Joachim Bilé-Aka and Michel K Brizoua-Bi, Founders, Bilé-Aka, Brizoua-Bi & Associés: Viewpoint

Viewpoint: Joachim Bilé-Aka; Michel K Brizoua-Bi

During the Cabinet statement given on August 1, 2018, the government introduced a new investment code to replace the previous one, which had been in force since 2012. The latest code is the third reiteration of the original investment code adopted in 1995. According to Emmanuel Essis Esmel, secretary of state for promoting investments in the private sector and former director-general at the Investment Promotion Agency of Côte d’Ivoire, the new investment code has been “revised to adjust and adapt to new development requirements. It is about meeting three requirements: optimising tax expenditure, targeting sectors and adding value to local content”. Specifically, these measures are supposed to provide investors with a more attractive taxation framework, offering a mix of two incentive schemes – tax exemption and tax credit – to support the goal of optimising tax expenditure. They also aim to provide innovative solutions that address the specific challenges faced by investors in general and, more specifically, small and medium-sized enterprises. The new code is being introduced at a time when Côte d’Ivoire is faced with the need to make a strategic choice between increasing domestic resources to finance its development or deciding to crowd in private investment in line with the objectives of the National Development Plan 2016-20.

While Moussa Sanogo, the secretary of state for the budget and state portfolio, announced at the end of 2017 that the level of Côte d’Ivoire’s public debt was close to CFA8.8trn (€13.2bn) and that the mobilisation of tax revenues should feature prominently in any fiscal consolidation strategy, the government seems to have opted for the system of tax incentives to attract investment by promoting the country’s legal and economic strong points.

A sound taxation policy is generally based on simple, fair and efficient tax rules. However, incentives can run counter to these principles because they add to the complexity of the tax system, create horizontal inequalities and distort production efficiency. In fact, a 2017 study presented to G20 members by multiple tax specialists from various international organisations, including Agustin Redonda from the Council on Economic Policies, showed that tax expenditures to promote investment are often ineffective, inefficient and associated with abusive practices.

It is therefore desirable that political authorities should repeal such mechanisms to some extent, or improve their design, transparency and management, especially as the tax element is rarely a consideration in investors’ strategic choices. Indeed, in its 2010 report, the UN Industrial Development Organisation concluded that the seven main considerations in the choice of foreign investment locations include political stability, domestic markets, skilled labour, economic stability, quality of life, transparency of the legal framework and local suppliers.

Lessons can be drawn from the aforementioned report. Côte d’Ivoire should seek to redesign its public policies so that the investment environment appeals to investors and their interests. For instance, working towards increasing the quality of labour as well as the number of available jobs by establishing centres of excellence for business training could help ensure investors are attracted to the country.

Nevertheless, considerable progress has been achieved on market factors, such as the abundant supply of raw materials and the positive trade balance, as well as on factors related to the business climate. For instance, Côte d’Ivoire ranked 139th out of 190 economies in the ease of doing business index in the World Bank’s “Doing Business Report 2018”, compared to 142nd out of 190 in 2017. The country must invest more in knowledge and skills development if it wants to expand. We possess the potential to transform into an economy that makes choices with the interests of future generations in mind.