The Minister of Finance, Hon Abdou Kolley, urged Gambians to comply saying that “tax compliance in the Gambia remains a formidable challenge.

Delivering the budget statement and economic policy financial year 2011, before the National Assembly in Banjul on Friday, Hon. Kolley said in an effort to enhance domestic revenue mobilization Gambia Revenue Authority (GRA), the body tasked with revenue collection in the country among other things, will, as part of the new tax measures, collect a creditable withholding tax on imports of 1 percent of the import value.

He said rental income on commercial properties will now be taxed on a flat rate of 15 percent, adding that fees for marriage registration, which was last reviewed in 2007, has now been increase from D8000 to D15,000 where one party is either a citizen of The Gambia or a citizen of ECOWAS and the other party is neither a Gambian nor a citizen of ECOWAS, and from D10,000 to D20,000 where both parties are neither citizens of The Gambia nor citizen of ECOWAS from D10, 000 to D20, 000.

“Business registrations for companies and individuals and other miscellaneous receipts have not been reviewed for the past thirty years. Consequently, they have now been increased and the new fees would be gazette to come into force in January 2011,” the Finance Minister, who holds a master degree in economics, said.

He added that government will also introduce a new levy on private educational institutions, “the appropriate levy will be gazetted to take effect in January 2011”.

Government is now gradually moving in the direction of cost recovery in the delivery of public services.

Tax administration reforms

Much of the growth in revenues in the past has been on account of increases in duty and tax rates. Since the establishment of the GRA, there has been a lot of emphasis on strengthening tax administration and improving tax collections.

Government will, in financial year 2011, undertake studies aimed at rationalization and harmonization of taxes and duties, stepping up monitoring and evaluation of performance of key tax revenue sources and system; ensuring transparency and standardization in application of tax rules and procedures; and encouraging greater compliances.

Hon. Kolley explained that GRA will simplify record-keeping obligations for small and medium size taxpayers, as part of their administration measures to be implemented in 2011, and they will also limit the informal sector tax to very small businesses with an annual turnover below D100,000; business with an annual turnover between D100,00 to D1,200,000 will be taxed based on turnover, using simplified tax records and applying a set of predetermined profit to turnover ratios; businesses with annual turnover above D1,200,000 will be taxed based on profits.

Provided that compliance will consequently improve, the minister said the existing alternative turnover-based method of determining minimum income tax and capital gains tax will be eliminated altogether. Furthermore, in an effort to reduce the multiplicity of taxes and foster compliance, we will undertake a study on tax heads that generate minimal revenues that hardly cover their administrative cost with a view of eliminating them.

He said GRA will also enforce the collection of all excise taxes on domestically produced goods as stipulated in the Customs and Excise Act 2010 and also explore the possibility of using commercial banks in tax collection with a view to facilitating faster collection and reconciliation of tax revenue collections.

Petroleum pricing to be determine by international market

The Finance Minister said, as part of the fiscal policy measures, “Government can no longer continue to heavily subsidized petroleum products as these subsidies crowd-out financing for priority public expenditures”.

Before now the petroleum pricing formula was designed in such a way that adverse movements in the international prices of petroleum products and exchange rates are absorbed by government in the form of subsidized retail prices.

“It is undeniable that higher income groups capture most of the benefits from fuel subsidies which renders the current pricing formula a nemesis to pro-poor policy objective.

Government will therefore, commencing January 2011, introduce a new petroleum pricing formula to replace the current system based on the formula. Details of how the new pricing mechanism works will be provided by the Gambia Revenue Authority,” Hon. Kolley said.

He explained that the introduction of the new pricing formula will ensure a steady flow of revenues as the formula automatically adjusts itself to the movements in petroleum prices at the international market and exchange rates.

“Consequently, increase in pump prices will henceforth reflect fluctuations in international prices and exchange rates. In order to reduce the impact of such movements, a smoothening out elements has been built into the formula that allows retail prices to adjust on the basis of analytical outcomes based on three months moving average,” the Finance Minister said.