capita income has steadily declined.
  - Reliable data are available only for the period starting in 1985 and mostly on an annual basis; the empirical analysis uses 28 yearly observations for 1980–2007.

### External sector developments and vulnerabilities
- Balance of payments features (1991–2007):
  - Large and persistent trade deficits (goods and nonfactor services) averaging 21 percent of GDP annually.
  - Remittances amounted to more than 15 percent of GDP at the end of 2007.
  - Public transfers had gradually declined.
  - The current account deficit averaged 7 percent of GDP during the period.
  - The capital and financial account recorded a small surplus averaging 3.2 percent of GDP a year.
  - Official transfers offset large external debt repayment obligations and negative private capital inflows, keeping the financial account negative throughout the period.
  - International reserves have grown an average ¾ percent of GDP a year since 1991, reaching the equivalent of 7 months of imports by end-2007.
  - Despite comfortable reserves, external debt repayment obligations remain sizable and frequently unmet, causing accumulation of large external payments arrears.
- Vulnerabilities and sustainability:
  - The trade balance deficit is financed primarily by remittances, grants, and loans.
  - Sizable external debt obligations cannot be honored, producing unsustainable net foreign liabilities that appear impossible to address without debt relief under the HIPC Initiative and the MDRI.

### Evolution of REER and competitiveness indicators
- Price and volume developments (2000–07 and 2002–07):
  - During 2002–07 Comoros’s exports as a share of world exports declined by 50 percent.
  - Export volume shrank by 27 percent during 2002–07.
  - The CPI-based REER appreciated by 14 percent during 2002–07 (29 percent since 2000).
  - The internal terms of trade (Pd/Pm) declined substantially as prices of imported goods increased faster than prices of domestic goods.
  - Membership in the Franc Zone anchored price stability relative to many SSA fragile countries, but nominal appreciation of the Comorian Franc has been driven by strengthening of the euro vis-à-vis the U.S. dollar.
- Structural competitiveness:
  - Comoros has experienced the highest real currency appreciation since the 1994 devaluation within the Franc Zone and SSA fragile countries.
  - Structural indicators point to poor performance relative to other low-income small states and Franc Zone peers, highlighting the need for broad structural reforms to improve export performance and private sector activity.

### Empirical approaches and methodology
- Approaches applied to estimate equilibrium REER (ERER) and assess external competitiveness:
  - Behavioral single-equation equilibrium exchange rate approach (BEER-SE).
  - Macroeconomic balance approach (FEER-MB).
  - External sustainability approach (ESA).
- BEER-SE estimation details:
  - ARDL modeling used; sample comprises 28 yearly observations for 1980–2007.
  - Fundamentals included: terms of trade (TOT), trade openness (OPEN), total factor productivity (TFP, proxied by real per capita GDP relative to trading partners), and government consumption (GOV).
- Long-run equilibrium equation (Equation 1) specifics:
  - ARDL lag structure: (1,4,4,3,4) selected by the Akaike Information Criteria (AIC).
  - Robustness checks: alternative ARDL specifications and Johansen VECM led to similar conclusions.
  - In Equation 1: t-stats shown in square brackets; an asterisk (*) denotes equilibrium.

### Key quantitative findings and implications
- BEER-SE outcomes:
  - All estimated coefficients exhibit the expected sign; only the terms of trade variable is statistically significant.
  - Economic interpretation: REER appreciated with improved terms of trade, productivity, and higher openness; REER depreciated with increases in government consumption.
  - At end-2007: REER slightly undervalued but close to its equilibrium value; equilibrium REER has depreciated since 2003 as external imbalances widened while actual REER appreciated.
- FEER-MB and CA norm estimation (Imam and Minoiu (2008) panel results):
  - Six CA norms estimated using three panel estimators across two samples (full sample 140 countries, 1980–2005; LIC sample 35 countries).
  - Equation 2 (fixed effects, LIC sample, norm 4) reports the country-specific fixed effect for Comoros as the scalar –4.9.
  - Time coverage for estimation: 1980,...,2005; projection: 2007,...,2013.
  - Time-varying fundamentals included: FISC, NFA, RELGDP, GROWTH, POP.
  - Selected panel coefficients (natural logarithms; robust standard errors in parentheses):
    - Overall Budget balance (cash basis)/GDP: 0.377*** (Full sample, Fixed effects) and 0.557*** (LIC sample, Fixed effects)
    - Net foreign assets/GDP: 0.024*** (Full sample, Fixed effects) and 0.056** (LIC sample, Fixed effects)
    - Relative income: -0.054* (Full sample, Fixed effects) and -0.674*** (LIC sample, Fixed effects)
    - Per capita GDP growth: -0.093*** (Full sample, Fixed effects) and -0.207*** (LIC sample, Fixed effects)
    - Population growth: -0.403** (Full sample, Fixed effects) and -0.454* (LIC sample, Fixed effects)
    - Constant (country-specific for Comoros under fixed effect): -4.89***
- Interpretation of CA elasticities (panel results):
  - A 1 percent increase in the overall fiscal balance-to-GDP ratio predicts an improvement in the current account of 0.5 percentage point of GDP.
  - A higher NFA/GDP position is associated with a higher CA surplus; coefficient magnitude about 0.05 percent of GDP (per 1 percent change).
  - Raising income by 1 percentage point relative to US income worsens the CA by 0.7 percent (LIC sample).
  - Higher per capita growth causes CA to deteriorate by 0.2 percentage point (LIC sample).
  - An increase in population growth rate by 1 percentage point is associated with a deterioration of the CA balance by 0.5 percentage point of GDP.

### Trade and CA elasticity estimates for Comoros
- Trade elasticities estimated using OLS and ECM for 1985–2007.
- Main elasticities (OLS specification):
  - Import income elasticity = 2.16**
  - Export price elasticity = -1.14**
  - Import price elasticity = -1.36**
- ECM specification yields lower elasticities (e.g., export price -0.66*; import price -1.2**).
- Using period average ratios (imports = 39, exports = 17) and OLS price elasticities:
  - Mη (imports price elasticity) = -1.14
  - Xη (exports price elasticity) = -1.36
  - Estimated elasticity of the current account to the REER: CAη = 0.61
    - Implication: a depreciation of 1.6 percent of the REER would be needed to improve the Comoros current account by 1 percent (OLS).
  - Using ECM, CAη = 0.45, implying a depreciation of 2.2 percent in the REER would be needed to improve the CA by 1 percent.

