March 22, 2012 / 3:56 PM / in 6 years

Angola seeks to trim oil tax reliance

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.

The changes also give the tax authorities legal powers to penalise late payers and evaders.

“It is already showing results,” Luther said. “In place for just half of last year, the reform is estimated to have collected an additional $420 million until end-December, helping bring total non-oil taxes to around $7.67 billion.”

“The programme is set to run for five years, and one of the key goals is that by 2016 non-oil taxes rise to 16 percent of GDP from 9 percent now,” he added.

Another goal is to bring workers out of the grey economy.

An estimated 80 percent of working Angolans do not pay taxes and economists say a large part of an estimated 2.3 million private traders are street vendors.

Known as “zungueiros”, the vendors line the streets of the capital, Luanda, selling anything from top-end smartphones to combs and nail clippers.

Analysts say while the reform is generally a good idea, bringing the vendors into the tax system could be an impossible task and doubt the tax services’ ability to implement such deep changes and convince people it can benefit them.

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