Angola seeks to trim oil tax reliance

Thu Mar 22, 2012 3:54pm GMT

By Shrikesh Laxmidas

LUANDA (Reuters) - Angola's overhaul of its colonial-era tax system is designed to cut the state's reliance on oil output levies and trim the grey economy in a country where only one in five workers pays taxes, the deputy director of the reform drive said on Thursday.

Taxes on oil output in Angola, Africa's largest crude producer after Nigeria, represented almost 80 percent of tax revenues in 2011 and one-third of gross domestic product.

Oil revenues have helped Angola grow rapidly since the end of its 27-year civil war a decade ago. Analysts expect double-digit GDP expansion in 2012, but say Angola must diversify its economy to avoid suffering during oil price slumps.

Last year the government started to overhaul the tax system, which dated back to before independence from Portugal in 1975, saying it would lead to more sustainable financing for the state and boost non-oil sectors by creating simpler, easier rules.

"The old system was totally out of tune with Angola's current macroeconomic and social reality, and the structure which handled it never adapted with time," the reform's deputy director, Gilberto Luther, told Reuters. "It was all obsolete."

"It was a fiscal monoculture, in that the system made it easy to become excessively dependent on oil taxes and didn't push taxation on real estate, commerce, industry, farming or even investment."

The programme has cut taxes on corporate profits and property ownership to convince investors it is not worth evading taxes, with the goal of getting "more people to pay less taxes rather than a few people paying more".

It has also widened the list of products and services liable for consumption and investment taxes. Luther says these measures bring Angola into line with other sub-Saharan African nations, both in terms of what is taxed and how much is levied.   Continued...

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