The Cameroonian government would invoke exceptional circumstances not to proceed with a further reduction in its customs tariffs, contrary to its commitments. This attitude raises questions, especially as the expected financial gain is small.
Long announced and hailed by the business press on August 4, the new stage of the Economic Partnership Agreement (EPA) between Cameroon and the European Union is struggling to take hold. Thus, car importers from the European Union still have to pay the same customs duties as before August 4.
However, they were to benefit from a further 10% discount, in accordance with the EPA timetable, which provides for the gradual dismantling of tariff barriers. This, at a rate of 10% per year on certain specific products: fuels, cements, passenger and transport vehicles, motorcycles, mainly. The process is due to end in 2023. The General Directorate of Customs told the site investaucameroun that in the absence of a formal instruction from the Minister of Finance (Minfi), it cannot proceed with this discount.
Is this lack of diligence on the part of Minfi purely technical, or does it express a political decision to postpone the implementation of this phase of the agreement? On the side of the ministry, we invoke the coronavirus pandemic which has reduced the revenue collected. It is true that Cameroon has reduced by 20% its tax revenue forecast for fiscal year 2020, in its finance law. They fell from 2,962.2 to 2,374.8 billion CFA francs (3.62 billion euros), a decrease of 587.3 billion, including 206 billion in customs revenue.
Correspondence was initiated on August 10, 2020 to inform the European side and the EPA Committee, the bilateral body responsible for administering the agreement. In Brussels, it is feared that the pandemic is only a pretext to halt the EPA process, which started on August 4, 2016.
The agreement is denounced by part of civil society in Cameroon, over fears of an excessive increase in imports and a deterioration in the terms of trade. On the other hand, differences are said to have emerged between the authorities in Yaoundé and the European Union, on technical, financial and fiscal levels.
A policy of reducing customs revenue!
Financially, what looks like a suspension of this new phase of the EPA should not, however, significantly improve customs revenues. Initially, the total losses due to the agreement were estimated at 14 billion CFA francs; the products affected by this new application count only in part. In view of the slowdown in economic activity, imports will have declined significantly by the end of the year anyway.
As of March 31, 2020, indicates the Cameroonian Customs, the budget losses since the implementation of the EPA, in 2016, were 16 billion CFA francs. The agreement provides for compensation from the European Union under Development Aid.
This ill will, if it is confirmed, would be surprising. Indeed, the government of Cameroon is committed to a policy aimed at reducing the share of Customs in its overall revenue.
It notes that in comparison with other countries, the level of contribution from customs revenue remains high. The contribution of customs revenue varies between 8% to 10% in the countries of the European Union which mainly tax tobacco and alcohol.
It is only around 2% in other countries such as the United States and Mauritius. “It follows that our customs policy remains marked by a dominance of the tax function which still makes the customs administration a major source of budgetary revenue”, notes the General Directorate of Customs.
However, “the government of Cameroon has resorted to Article 31 of the EPA with the European Union which provides for safeguard measures in the event of an exogenous shock,” the Ministry of the Economy told the Cameroonian press. It remains to be seen whether Brussels will share this opinion.
Indeed, the EPA gives Cameroon the possibility, in the event of “exceptional circumstances”, to postpone the application of the EPA, not without having examined other solutions and notified its partners. It remains to define the “exceptional circumstances”.
The treaty mentions only one example of such a massive influx of imports that it threatens to damage an infant industry, or causes social problems. Is Cameroon in this situation?
Reference: https://magazinedelafrique.com/african-business/cooperation-african-business/