### Underlying CA, CA norm, and required adjustment (2007–13 projections)
- Methodology:
  - Underlying CA balance assumes projected real appreciation against the U.S. dollar of 3 percent a year from 2008 to 2013.
  - Two filters used: Hodrick-Prescott trend (HP) and 3-year moving average (MA).
  - Reference CA norm is averaged across alternative estimates.
- Key quantitative results:
  - Resulting CA deficit norm: 5.4 percent of GDP.
  - Estimated improvement of the underlying CA deficit needed over the medium term: either 2.3 or 3.4 percentage points of GDP depending on HP trend or 3-year MA.
  - Using adjusted underlying CA (assuming cumulative real appreciation of about 10–12 percent over 2008–13) and CAη = 0.61 (OLS):
    - Average needed reduction in the CA deficit over the medium-term: 8–8.5 percentage points of GDP.
    - Implied RER depreciation of about 11–12 percent.
    - Conclusion: a CA adjustment may require a 12 percent depreciation of the REER over the medium term given fundamentals.
- Selected table entries (percent of GDP and RER change ranges as presented):
  - Average CA norm estimate = - 5.7 (WEO proj.)
  - Adjusted underlying CA (HP trend): 2007-13 average = -13.8
  - Adjusted underlying CA (3-year MA): 2007-13 average = -14.2
  - RER change needed for CA equilibrium (HP underlying CA): reported values include -12.2, -14.0, -13.6, -6.6, -18.8, -14.5, -11.4
  - RER change needed for CA equilibrium (3-year MA underlying CA): reported values include -12.8, -14.6, -14.1, -7.2, -19.4, -15.1, -11.9
  - Memo: assumes CA elasticity of 0.61 (OLS) and adjusted for projected real appreciation in underlying CA over 2007-13 (10 percent RER appreciation).
- Note on end-2007 gap:
  - With OLS elasticity of 0.61, at end-2007 the gap between average CA norms and underlying CA was less than 1 percent, resulting in an estimated REER undervaluation of 0.8 to 1.5 percent.

### Long-run equilibrium equation findings (Equation 1)
- All estimated coefficients have expected signs; only terms of trade statistically significant.
- Economic interpretation reiterated:
  - REER appreciates with improved terms of trade, productivity, and openness.
  - REER depreciates with increases in government consumption.
- End-2007:
  - REER slightly undervalued but close to equilibrium.
  - Equilibrium REER depreciated since 2003 due to widening external imbalances and worsening terms of trade; actual REER appreciated since the 1994 devaluation, narrowing the gap during 2003–07.

### External sustainability approach and scenario results
- Methodology (Lee et al. (2006) framework):
  - Stabilizing CA-to-GDP formula: ca_s = ((1+g)(1+π) / (1+g+π)) * b_s
    - ca_s = stabilizing level of the CA balance to GDP
    - g = estimated growth rate of real GDP
    - π = estimated GDP inflation
    - b_s = stable NFA-to-GDP ratio
- Assumptions for Comoros:
  - g = 4.0 percent
  - π = 3 percent
  - b_s = –34.2 percent (NFA to GDP ratio at end-2007)
  - HIPC and MDRI debt relief assumed attained in 2012 for forward-looking analysis.
  - As of end-2007: external debt-to-GDP ratio about 60 percent; NFA was –34 percent; current account deficit was 6.7 percent of GDP.
- Applications and numerical outcomes:
  1. Projecting the 2008 CA:
     - Underlying CA deficit (including grants) estimated at 8.7 percent of GDP for 2008.
     - With g = 4 percent and π = 3 percent, a CA deficit of 8.7 percent of GDP would result in a long-run NFA position equal to –133 percent of GDP.
  2. Maintaining the 2007 NFA position:
     - CA deficit required to keep NFA at –34 percent of GDP is 2.2 percent of GDP.
     - This would imply 6–7 percent real exchange depreciation.
  3. NFA/FDI-driven scenarios (2030 outcomes):
     - Low FDI scenario:
       - FDI-to-GDP rises from 1.6 percent at end-2007 to 2.5 percent by 2013, on track for 7.5 percent by end-2030.
       - NFA by 2030 = 3.1 percent of GDP.
       - Using average CA norm of 5.7 (MB-FEER), projected CA deficit = 0.2 percent of GDP.
       - With CA elasticity to RER of 1.6, required real depreciation = -9.0 (minus implies depreciation).
       - Change in CA needed to achieve external sustainability by 2030 = -5.5 (minus implies CA reduction).
       - Comoros’s real exchange rate would be overvalued by 9 percent (low-FDI scenario).
     - High FDI scenario:
       - FDI-to-GDP rises from 1.6 percent at end-2007 to 17.2 percent by 2013, on track for 52 percent by end-2030.
       - NFA by 2030 = 48 percent of GDP.
       - Using average CA norm of 5.7 (MB-FEER), projected CA deficit = 3.3 percent of GDP.
       - With CA elasticity to RER of 1.6, required real depreciation = -3.9 (minus implies depreciation).
       - Change in CA needed to achieve external sustainability by 2030 = -2.4 (minus implies CA reduction).
       - Comoros’s real exchange rate would be overvalued by 4 percent (high-FDI scenario).
- Tabulated summary values (as presented):
  - NFA 2030 target: -48.0 (high) / -3.1 (low)
  - Current Account 2030 Target: -3.3 (high) / -0.2 (low)
  - Required change in the Current Account: -2.4 (high) / -5.5 (low)
  - Estimated RER depreciation required (percent): -3.9 (high) / -9.0 (low)  (using elasticity of 1.6)

### Cross-method comparison and overall implications
- BEER-SE:
  - Gap between actual and equilibrium REER narrowed from 30 percent undervaluation in 2003 to 4 percent in 2007.
- MB-FEER and External Sustainability:
  - Both suggest substantial narrowing of the CA deficit—ranging between 8 and 12 percent of GDP—may be needed over the medium term.
  - Associated real depreciation of the exchange rate estimated at 4–7 percent, considering CA sensitivity to REER.
- Conclusions:
  - Equilibrium REER broadly in line with fundamentals at end-2007; equilibrium REER depreciated over time while actual REER appreciated (notably due to euro strengthening).
  - Required macro adjustment: CA deficit narrowing of 8–12 percent of GDP with real depreciation of 4–7 percent.
  - Structural reform priorities: address constraints related to SOEs, business licensing, investor protection, legal system; enhance international trade and FDI to support diversification and tourism.
  - Debt distress caveat: Comoros is in debt distress; without an adjustment program and absent HIPC and MDRI debt relief most debt indicators would remain above policy-dependent thresholds and net external asset position would not converge to sustainable equilibrium.

