Regaining competitiveness to attract investment to Cabo Verde (Cape Verde) and thus increase economic growth and job creation, is one of the new government’s priorities included in the State Budget for 2017, according to the Africa Intelligence Monitor.
The publication wrote that the ongoing dispute between North and West African countries for tax breaks on business activities has intensified between authorities and business agents in Cabo Verde, and a perceived loss of competitiveness in the country, had all been underlined by the recent drop of four places in the “Doing Business” list of the World Bank.
Boosting the financial system was also identified as key to improving competitiveness, said the Africa Intelligence Monitor. The financial system is currently blocked as it has small banks, credit granted by banks at reduced levels, with high interest rates and companies in a situation excessive debt.
During the debate for the 2017 Budget, approved last week with favourable votes of the Movement for Democracy (MPD), winner of the general election in March 2016, the Prime Minister stressed the economic growth forecast of 5.5% in 2017 “driven by improved credit conditions and the business climate, which will drive more dynamic private sector and foreign direct investment.”
“We maintain the targets for average annual economic growth of 7% and the creation of 45,000 jobs over the term of office,” it said, with growth “mainly focusing on tourism,” but also on the maritime economy, information technology and offshore communication services, renewable energy and services.
The range of measures to facilitate and stimulate business activity, include a one percentage point lowering of the maximum personal income tax (IRPS), to 24%, easing of the Special Scheme for Micro and Small Business (Rempe) and the introduction of new tax benefits.
Tax on personal income (IRPC), among other measures, is expected to see the elimination of double taxation, restriction of situations that lead to an increase in the self-paying tax rate, release from payment in installments for taxpayers who had negative results in the previous year and those that begin their activity and elimination of the obligation to pay the minimum installment.
The tax benefit package included in the 2017 State Budget includes reducing the amount of investment to benefit from contractual benefits, to 500 million escudos (US$4.8 million), and reduction of jobs, expansion into new strategic sectors of the 50% investment credit and extension of the period for deduction of credit for investment to 15 years.
It also extended the concept of relevant investment for the areas of information and communication technologies and hotel operation and extended the term of the exemption of income from the securities market, with public offerings and listings on the Cabo Verde Stock Exchange from 2017 to 2025.
At a government level there is a belief that a reduction in tax evasion may allow for tax rate reductions and a future tax reform, along with improvements in efficiency of the tax collection system, based on the results of a study on tax competitiveness ordered by the Finance Minister Olavo Correia.
Among the measures that are most exciting to business agents is the creation of a Sovereign Guarantee Fund, to improve access to external financing for medium and large enterprises as well as financial institutions, as well as a guarantee fund of around US$5 million, to be negotiated with the World Bank to recover companies and improve access to finance for small and medium enterprises. (macauhub)