São Tomé and Príncipe: Domestic Tax System and Tax Revenue Potential
IMF Working Papers, September 1, 2009
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- São Tomé and Príncipe: Domestic Tax System and Tax Revenue Potential
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Bibliographic details
- Authors: Nisreen H. Farhan
- Published: September 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873627.001
Executive summary and context
- Author: Nisreen H. Farhan
- Publication date: September 1, 2009
- Series: Working Paper No. 2009/215
- Volume: 2009; Issue: 215; Pages: 40
- DOI: https://doi.org/10.5089/9781451873627.001
- Stock No: WPIEA2009215
- ISBN: 9781451873627
- ISSN: 1018-5941
- Subject: Consumption taxes, Excises, Oil, Revenue administration, Tax administration core functions
- Keywords: excise, indirect tax, São Tomé and Príncipe, tax revenue, WP
Key findings
- São Tomé and Príncipe is very open and highly depends on imports resulting in high indirect tax revenue.
- The production and export base are very narrow, leaving the authorities with a small domestic tax base.
- The country compares unfavorably with neighboring economies and other island countries in terms of domestic revenue in percent of GDP.
- Cross-country empirical analysis is used to establish a benchmark tax potential for São Tomé and Príncipe.
- The paper concludes that whether São Tomé and Príncipe becomes an oil producer or not, it is more sustainable to rely on non-oil domestic revenue—a less volatile and less exhaustible resource—to finance current expenditures.
- To meet increasing development and social objectives, the authorities need to mobilize sufficient domestic resources.
Policy recommendations and proposed reforms
- Implement the new tax laws.
- Reduce exemptions.
- Pursue tax system reforms.
- Improve tax administration.
Implications and emphasis
- Emphasis on mobilizing non-oil domestic revenue as a priority for sustainability.
- Importance of strengthening both the legal framework (new tax laws, reduction of exemptions) and administrative capacity (tax administration improvement) to increase domestic revenue mobilization.
Source: IMF Working Papers — São Tomé and Príncipe: Domestic Tax System and Tax Revenue Potential (Nisreen H. Farhan, September 1, 2009).