### Structural indicators of competitiveness and governance
- World Bank Doing Business 2009:
  - Overall rank: 155 out of 181.
  - Within sub-Saharan Africa: 25 out of 46.
  - GNI per capita (US$): 680
  - Population (thousands): 626
  - Weak areas: trading across borders, starting and closing a business, getting credit.
  - Areas comparing well with SIDS: paying taxes, registering property.
  - Ease of doing business rank examples: Comoros 155; Mauritius 24; Kenya 88; Seychelles 104; Tanzania 127; Mozambique 141; Madagascar 144.
  - Trading across borders rank examples: Comoros 129; Mauritius 48.
- World Bank WGI (1996–2007):
  - Comoros’ rank worsened in government effectiveness and regulatory quality (bottom 10 percent).
  - Position worsened on political stability and absence of violence.
  - Progress noted on control of corruption and rule of law.
  - Within 15-country Franc Zone: top 5 on control of corruption; top 6 on voice and accountability; lowest on quality of regulation; fourth worst on rule of law.

### Tax system (summary as of August 31, 2006)
- General notes:
  - Tax schedules, rates, exemptions and specific levies across income, property, goods and services, and international trade are itemized.
- Selected highlights and exact rates:
  - Profit tax (IBD): 35 percent for individuals and companies with turnover less than CF 500 million, 50 percent otherwise.
  - Thresholds and business-license multipliers:
    - Tax levied on companies and self-employed with turnover exceeding CF 20 million.
    - x times cost of business licence with x = 4 for 15 < T < 20; x = 3 for 5 < T < 15; x = 2 for 3< T < 5 (T in CF millions).
  - Single professional tax (TPU): levied on companies and self-employed with turnover below CF 20 million.
  - Advance on income taxes (Acompte sur IBD et TPU): 1 percent of customs value of imports for importers with taxpayer number; 50 percent for all others.
  - Taxes on capital income: 15 percent on distributed dividends and interest.
  - Payroll tax (Taxe sur les salires): income brackets and rates include exemption under FC150,000 per year and rates 5, 10, 15, 20, 25, 30 across higher brackets.
  - Property taxes:
    - Rentals: dwellings 20 percent of rental value; commercial/industrial premises 30 percent.
    - Registered property (sales): 2-9 percent of price; donations and inheritances: 5-60 percent.
  - Business license (Patente d’exploitation): 3, 5, or 10 percent of annual rental value plus fixed amount CF 5,000 to CF 750,000 depending on type and location.
  - Consumption tax: multiple rates including 0 percent (basic necessities), 3 percent (water, private schools, inter-island airfares), 5 percent (electricity, telephone, hotel, restaurants, banking services, international airfares), and higher rates up to 25 percent (casino revenues); reference to five rates including base rate 10 percent.
  - Visa fees: Visas CF500-2000; Residency card CF 60,000.
  - Motor vehicle vignette: CF4,000-22,500 per cylinder.
  - Special tax on diesel vehicles: CF 25,000 per ton of load capacity.
  - Stamp duties: CF500-CF25,000 depending on transaction.
  - Tax on TV equipment: FC20,000 per set.
  - Alcohol sale license one-time: CF 750,000 (distributors), CF 500,000 (retailers).
  - Single import tax (TUI): 0, 5, 15, and 20 percent of import value, c.i.f.
  - Accompte sur IBD et TPU (AIT): 1 percent of c.i.f. value.
  - Administrative levy: 1 percent of customs receipts on taxable imports; 3 percent of c.i.f. value of exempt imports.
  - Single specific tax on imports (TUS): CF 10-150 per kilogram, CF 8-200 per liter, up to CF 1 million for buses.
  - Single tax on rice: CF 150/kg (high-grade); CF 45/kg (ordinary).
  - Single tax on petroleum (TPP): Gasoline (normal rate) CF 230/l; Gasoline (reduced rate) CF 211/l; Diesel oil (normal rate) CF 115/l; Diesel oil (reduced rate) CF 95/l; Kerosene (normal rate) CF 10/l.
  - Excises/TSVF rates: 3, 5, 10, 15, 100, 200, 250 percent; specifics: Spirits 250 percent; wine and beer 250 percent; tobacco products 200 percent; cement 15 percent of c.i.f. value.
  - Export duty: cloves, vanilla, and Ylang-ylang zero rated.
  - Forfait regime on containers: 20 ft container CF 2.25 million; 40 ft container CF 3.425 million.
  - Additional centimes (levy on exports for UCCIA): 1 percent of export value, f.o.b., less export duties.

*Source: _cr0946 - Appendix I; _cr0946 - 10; _cr0946 - 21; Comoros: Summary of the Tax System (as of August 31, 2006)*

### Appendix I .............................................................................................................

### _cr0946 - Appendix I .............................................................................................................

### Introduction
- Since joining the Franc Zone in 1979, Comoros has operated a conventional peg to the French franc and the euro and retains its own currency and central bank while following safeguards on monetary financing of government financial operations.
- Recent shocks and policy environment:
  - Trend decline in the world price of vanilla, Comoros’s main export.
  - Unprecedented increases in international food and petroleum prices.
  - Surge in remittances and steady real appreciation of the euro-pegged national currency.
  - Constant political instability and dilapidated infrastructure have constrained institutional capacity and private investment.
- Key summary findings:
  - At end-2007 the real effective exchange rate (REER) was broadly in line with its equilibrium value as determined by economic fundamentals.
  - A substantial narrowing of the underlying current account deficit—in the range of 8–12 percent of GDP—may have been needed at end-2007 to ensure consistency with the norm current account deficit, requiring a real depreciation of the exchange rate of about 4–7 percent.
  - Comoros fares poorly on structural competitiveness grounds compared to other low-income small states in the region and within the Franc Zone, underscoring the need for wide-ranging structural reforms.
- Performance metrics:
  - Real GDP growth averaged 2.1 percent for 2000–07, and per capita income has steadily declined.
  - Reliable data are available only for the period starting in 1985 and mostly on an annual basis; the empirical analysis uses 28 yearly observations for 1980–2007.

### External sector developments and vulnerabilities
- Balance of payments features (1991–2007):
  - Large and persistent trade deficits (goods and nonfactor services) averaging 21 percent of GDP annually.
  - Remittances amounted to more than 15 percent of GDP at the end of 2007.
  - Public transfers had gradually declined.
  - The current account deficit averaged 7 percent of GDP during the period.
  - The capital and financial account recorded a small surplus averaging 3.2 percent of GDP a year.
  - Official transfers offset large external debt repayment obligations and negative private capital inflows, keeping the financial account negative throughout the period.
  - International reserves have grown an average ¾ percent of GDP a year since 1991, reaching the equivalent of 7 months of imports by end-2007.
  - Despite comfortable reserves, external debt repayment obligations remain sizable and frequently unmet, causing accumulation of large external payments arrears.
- Vulnerabilities and sustainability:
  - The trade balance deficit is financed primarily by remittances, grants, and loans.
  - Sizable external debt obligations cannot be honored, producing unsustainable net foreign liabilities that appear impossible to address without debt relief under the HIPC Initiative and the MDRI.

