THE BUOYANCY OF THE VALUE ADDED TAX ON ECONOMIC DEVELOPMENT: ITS DRIFTS AND CHALLENGES IN CAMEROON

Value Added Tax (VAT) is essentially the tax charged on a wide range of transactions, with a mechanism to offset the tax paid on inputs against those paid on outputs thereby enhancing its buoyancy and efficiency on economic development. As well, VAT expediently exhibits considerable diversity as regards, inter alia, the base of the tax and the range of economic activity to which the tax applies. Consequently, there can be room for disagreement as to whether a given tax is properly called a VAT or not. This paper, therefore, tries to assess and provide an understanding of VAT as a tax initially developed to meet the rising revenue requirements that could not easily be satisfied by the existing turnover taxes and the cascading nature which could seriously distort economic decisions. In this connection, the paper, thus, applauds the significance of the adoption of the VAT system in Cameroon - introduced first in its tax reform system in the 1990s - as an integral part of the adjustment policies engaged in the second half of the 1980s; to form the focal point in enhancing the economic development of Cameroon. Correspondingly, it accentuates the importance of the informal sector which was not taken into account in the new fiscal scheme. By so doing, it extends the methodological framework used in the analysis of optimal taxation to both formal and informal sectors. In fact, based on an earlier data from the Cameroonian survey on household consumption and the Directorate General of Taxation, it finds that in the informal sector some goods and services like clothing, tobacco, drinks, health and agriculture are currently unduly exonerated from VAT and however suggests that they should be included and taxed. The paper, in a nutshell, provides the drifts and challenges of VAT, and proffers the necessary recommendation for a buoyant and viable VAT system in Cameroon.