WTO Publishes TPR For Madagascar

by Amanda Banks, Tax-News.com, London

03 April 2008

According to a WTO Secretariat report on the trade policies and practices of Madagascar, published this week, the country's economy has recorded sustained real growth at an annual average of 6.2% since 2002.

This continued pattern of growth has been largely attributed to trade liberalization reforms, and boosted by the expansion of industrial activities, construction, financial services, telecommunications and transport.

The WTO went on to suggest that this performance would improve with a more transparent, credible and predictable trade regime that can be achieved by stronger multilateral commitments by Madagascar, through extension of its tariff bindings to more non-agricultural products, lower bound rates, and stronger GATS commitments.

Commenting on the situation with regard to the country's tax regime, the WTO Secretariat observed that:

"Government finance is facing considerable structural problems, particularly because of the common practice of giving tax and customs exemptions and the narrow tax base as a result of the size of the informal sector (estimated to be around 30 per cent of total GDP)."

"Improvements are expected as regards governance, including transparency in fiscal management. The primary budget deficit of some 4.4% of GDP in 2006 is financed by development aid, whose net total (grants less debt servicing) was estimated to be 10.4% of GDP in 2006. The European Union (EU) and its member countries are large donors to Madagascar."

A reform of the taxation system, to respect the principle of national treatment, would add consistency to Madagascar’s trade regime, the WTO argued.

It went on to suggest that such an improved climate would help Madagascar to attract the capital needed to exploit its vast potential and derive greater benefit from its participation in the multilateral trading system.

The international community could give Madagascar more help in its reform efforts by responding favourably to its request for technical assistance, it concluded.

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