### Evolution of REER and competitiveness indicators
- Competitiveness and price/volume developments (2000–07 and 2002–07):
  - During 2002–07 Comoros’s exports as a share of world exports declined by 50 percent.
  - Export volume shrank by 27 percent during 2002–07.
  - The CPI-based REER appreciated by 14 percent during 2002–07 (29 percent since 2000).
  - The internal terms of trade (Pd/Pm) declined substantially as prices of imported goods increased faster than prices of domestic goods.
  - Membership in the Franc Zone anchored price stability relative to many SSA fragile countries, but nominal appreciation of the Comorian Franc has been driven by strengthening of the euro vis-à-vis the U.S. dollar.
- Structural competitiveness:
  - Comoros has experienced the highest real currency appreciation since the 1994 devaluation within the Franc Zone and SSA fragile countries.
  - Structural indicators point to poor performance relative to other low-income small states and Franc Zone peers, highlighting the need for broad structural reforms to improve export performance and private sector activity.

### Empirical analysis of the equilibrium exchange rate (overview)
- Approaches applied to estimate equilibrium REER (ERER) and assess external competitiveness:
  - Behavioral single-equation equilibrium exchange rate approach (BEER-SE): assesses ERER based on past behavior of macroeconomic fundamentals.
  - Macroeconomic balance approach (FEER-MB): estimates deviation of the current account (CA) from an estimated norm implied by fundamentals of saving and investment.
  - External sustainability approach (ESA): projects the long-run relationship between the CA and net foreign assets (NFA) and assesses required REER adjustments.
- Purpose:
  - These approaches provide various ERER and current account estimates to judge the appropriateness of the exchange rate policy pursued by the authorities.

### Behavioral equilibrium exchange rate (BEER-SE) methodology and factors
- Estimation method:
  - ARDL (autoregressive distributed lag) modeling used as appropriate for small samples and mixed orders of integration; sample comprises 28 yearly observations for 1980–2007.
  - The BEER-SE empirical analysis follows Edwards (1989) and Chudik and Mongardini (2007) methodological approaches.
- Fundamentals included in the REER equilibrium estimation:
  - Terms of trade (TOT): ratio of export price to import price; improvements in TOT lead ERER to appreciate.
  - Trade openness (OPEN): exports plus imports of goods and services to GDP; change in trade controls may appreciate or depreciate ERER depending on country circumstances.
  - Total factor productivity (TFP): proxied by real per capita GDP relative to main trading partners; captures Balassa-Samuelson effects and tradable-sector productivity-driven appreciation.
  - Government consumption (GOV): an increase biased toward nontradables appreciates ERER; if biased toward tradables, ERER may depreciate.

### Key quantitative findings and implications
- End-2007 assessment:
  - Actual REER broadly in line with equilibrium REER as determined by fundamentals.
  - Recent widening of external and internal imbalances caused the actual REER to weaken while the equilibrium REER appreciated, narrowing the gap between actual and equilibrium values.
- Current account adjustment needs:
  - A substantial narrowing of the underlying current account deficit in the range of 8–12 percent of GDP may have been needed at end-2007 to align with the norm current account deficit.
  - Achieving such a narrowing would have required a real depreciation of about 4–7 percent.
- Data and policy considerations:
  - Serious data deficiencies and limited long data series constrain analysis; reliable data mainly available from 1985 onward.
  - Given persistent structural weaknesses, policy priorities include debt relief mechanisms (e.g., HIPC and MDRI where applicable) and wide-ranging structural reforms to improve the business environment, investment, and export performance.

*Source: _cr0946 - Appendix I*

### 10.      The following long-run equilibrium equation was estimated:

### _cr0946 - 10.      The following long-run equilibrium equation was estimated:

### Long-run equilibrium equation and estimation approach
- The long-run equilibrium equation (Equation 1) was estimated using the autoregressive distributed lag (ARDL) approach to cointegration developed by Pesaran, Shin, and Smith (1999).
  - ARDL lag structure: (1,4,4,3,4) selected by the Akaike Information Criteria (AIC).
  - Robustness checks: several ARDL specifications and alternative approaches estimated, including the Johansen vector error correction model (VECM); all led to similar conclusions.
- Notes on reported statistics in Equation 1:
  - t-stats are shown in square brackets.
  - an asterisk (*) denotes equilibrium.

### Findings from Equation 1 (REER determinants)
- All estimated coefficients exhibit the expected sign.
- Only the terms of trade variable is statistically significant.
- Economic interpretation:
  - The REER appreciated in response to improved terms of trade, productivity, and higher openness to international trade.
  - The REER depreciated in response to increases in government consumption.
- At end-2007:
  - The REER was slightly undervalued but close to its equilibrium value as determined by economic fundamentals.
  - The equilibrium REER has steadily depreciated since 2003 as external imbalances widened, notably in response to worsening terms of trade and low growth.
  - The actual REER has steadily appreciated since the 1994 devaluation, narrowing the gap between actual and equilibrium REER during 2003-07.

### FEER-MB (Macroeconomic Balance) approach — overview
- The FEER-MB approach links developments in the ERER to medium-term macroeconomic fundamentals and defines the current account (CA) in two ways: (i) domestic saving minus investment; and (ii) net exports balance.
- If an equilibrium saving-investment balance can be defined and other fundamentals affecting net exports are controlled for, an equilibrium exchange rate can be estimated that makes the two CA definitions consistent at internal balance (full employment).
- The analysis proceeds in three steps:
  1. Estimate an equilibrium (norm) current account.
  2. Gauge sensitivity of the CA balance to changes in the REER.
  3. Assess the RER adjustment needed to close the gap between estimated CA norm and underlying CA based on trade elasticities.

