The euphoria in Banjul hinges on the observation by the Fund's representative, and reported by the Daily Observer that the new tax reform "has the potential to create greater revenue."
A regime that is on the ropes or, more appropriately, drowning in its own bad policy choices will clutch onto anything, including straws. Of course, the VAT has the potential to create greater revenue but so does any other form of taxation. That's what taxes are for and designed to do - raise revenue for government. The VAT has the potential of raising revenue but so does income, sales and other category of taxes.
The 'fairness' of each of these various forms is usually measured by its progressivity (income tax) or its regressivity (sales tax). Our criticism of the VAT was not based on its appropriateness even though we could made strong argument for deferral. But because VAT was a component part of ECOWAS's regional effort to harmonize regional member's trade policies, we opted for critically looking at its implementation.
Everyone will agree that the introduction of the VAT was disastrous. The Gambia Revenue Agency (GRA), charged with the administration of the VAT was woefully unprepared. It turned out that they had no clue about the new tax, and they lacked implementation strategy. Gambians were told that the VAT is replacement of the sales tax.
We noted six months into implementation that the 15% sales tax is still being charged in addition to the 15% VAT. This claim was disputed by government - a government whose credibility is zero. This is a government that deliberately lies to the very people it's supposed to serve.
When we checked again, indeed the sales tax is still being charged. The VAT is supposed to be a one-time charge as point of entry but we have shown, time after time, that multiple charges are been leveled at each transaction point down to the tomato woman at the Serrekunda Market.
We encourage Mr. Mpatswe to go and tell those market women that VAT did not add to the increases in local food prices. Urban dwellers are starving in The Gambia and people are dying of malnutrition. As for rural folk, they are being stiffed at both ends, including the raw deal they are getting from GGC for not offering them fair prices for their groundnuts. To add insult to injury, GGC buys some of these nuts on credit. The claim that VAT has contributed to the recent spike in prices cannot be dismissed simply by brushing it off. The IMF chief in Banjul must do better to convince us otherwise.
One last observation, tangentially related to the subject, on Gambia being a hub for international trade. Banjul had enjoyed this status since the mid 1980's, particularly after the Economic Recovery Program (ERP). The comparative advantage (shorter turn around times, lower custom tariffs etc.) that the Banjul Port had over Port Automone de Dakar was squandered by the present regime because of high level corruption and incompetence - a combo that proved deadly for a once thriving cross-border (re-export) trade which would have formed the solid foundation for Banjul to be the regional hub for international trade. These corrupt and incompetent soldiers are harming Gambia and they MUST GO.
