Mauritania, Taxation and Self Employment

Youssouf El Yedaly: "The lack of a simplified tax system for young entrepreneurs is likely to encourage the development of the informal sector, which employs, according to the statistics of 2017, 63% of the active population against 43% in 2012. "

By Youssouf El Yedaly *

Let youth employment be a solution to a problem, not a problem to be solved.

The business climate in Mauritania has improved significantly in recent years, thanks in particular to important measures taken by the Government. These measures concerned in particular the simplification of business start-up procedures, the abandonment of the required minimum capital, the reduction of company creation costs, the simplification of procedures related to cross-border trade and easier access to credit.

The Mauritanian company’s tax system has, in turn, undergone significant improvements as regards the guarantee relating to litigation, the recovery and repayment of VAT credits. Tax audit procedures have been clarified and disseminated to allow taxpayers to better understand their obligations and rights in respect of declarations and data communications used as a basis for calculating taxes. There has been a drop in general income tax and a 15-point reduction in the tax rate on industrial and commercial profits, in addition to the right to deduct all of the flat-rate minimum tax. regime of the real.

This set of measures has resulted in the creation of about 13,000 entities at the single window. Today there is a simplified regime applicable to foreign entities that do not have a permanent establishment in Mauritania, and another simplified regime applicable to oil companies. Mauritania also has a free zone in Nouadhibou which has its own tax system.

These mechanisms put in place were particularly aimed at encouraging foreign companies to come and invest in Mauritania, they had a positive impact at this level. However, they have not yet allowed young national entrepreneurs to emerge and develop medium-sized structures that can create stable jobs and contribute to the recovery of the economy through household consumption.

The lack of a simplified tax system for young entrepreneurs is likely to encourage the development of the informal sector which employs, according to the statistics of 2017, 63% of the active population against 43% in 2012.

Unemployment is largely in the hands of young people, and this is largely taken into consideration in the Government’s policy, which has decided, among other measures, to develop vocational programs, promote self-employment, set up vocational training short-term financing and to support young entrepreneurs, especially women.

The purpose of this article is to make proposals in the sense of promoting self – employment for stable employment at the regional level through the establishment of a simplified regional scheme for the benefit of young entrepreneurs.

Indeed, the forthcoming installation of the first regional councils is a real opportunity for the implementation of the Government’s employment and entrepreneurship promotion policy, an important lever for the revival of the national economy.

 

Taxation of the company’s main financing resources in Mauritania

As part of its project to encourage foreign investment, and the setting up of Public – Private Partnership involving internationally renowned companies, the Government of Mauritania has put in place certain measures to reduce the tax burden on the economy. business. Among these measures, the establishment of a free zone and the creation of two simplified regimes, one in favor of oil companies, and the other open to foreign entities that do not have a permanent establishment in Mauritania.

a) Free Zone of Nouadhibou
The Nouadhibou Free Zone offers significant tax benefits to companies wishing to invest in the area. A full exemption from tax on industrial and commercial profits for the first 7 years, followed by a reduced rate of 7% until the 15th year. It is from the 16th year that the approved companies begin to pay the BIC at the rate of the real regime of common law.

These are important savings for the long-term development of businesses in the area, which is likely to promote youth employment. The tax benefits do not apply to the Wages and Wages Tax, which remains mandatory for him to withhold income from employees.

 

b) Simplified regime of application to oil companies
It is a special scheme established by law 2004 – 29, for service providers who have signed service agreements with oil companies based or operating licenses in Mauritania.

The foreign enterprise covered by the law, refers to a company incorporated outside Mauritania, although it may have a branch, an office, facilities or other types of representation.

The criteria for the qualification of  » foreign company  » are:

– be a legal or natural person of foreign nationality;
– be established abroad;
– To have signed with a petroleum company or with a direct contractor (subcontractor) of an oil company, a contract for the hiring of services for oil operations in Mauritania;
– Exert exclusively in Mauritania only a service contract activity for oil operations.
The company wishing to benefit from the simplified scheme, is asked to make the request 30 days from the signing of the first contract of service. It is the Director General of Taxes who signs the approval within one month.

The accreditation is granted for a period of 3 years, renewable.

The scheme concerns the BIC and the ITS. The taxable BIC is assessed at a flat rate of 16% of operating income. The method of payment (collection) is withholding. The tax rate is the common law rate. For the calculation, the operational income is multiplied by 16% then by 25%.