### Current account norm estimation (Imam and Minoiu (2008) panel results)
- Panel estimators and samples:
  - Six different CA norms estimated using three panel estimators (fixed effects, pooled OLS, random effects) applied to two country samples: (i) full sample of 140 countries (1980–2005), and (ii) LIC sample of 35 countries (including Comoros).
- Equation 2 (fixed effects estimator for the LIC sample, norm 4) reported elasticities; the country-specific fixed effect for Comoros is captured by the scalar –4.9.
- Time coverage in the model:
  - 1980,...,2005 for estimation; 2007,...,2013 for projection.
- Time-varying fundamentals included as regressors:
  1. FISC: overall fiscal balance (cash basis) / GDP
  2. NFA: net foreign assets position (end-period percent of GDP)
  3. RELGDP: relative per capita GDP (deviation from US income)
  4. GROWTH: Comoros per capita GDP growth
  5. POP: population growth rate
- Selected panel coefficient magnitudes and significance (Table 1, expressed in natural logarithms; robust standard errors in parenthesis):
  - Overall Budget balance (cash basis)/GDP: 0.377*** (Full sample, Fixed effects) and 0.557*** (LIC sample, Fixed effects)
  - Net foreign assets/GDP: 0.024*** (Full sample, Fixed effects) and 0.056** (LIC sample, Fixed effects)
  - Relative income: -0.054* (Full sample, Fixed effects) and -0.674*** (LIC sample, Fixed effects)
  - Per capita GDP growth: -0.093*** (Full sample, Fixed effects) and -0.207*** (LIC sample, Fixed effects)
  - Population growth: -0.403** (Full sample, Fixed effects) and -0.454* (LIC sample, Fixed effects)
  - Constant (country-specific for Comoros under fixed effect): -4.89***

### Interpretation of CA elasticities (from equation 1 / panel results)
- A 1 percent increase in the overall fiscal balance-to-GDP ratio predicts an improvement in the current account of 0.5 percentage point of GDP.
- A higher NFA/GDP position is associated with a higher CA surplus; the coefficient magnitude is about 0.05 percent of GDP (per 1 percent change).
- Raising income by 1 percentage point relative to US income worsens the CA by 0.7 percent (LIC sample).
- Higher per capita growth causes CA to deteriorate by 0.2 percentage point (LIC sample).
- An increase in population growth rate by 1 percentage point is associated with a deterioration of the CA balance by 0.5 percentage point of GDP.

### Estimating trade and current account elasticities for Comoros (Box 3)
- Trade elasticities estimated using OLS and ECM specifications for 1985–2007.
- Main results:
  - Price elasticities are statistically significant and higher than 1 in absolute value (Marshall-Lerner conditions met).
  - OLS specification: import income elasticity = 2.16**, export price elasticity = -1.14**, import price elasticity = -1.36**.
  - ECM specification yields somewhat lower elasticities (e.g., prices -0.66* for exports, -1.2** for imports).
- Using period average ratios: imports = 39 (percent of GDP) and exports = 17 (percent of GDP), and OLS price elasticities:
  - Imports price elasticity Mη = -1.14
  - Exports price elasticity Xη = -1.36
  - Estimated elasticity of the current account to the REER: CAη = 0.61
    - Implication: a depreciation of 1.6 percent of the REER would be needed to improve the Comoros current account by 1 percent (OLS).
  - Using ECM specification, CA elasticity = 0.45, implying a depreciation of 2.2 percent in the REER would be needed to improve the CA by 1 percent.

### Underlying CA, CA norm, and required adjustment (2007–13 projections)
- Methodology notes:
  - Underlying CA balance is based on a projected real appreciation against the US dollar of 3 percent a year from 2008 to 2013 (Balassa-Samuelson effect and euro appreciation against USD).
  - Two filters applied to estimate underlying CA: Hodrick-Prescott trend (HP) and 3-year moving average (MA) to filter temporary effects.
  - Given sensitivity to sample and estimator, the reference CA norm is averaged across all alternative estimates.
- Key quantitative results:
  - Resulting CA deficit norm: 5.4 percent of GDP.
  - Estimated improvement of the underlying CA deficit needed over the medium term:
    - Either 2.3 or 3.4 percentage points of GDP depending on HP trend or 3-year MA.
  - Using adjusted underlying CA (assuming cumulative real appreciation of about 10–12 percent against main trading partners over 2008–13) and CA elasticity CAη = 0.61 (OLS):
    - On average, the needed reduction in the CA deficit over the medium-term is estimated at 8–8.5 percentage points of GDP.
    - Implies a RER depreciation of about 11–12 percent.
    - These results indicate that a CA adjustment may require a 12 percent depreciation of the REER over the medium term, given the economic fundamentals.
- Additional numerical details from Table 2 (selected entries, in percent of GDP):
  - Average CA norm estimate = - 5.7 (WEO proj.)
  - Adjusted underlying CA (assuming HP trend): 2007-13 average = -13.8
  - Adjusted underlying CA (assuming 3-year MA): 2007-13 average = -14.2
  - RER change needed for CA equilibrium (assuming HP underlying CA): ranges reported across estimators, e.g., -12.2, -14.0, -13.6, -6.6, -18.8, -14.5, -11.4
  - RER change needed for CA equilibrium (assuming 3-year MA underlying CA): ranges reported, e.g., -12.8, -14.6, -14.1, -7.2, -19.4, -15.1, -11.9
  - Memo: Assuming a current account elasticity of 0.61 (OLS) and adjusted for projected real appreciation in the underlying CA over 2007-13 (10 percent RER appreciation).

### Additional methodological and contextual notes
- Data limitations:
  - Data on government spending broken down by tradable and non-tradable goods are not available; about 60 percent of domestically financed primary expenditure is salaries for public employees (likely spent on tradable goods and services).
- Structural and volatility context:
  - Comoros political, institutional, and economic environment has undergone frequent structural changes since independence in 1976, introducing volatility and structural breaks into macroeconomic variables.
  - The equilibrium REER is highly correlated with the price deflator for exports of goods (correlation ratio of 0.90), reflecting dependence on a narrow and volatile export base.
- Underlying CA adjustment assumptions:
  - Underlying CA assumes a cumulative real exchange appreciation of about 10–12 percent against main trading partners over 2008–13.
  - In the rest of the paper the OLS elasticity of 0.61 is used; with that elasticity, at end-2007 the gap between average CA norms and underlying CA was less than 1 percent, resulting in an estimated REER undervaluation of 0.8 to 1.5 percent.

*Source: _cr0946 - 10.      The following long-run equilibrium equation was estimated:*

### 21.      The external sustainability approach emphasizes the relationship between a country’s

### _cr0946 - 21.      The external sustainability approach emphasizes the relationship between a country’s

### External sustainability approach: methodology
- Follows Lee et al. (2006) and consists of three steps:
  - (i) calculate the level of the current account (CA) that would stabilize the net foreign asset (NFA) position at a given benchmark level;
  - (ii) compare observed CA flows or the NFA position with the benchmark;
  - (iii) calculate the REER adjustment necessary to bring the CA balance to the level that stabilizes the NFA position as targeted.
- Stabilizing CA-to-GDP formula (equation (3)):
  - ca_s = ((1+g)(1+π) / (1+g+π)) * b_s  (presented in text as equation (3) with variables defined below)
  - where:
    - ca_s = stabilizing level of the CA balance to GDP
    - g = estimated growth rate of real GDP
    - π = estimated GDP inflation
    - b_s = stable NFA-to-GDP ratio

### Comoros: assumptions used in the analysis
- g = 4.0 percent (projected growth rate of real GDP)
- π = 3 percent (projected growth in the GDP deflator)
- b_s = –34.2 percent (NFA to GDP ratio at the end of 2007)
- Debt-relief assumption:
  - HIPC and MDRI debt relief is assumed attained in 2012 for forward-looking analysis.
- As of end-2007:
  - external debt-to-GDP ratio was about 60 percent.
  - NFA was –34 percent and current account deficit was 6.7 percent of GDP (note in Table 3 source footnote).

