The DRC Government initiated in the last few years a set of reforms in order to improve the business climate which has been extensively deteriorated over time. One reform in particular is the DRC membership to OHADA, the simplification of payments of duties to the State through the implementation of a single window, etc.
These actions are a result of the World Bank recurrent reports published in the context of ‘’Doing Business’’ which ranked the Democratic Republic of the Congo (“DRC”) at the 181st position out of 185 countries listed in the report.
Indeed, these studies by the World Bank are essentially based on the conditions offered by each country to do business which through ten (10) indicators that deal with the regulation and practices in each country and are selected according to essential steps of a medium-size company from its creation to liquidation. These are:
- Starting a business;
- Registering property;
- Dealing with building permits;
- Getting electricity;
- Getting credit;
- Payment of taxes and duties;
- Cross-border trading;
- Investors’ protection;
- Enforcing contracts;
- Resolving insolvability;
The indicator “payment of taxes and duties” is the indicator that measures the payments1, term of payment2 and total taxes and duties paid by a medium-sized company over a year3. The DRC is ranked 171th among 185 States while other African countries such as Rwanda and Malawi are respectively the 25th and 58th of the 158 listed countries. In this regard, Congolese tax authorities have often been criticized, among others, for processing a high number of payments in a year4, setting a relatively long term of payment of taxes5 and duties as well as excessively high taxes or rates6.
Thus, in order to remedy this situation, the Government of the DRC, having requested and obtained the habilitation of its Parliament by Law No. 13/007 of 22 January 2013 on the accreditation of the Government, took on 23 February 2013 a series of fiscal reform measures through ordinances-law:
- No. 13 /001 establishing the nomenclature of taxes, duties, and royalties due to Provinces and the decentralized territorial entities as well as their allocation;
- No.13/002 establishing the nomenclature of duties, taxes and royalties due to the Central Government;
- No. 13/003 on the reform of proceedings relating to the tax base, control and modalities of the collection of non-tax income;
- No. 13/004 repealing some provisions of law No. 006/03 of 13 March 2003 laying down procedures for calculation and collection procedures of installments payments and withholding taxes levied on gains and profits;
- No. 13/005 amending and supplementing some provisions of Law No. 004/2003 of 13 March 2003 on the reform of taxation procedures;
- No. 13 / 006 concerning tax regime applicable to small businesses in connection with tax profits and gains;
- No. 13/007 amending and supplementing some provisions of Ordinance-law No. 10/001 of 20 August 2010 on the establishment of the Value added tax;
- No. 13/008 amending and supplementing some provisions of Ordinance-Law No. 69/009 of 10 February 1969 on the schedular taxes on income;7
One aspect of the tax ordinances-laws that may be highlighted is the particular response of the Congolese Government to the criticisms, especially related to “payment of taxes and duties” indicator as noted above. It introduced remote electronic payment, the unifying tax returns in a single form, as well as unifying tax deadlines.
Indeed, remote electronic filing has been established by the Ordinance-Law No. 13/005 of 23 February 2013 amending and supplementing some provisions of the Law No. 004/2003 of 13 March 2003 on reform tax procedures which provides in Article 1 that: “They (the filing may be done either on paper or by electronic means. They determine, in these declarations and under their own responsibility, statutory tax bases and amount of taxes and other duties”. Tax returns made on papers, duly completed, dated and signed by taxpayers or their representatives shall be filed with the competent Tax Administration. Subscription terms of electronic tax filing shall be determined by an order of the Minister in charge of Finance. “
The main objective of adopting new remote electronic filing and payment is to curtail long queues observed at relevant tax administration services. Taxpayers were often prevented from meeting their obligations within the legal timeframe; hence being subjected to penalties thereto. This way, individuals and legal entities may, from their personal computers, fulfill this duty at ease. At first, only large companies will be able to use this system, while the Government is working towards extending it to all companies liable for paying relevant taxes.
Unifying tax declarations in one form and unifying tax deadlines are set forth by the same article 1 revising article 17 of the former text which provides: “every individual or legal entity liable to Professional tax on the remuneration and special tax as salaries of expatriate personnel is required to submit a declaration every month, within ten days following the month in which wages have been paid or made ??available to recipients. (…)“.
In addition, various reforms are being set up, including in particular the simplification of forms and procedures for paying taxes on profits, the merger of taxes and duties calculated on a common basis, and the consolidation of tax declarations on a single form and unique payment of taxes.
Furthermore, several best world practices shall be set up in the DRC, including in particular:
- The use of New Information and Communications Technologies (“NICT”);
- Fulfillment of tax obligations;
- The reduction of the frequency of tax declarations;
- The establishment of a tax by tax basis;
- The rationalization of monitoring;
- Reduction of tax rates;
- Simultaneous filing and payment of several taxes, etc.
Furthermore, the implementation of the reforms mentioned above requires the combination of a great number of relevant infrastructures for various performances. This includes a high quality of Internet, fast and reliable transmission of data, trained personnel, a permanent flow of electricity with no outages during the transmission of data to the tax authorities, etc. This is a matter of concern for the economic operators grouped within the Federation of Congolese Enterprises (“FEC”) and who has expressed this concern during a meeting.
In conclusion, the Congolese Government should therefore proceed efficiently and forthwith in effecting the tax reforms created some years ago in order to improve the business climate, especially since it is public knowledge that “the more the tax system is complicated, the more there are tax evasions and the more the tax rate is reduced, the more the tax basis is extended; such situation leads to a progressive reduction of the informal sector”.