 

c) Simplified common law scheme
It is applicable to foreign natural or legal persons who do not have a permanent establishment in the national territory and who perform exclusively services of all types for the benefit of natural or legal persons subject to the system of real profit.

Approval issued on request addressed to the General Tax Directorate, is granted for a period of 6 months. The request must be sent to the DGI 20 days before the start of the activities.

This regime consists of a withholding tax to be levied by the debtor established in Mauritania on the income of foreign service providers.

The withholding tax rate is set at 15% on the amounts paid by resident companies to service providers.

These different tax systems combined with other measures taken by the Government, such as the reduction of the tax rate on industrial and commercial profits and the abandonment of the general income tax, these various actions have not negative impact on improving the Mauritanian state’s fiscal resources (see chart).

Indeed, thanks to the fiscal resources, the budget forecasts recorded a development of 152% between the 2007 fiscal year and that of 2018. Thus, the budget forecasts went from 20.9 billion MRU to 52 billion MRU for the period considered.

In the same period, fiscal resources recorded an improvement of 245% in terms of budget forecasts. Which forecasts are determined by considering the significant rates of achievement from one year to the next.

These budgetary performances enabled the Government to finance its operating expenses and to contribute considerably to the financing of development projects in various sectors of the national economy, particularly the fight against poverty and youth employment, despite the strong presence of an informal sector occupying 63% of active persons.

The informal sector is characterized by a strong dominance of general trade and services activities. The manufacturer represents 26% of the activities carried out informally. Unemployment in Mauritania is urban, like most African countries. It particularly affects youth under 24 years of age.

This set of data is largely taken into account in state policies, which is committed to further developing vocational streams, supporting entrepreneurship and setting up short-term financing systems.

The development of vocational streams is necessary, only it will have to be done taking into account the real needs of the labor market, and the recent statistics on the characteristics of unemployment with regard in particular to the zoning, the age and the nature of the activities. exercised in informal.

The recent establishment of the regional councils and their forthcoming establishment, may constitute a real opportunity to make youth employment a solution for regional economic development and not a problem to be solved. To this end, other tax incentives will have to emerge, as well as the establishment at regional level of basic infrastructure necessary for economic and social development.

Towards a tax regime at regional level

The financing system for decentralization in Mauritania has proved its worth and has made it possible to build several basic infrastructures necessary for local and regional development, despite the fact that it is characterized by a low mobilization of local authorities’ own resources. a heavy reliance on state subsidies to meet basic operating needs. This is notably due to the presence of a local tax system that is not very profitable and difficult to mobilize before a municipal service that is not yet optimal.

Regional councils must capitalize on this experience of more than 30 years, and work for the creation of regional taxation based on the creation of value. This taxation can make its way through the creation of tax regimes specific to the regions and which are likely to encourage young people to invest outside Nouakchott and Nouadhibou.

Instead of creating grants based on tax revenue from value added tax or any other revenue managed by the Treasury, a funding mechanism needs to be created that allows regions to access stable and manageable financial resources.

As is the case with the Nouadhibou free zone and the tax advantages granted to foreign entities investing in Mauritania, it is recommended to decentralize the tax base and make it available to the regions. This can be done through the granting of tax benefits ranging from total exemption to the reduction of rates and scales applicable to the main tax resources (VAT, BIC, ITS …), for the benefit of young people who create small businesses in regional level, or which transfer some or all of their activities from the center to the regions.

Thus, we will make self-employment a cost-effective solution that will allow regional councils to have stable financial resources, create sustainable jobs far from the dominance of the informal sector and contribute to economic recovery through consumption at the level of the economy. regions.

This regional tax regime will have to go beyond the simplification of the taxation applicable to the company, and benefit employees through measures such as the enhancement of the tax deduction applied to ITS tax and the reduction of rates.

In return, and for better governance of public and private finances, young entrepreneurs will commit to reporting on their annual results by putting in place the necessary mechanisms for the production of reliable financial data on their sectors of activity and their performance. financial. The employment priority will also benefit the youth of the region and surrounding communities.

About Youssouf El Yedaly

Expert accountant, specialist in financing decentralization, Youssouf El Yedaly holds a master’s degree in Engineering Training from the University of Rouen. He is a consultant to international institutions and is Senior Associate of the Mauritanian firm ICF – Consulting and its network Experts Online Area (3EL). It capitalizes on 22 years of experience in various fields including decentralization and local development.

e-mail: icf-3el@outlook.fr

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