### Applications of equation (3): scenarios and numerical outcomes
- 1) Projecting the 2008 CA:
  - Underlying CA deficit (including grants) estimated at 8.7 percent of GDP for 2008.
  - With g = 4 percent and π = 3 percent, a CA deficit of 8.7 percent of GDP would result in a long-run NFA position equal to –133 percent of GDP.
- 2) Maintaining the 2007 NFA position:
  - CA deficit required to keep NFA at –34 percent of GDP is 2.2 percent of GDP.
  - This would imply 6–7 percent real exchange depreciation (Table 3 reference).
- 3) Appropriate NFA target with FDI-driven scenarios:
  - Low FDI scenario:
    - FDI-to-GDP ratio rises from 1.6 percent at end-2007 to 2.5 percent by 2013, on track for 7.5 percent by end-2030.
    - NFA by 2030 = 3.1 percent of GDP.
    - Using average CA norm of 5.7 (MB-FEER), projected CA deficit = 0.2 percent of GDP.
    - With CA elasticity to RER of 1.6, required real depreciation = 9 percent (minus sign implies depreciation).
    - Change in CA needed to achieve external sustainability by 2030 = 5.5 percent of GDP (implied reduction).
    - Comoros’s real exchange rate would be overvalued by 9 percent (low-FDI scenario).
  - High FDI scenario:
    - FDI-to-GDP ratio rises from 1.6 percent at end-2007 to 17.2 percent by 2013, on track for 52 percent by end-2030.
    - NFA by 2030 = 48 percent of GDP.
    - Using average CA norm of 5.7 (MB-FEER), projected CA deficit = 3.3 percent of GDP.
    - With CA elasticity to RER of 1.6, required real depreciation = 3.9 percent (minus sign implies depreciation).
    - Change in CA needed to achieve external sustainability by 2030 = 2.4 percent of GDP (implied reduction).
    - Comoros’s real exchange rate would be overvalued by 4 percent (high-FDI scenario).
- Tabulated summary values (as presented):
  - NFA 2030 target (minus implies NFL): -48.0 (high) / -3.1 (low) — presented in table as "NFA 2030 target (minus imples NFL)-48.0-3.1"
  - Current Account 2030 Target: -3.3 (high) / -0.2 (low)
  - Required change in the Current Account: -2.4 (high) / -5.5 (low)  (minus sign implies a CA reduction)
  - Estimated RER depreciation required (in percent): -3.9 (high) / -9.0 (low)  (using elasticity of 1.6; minus implies depreciation)

### Implications for CA and REER (cross-method comparison)
- BEER-SE approach:
  - As of 2007, gap between actual and equilibrium REER narrowed from 30 percent undervaluation in 2003 to 4 percent in 2007.
- MB-FEER and External Sustainability approaches:
  - Both suggest a substantial narrowing of the CA deficit—ranging between 8 and 12 percent of GDP—may be needed over the medium term (textual summary in Conclusions).
  - Associated real depreciation of the exchange rate of 4–7 percent, considering CA sensitivity to REER.
- Table 4 excerpts (as presented):
  - BEER-SE: Change in the Current Account not required; estimated RER depreciation small undervaluation (4)
  - MB-FEER: Change in the Current Account 8.1 - 8.5; Estimated RER depreciation 11.4 - 11.9
  - ES (External Sustainability): Change in the Current Account 4 - 5; Estimated RER depreciation 6 - 7
  - Note: Table footnotes indicate use of elasticity 1.6 and constant NFA based on 2007 (-34 percent of GDP).

### Structural indicators of competitiveness and governance
- World Bank Doing Business 2009 rankings for Comoros:
  - Overall rank: 155 out of 181 (bottom 20 percent globally).
  - Within sub-Saharan Africa: 25 out of 46 (bottom half).
  - GNI per capita (US$): 680
  - Population (thousands): 626
  - Specific areas needing improvement: trading across borders, starting and closing a business, getting credit.
  - Areas comparing well with SIDS: paying taxes, registering property.
- Doing Business comparative table highlights (selected values as presented):
  - Ease of doing business rank (out of 181): Comoros 155; Madagascar 144; Mozambique 141; Tanzania 127; Seychelles 104; Kenya 88; Mauritius 24.
  - Trading across borders rank examples: Comoros 129; Mauritius 48.
- Governance indicators (World Bank WGI, 1996–2007):
  - Comoros’ rank worsened over the last decade in government effectiveness and regulatory quality (bottom 10 percent).
  - Position worsened on political stability and absence of violence.
  - Progress noted on control of corruption and rule of law.
  - Within 15-country Franc Zone: top 5 on control of corruption; top 6 on voice and accountability; lowest on quality of regulation; fourth worst on rule of law.

### Conclusions and policy implications
- Equilibrium REER and fundamentals:
  - Real effective exchange rate broadly in line with economic fundamentals at end-2007.
  - Equilibrium REER has depreciated over time as external and internal imbalances widened; actual REER appreciated (notably due to euro strengthening), narrowing the gap.
- Required macro adjustment:
  - Both the macroeconomic balance and external sustainability approaches indicate a need for substantial narrowing of the CA deficit—ranging between 8 and 12 percent of GDP—over the medium term.
  - This would be associated with a real depreciation of 4–7 percent, given CA sensitivity to REER.
- Structural reform priorities (authorities’ medium-term agenda as noted):
  - Address constraints related to state-owned enterprises (SOEs), business licensing requirements, investor protection, and the legal system.
  - Enhance international trade and foreign direct investment (FDI) to facilitate economic diversification and develop tourism potential.
- Debt distress caveat:
  - Comoros is in debt distress; without an adjustment program and absent HIPC and MDRI debt relief most debt indicators would remain above policy-dependent thresholds and net external asset position would not converge to sustainable equilibrium.

### Appendix notes (methodology and data)
- Trade elasticities estimated using a standard empirical trade model for 1985–2007 with OLS and ECM specifications; model relates import volumes to relative import prices and domestic income, and export volumes to relative export prices and foreign income.
- Current account elasticity to RER computed assuming RER affects CA solely through trade balance, per IMF-CGER methodology and Lee et al. (2006).
- Survey-based indicators used:
  - World Bank Doing Business Indicators, 2009.
  - World Bank, World Governance Indicators, 2008 (covers 1996–2007 across six governance dimensions: VA, PV, GE, RQ, RL, CC).

*Source: _cr0946 - 21.      The external sustainability approach emphasizes the relationship between a country’s*

### REFERENCES

### _cr0946 - REFERENCES

### References
- Chinn, Menzie D., and Eswar S. Prasad, 2003, “Medium-term Determinants of Current Accounts in Industrial and Developing Countries: an Empirical Exploration”. Journal of International Economics vol. 59,  pp.47–76.  
- Chudik, A., and J. Mongardini, 2007, “In Search of Equilibrium: Estimating Equilibrium Real Exchange Rates in Sub-Saharan African Countries,” IMF Working Paper No. 07/90 (Washington: International Monetary Fund).  
- Di Bella G., M. Lewis, and A. Martin, 2007, “Assessing Competitiveness and Real Exchange Misalignment in Low-Income Countries,” IMF Working Paper No. 07/201 (Washington: International Monetary Fund).  
- Edwards, S., 1989, “Exchange Rate Misalignment in Developing Countries,” World Bank Research Observer, Vol. 4, No. 1, pp. 3–21.  
- Faruqee, H., P. Isard, and P.R. Masson, 1999, “A Macroeconomic Balance Framework for Estimating Equilibrium Real Exchange Rates,” in Equilibrium Exchange Rates, ed. by R. MacDonald and J. Stein (Amsterdam: Kluwer).  
- Imam, P., and C. Minoiu, 2008, “Mauritius: A Competitiveness Assessment,” IMF Working Paper No. 08/212 (Washington: International Monetary Fund).  
- Isard, P., and H. Faruqee, eds., 1998, “Exchange Rate Assessment: Extensions of the Macroeconomic Balance Approach,” IMF Occasional Paper No. 167 (Washington: International Monetary Fund).  
- Kaufmann, Daniel, Aart Kraay, and Massimo Mastruzzi, 2008, “Governance Matters VII: Aggregate and Individual Governance Indicators, 1996–2007,” World Bank Policy Research Working Paper No. 4654. Available at: www.worldbank.org/wbi/governance.  
- Lee, J., G.M. Milesi-Ferretti, and L. Ricci, 2006, “Methodology for CGER Exchange Rate Assessments,” (photocopy) downloaded from: www.imf.org/external/np/pp/eng/2006/110806.pdf (Washington: International Monetary Fund).  
- Masson, Paul, 1989, “A Globally Consistent Conceptual Framework”, in Exchange Rate Assessment: Extensions of the Macroeconomic Balance Approach, IMF Occasional paper No. 167, Ed. By Peter Isard and Hamid Faruqee. Washington.  
- Pesaran, M. Hashem, Y Shin, and R.J. Smith, 1999, “Bounds Testing Approaches to the Analysis of Long-run Relationships,” Cambridge Working Papers in Economics 9907 (Cambridge, UK: Faculty of Economics, University of Cambridge).  
- World Bank, 2008, Doing Business Indicators, 2009, http://www.doingbusiness.org.  
- World Bank, 2008, World Governance Indicators, (http://info.worldbank.org/governance/wgi2008).

*Source: _cr0946 - REFERENCES*

### 1. Taxes on net income and profits 1.1 Profit tax (Impôt sur les Bénéfices Divers, IBD)

### 1. Taxes on net income and profits 1.1 Profit tax (Impôt sur les Bénéfices Divers, IBD)

### Scope and exemptions
- Tax levied on companies and self-employed individuals whose turnover exceeds CF 20 million.
- Newly created enterprises eligible under the Investment Code, agricultural cooperatives and credit unions, government agencies and offices (exemptions).

### Rates and structure
- 35 percent for individuals and companies with turnover less than CF 500 million, 50 percent otherwise.
- x times the cost of a business licence (see item 3.1), depending on turnover, with x equal to:
  - Turnover (T, in CF millions): 4 for 15 < T < 20
  - Turnover (T, in CF millions): 3 for 5 < T < 15
  - Turnover (T, in CF millions): 2 for 3< T < 5

### Related advance and interactions
- See item 1.3 (Acompte sur IBD et TPU) for surcharge on imports deductible from IBD or TPU.

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### 1.2 Single professional tax (Taxe Professionnelle Unique, TPU)

### Scope and exemptions
- Tax levied on companies and self-employed individuals with turnover below CF 20 million.
- Provisions of the investment code apply.

### Rate indicator
- 1                                  T<                                  3

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### 1.3 Advance on income taxes (Acompte sur IBD et TPU)

### Nature and treatment
- Surcharge on imports, deductible from IBD or TPU. See item 4.2.

### Rates and applicability
- Same as for customs duties.
- 1 percent of customs value of imports for importers with taxpayer number; 50 percent for all others.

---

### 1.4 Taxes on capital income (Impôt sur les revenus de valeur et capitaux mobiliaire)

### Scope
- Tax on distributed dividends and interest paid.
- Interest on loans contracted or granted by microcredit agencies, housing cooperatives, and agricultural credit unions.

### Rates
- 15 percent

### Additional table header text (as in source)
- Tax bracket (in CF)
- Tax rate (in percent)

---

### 1.5 Payroll Tax (Taxe sur les salires, formerly ‘Impôt general sur le revenu’)

### Scope and treatment
- Paid by employees on wages and salaries.
- Withheld at source for civil servants; settled within one month for others.
- Diplomats.

### Exemptions and brackets
- Incomes under FC150,000 per year
- 150,001 – 500,000
- 500,001 – 1,000,000
- 1,000,001 – 1,500,000
- 1,500,001 – 2,500,000
- 2,500,001 – 3,500,000
- over 3,500,000

### Rates by bracket
- 5
- 10
- 15
- 20
- 25
- 30

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### 2. Property taxes

### 2.1 Tax on rentals (Impôt sur la proprieté batie et louée)
- Annual tax on rental dwellings.
- Exemptions: New properties used as dwellings for the first two years, and properties belonging to the government or to communes.
- Rates:
  - Dwellings: 20 percent of rental value
  - Commercial and industrial premises: 30 percent.

### 2.2 Tax on registered property (droits d’enrigestrement)
- Transactions tax on real estate transmissions (sales, donations, inheritances).
- Exemptions: Government transactions (that include Muslim religion buildings).
- Rates:
  - Judicial acts: fixed taxes of  CF1,000 to CF20,000.
  - Sales: 2-9 percent of price.
  - Donations and inheritances: 5-60 percent of assessed value.

### 2.3 Property recording fees (Taxe de publicité fonciére)
- Tax on recording acts concerning property transactions.
- Exemptions: Government transactions (that include Muslim religion buildings).
- Rates:
  - 2 percent property rights and motgages; 1 percent baux.

### 2.4 Tax on real estate gains (Taxe sur la plus value immobiliere)
- Tax on capital gains for property sales.
- Exemptions: Government transactions (that include Muslim religion buildings).
- Note: The capital gain calculation and applicable tax are determined in the art. 65.2 of the Tax Code.

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### 3. Taxes on goods and services

### 3.1 Business license (Patente d’exploitation)
- Tax on any company or self-employed individual involved in trade, industry, or a profession.
- Exemptions: Craftsmen, farmers, agricultural cooperatives, agricultural credit unions.
- Rates:
  - 3, 5, or 10 percent of the annual rental value of the business premises depending on location; plus fixed amount of between CF 5,000 and CF 750,000, depending on the type of business.

### 3.2 Consumption tax (Taxe de consommation)
- Turnover tax levied on domestic services (hotels, restaurants, banks, electricity, water, telecommunications, import trade,...).
- Consumption tax on imports: Levied at customs, based on c.i.f. value plus single import tax, credited against domestic consumption tax if applicable.
- Exemptions: Enterprises with turnover of CF 20 million or less; Exports, petroleum products, and publishing.
- Rates:
  - basic necessities, 0 percent
  - water, private schools, and inter-island airfares, 3 percent
  - electricity, telephone, hotel and restaurants, banking services, and international airfares, 5 percent
  - casino revenues, 25 percent
  - Five rates: base rate, 10 percent;

### 3.3 Visa fee (Droits de visa)
- Entry and residency fees to be paid by foreigners coming into Comoros.
- Exemptions: Diplomats.
- Rates:
  - Visas         CF500-2000 depending on duration and number of entries
  - Residency card             CF 60,000

### 3.4 Motor vehicle tax (Vignette)
- Annual tax on vehicles in use.
- Exemptions: Vehicles owned by the central government or local governments, diplomats and cooperant missions. Cars in Comoros for more than 20 years.
- Rates:
  - CF4,000-22,500 per cylinder, depending on the age and of the vehicle and engine capacity.

### 3.5 Special tax on diesel engine vehicles (Taxe sur les vehicules à moteur diesel)
- Annual tax on vehicles in use.
- Exemptions: Vehicles owned by the central government or local governments, diplomats and cooperant missions; and vehicles used in agricultural activities.
- Rates:
  - CF 25,000 per ton of load capacity.

### 3.6 Parking fee (Droit de stationement)
- Annual tax on vehicles in use.
- Same exemptions as special tax on diesel engine vehicles.
- Rates:
  - CF 1,000 per vehicle.

### 3.7 Stamp duties (Droit de timbre)
- Tax charge on official acts.
- Exemptions: Government, diplomats, cooperant missions.
- Rates:
  - CF500-CF25,000 depending on transaction

### 3.8 Tax on insurance policies (Taxe sur les contrats d’assurances)
- Tax charge on insurance policies.
- Exemptions: Government, diplomats, cooperant missions.
- Rates:
  - 3 percent of the policy value for life, maritime, and rental insurance.
  - 15 percent for fire insurance.
  - 4 percent for all other modalities.

### 3.9 Tax on TV equipment (Impôt sur les récepteurs de télévisions, les magnétoscopes et les vidéoscopes)
- Annual tax charged on use of TV, magnetoscope and videoscope sets.
- Exemptions: None.
- Rate:
  - FC20,000 per set

### 3.10 Alcohol sale license (License de vente de boissons alcoholiques)
- One-time tax for newly licensed distributors and retailers of alcoholic beverages.
- Exemptions: None.
- Rates:
  - CF 750,000 for distributors
  - CF 500,000 for retailers

---

### 4. Taxes on international trade

### 4.1 Single import tax (TUI)
- Tax on imported goods.
- Exemptions: Goods imported by the central government under grants, and goods imported by diplomatic missions.
- Rates:
  - 0, 5, 15, and 20 percent of import value, c.i.f.

### 4.2 Accompte sur IBD et TPU (AIT)
- Levied on all commercial imports.
- Deductible from payment of IBD and TPU, see items 1.1 and 1.2.
- Rate:
  - 1 percent of c.i.f. value

### 4.3 Administrative levy (redevance administrative)
- Tax on imported goods.
- Exemptions: Goods imported by the central government under grants, and imports by diplomatic missions. Cement, fertilizers, rice, petroleum products, flour.
- Rates:
  - 1 percent of customs receipts on taxable imports; 3 percent of c.i.f. value of exempt imports.

### 4.4 Single specific tax on imports (TUS)
- Selected imports, mainly meat and buses.
- Exemptions: Goods imported by the central government under grants, and goods imported by diplomatic missions.
- Rates:
  - CF 10-150 per kilogram, CF 8-200 per liter, up to CF 1 million for buses.

### 4.5 Single tax on rice
- Rates:
  - CF 150/kg for high-grade rice;
  - CF 45/kg for ordinary rice;

### 4.6 Single tax on petroleum (TPP)
- Reduced rate applies to diplomatic missions, ships, and aircrafts (zero rate for aviation fuel Jet A1).
- Rates:
  - Gasoline (normal rate)   CF 230/l
  - Gasoline (reduced rate) CF 211/l
  - Diesel oil (normal rate)   CF 115/l
  - Diesel oil (reduced rate) CF 95/l
  - Kerosene (normal rate)  CF 10/l

### 4.7 Excises, or Special fiscal duty (TSVF)
- Levied on alcoholic beverages, tobacco products, and cement.
- Rates: 3, 5, 10, 15, 100, 200, and 250 percent
- Specifics:
  - Spirits: 250 percent; wine and beer: 250 percent; tobacco products, 200 percent.
  - Cement: 15 percent of c.i.f. value.

### 4.8 Export duty
- Cloves, vanilla, and Ylang-ylang: zero rated.

### 4.9 Forfait regime (regime forfaitaire)
- Specific tax rate levied on all containers (20 foot and 40 foot). Not applied to one imported good if more than 60 percent of content.
- Exclusions: Tabac, Alcool, Rice, Soda beverages Printed textiles (Kiromani, Lesso, Pagne, Mamuwa, and Msoutrou)
- Rates:
  - 20 ft container: FC 2.25 million
  - 40 ft container: FC 3.425 million

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### 5.0 Additional centimes

### Levy on exports
- Levied on behalf of the Chamber of Commerce (UCCIA).
- Rate:
  - 1 percent of export value, f.o.b., less export duties.

*Comoros: Summary of the Tax System (as of August 31, 2006) — extracted from the source content.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr0946.pdf_