FILE cr y RSTRCTE

AW15Vol. 2

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

THE CURRENT ECONOMIC SITUATION

AND PROSPECTS

OF

SENEGAL

(in seven volumes)

VOLUME II

PUBLIC FINANCE

June 8, 1970

Western Africa Department

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C.TT13DLVXC'V VY\TTT~T TftTVKTrr

t-AAI-UIy Un±ILU; CFA Frar,I (CF

Before. August 11, 1969:US$ 1.00 = CFAF 246.85CFAF i,0O00 US:s h.05

After August 11, 1969:US$ 1.00 = CFAF. 277.71CFAF 1,0uu= uS$ 3.60

TWEIGHTS AND MEASURES

1 Metric Ton (t) = 2,205 lbs.1 Kilogram (kg), = 2.2 lbs.1 Kilometer (km) = 0.62 mile1 Meter (m) = 3.28 feet

COMPOSITION OF THE MISSION

This report is based on the findings of a mission whichvisited Senegal in October and November of 1969. The mission wascomposed of the following members:

Cornelis J. Jansen Chief of MissionHeinz B. Bachmann Chief EconomistCarlos Merayo General EconomistJacques Baldet Fiscal EconomistMichel Palein Agricultural EconomistPietro Rava (Consultant) AgronomistRobert A. Moal (Consultant) Fisheries ExpertWybold van Warmelo (Consultant) Industries ExpertAlain Thys Water Supply ExpertAbdallah El Maaroufi Tourism Expert

This volume was prepared by Jacques Baldet, International Monetary Fund.

,DV: AFT ,v -T jws ^ T

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS

I. TREND OF THE LAST FIVE YEARS 1

Scope of the Study 1iviethodology 1General Trends for the Period 1964/65 to 1968/69 2Public Savings and Investments 4Financing the Overall Deficit 5Role of the Public Treasury 5Treasury Transactions 9

II. STRUCTURE OF THE CURRENT ACCOUNT OF PUBLIC AUTHORITIES 16

Current Expenditures of the Central Government 16Current Revenues of the Public Authorities 21Taxes on International Trade 24Smuggling 33Taxes on Production and Domestic Consumption 36The Problem of Personal Exemptions 43Tax Incentives for investment in Senegal 45Operating Accounts of the Public Enterprises 46

III. PROSPECTS FOR 1973/74 49

APPENDIX I: PROJECTIONS OF REVENUES AND EXPENDITURES OF TIEPUBLIC SECTOR

STATISTICAL APPENDIX

Public Finance of Senegal

SUMMARY AND CONCLUSIONS

1. Although the growth of Senegal's economy was seriouslyaffected by the breakup of forrLer French Wlest Africa and the result-ant loss of external markets, the country's public sector not only keptthe vast administrative infrastructure set un during the time of theFederations but actually grew in size as the years passed and Stateintervrenti on wi dened i-n Sopne -

2. The pli - sector consis ts first of the whole range of servicesof the central government, regional and provincial bodies; second, at thelocal level, the mlnicipalities; annd finally, a n.um.ber of public enter-prises which theoretically enjoy financial autonomy but are in practice

ac^w tbleto the XMn-Irstries. In 196 1tese -public autho.-itie ac^o1-ted.CL V VA J.AA A. U A. In .LJL L j' FtA VL4 J .A.J. ~ -

for 43% of all payroll jobs in the modern sector while government leviesa,mountlek- to alr.ost- 2O0% of. Vile GDP; the public seclor thus occupied adisproportionate place in an economy with relatively limited growth

V414-4--".possib.i-litie.M

3 . WJULLe' t cen.tral goverUnmenL spen[ing began wi th ver-y r.oduerateincreases during the first three years of the period 1964/65 to 1968/69but rose fairly sharply during the last two years as a result of thepay raises granted following the labo;' unrest of May 1968. Current revenues,on the other hand, stagnated because of the decline in economic activity

due to the depressed market for groundnuts, the main source of wealthfor the Senegalese ecqnomy. As a result, the central government's grosscurrent savings fell steadily throughout the period and almost evaporatedentirely in 1968-69.

4. The public enterprises, for their part, showed gross savingsof approximately CFAF 1.3 billion a year, while the local authorities,after a rally in 1966/67, ended the period with practically none. Allin all, public sector gross savings declined steadily over the 5-yearperiod, from just over CFAF 5 billion in 1964/65 to 1.3 billion in thelast year. As a percentage of total domestic savings, the share ofpublic savings dropped from one-third at the start of the period tobarely 10% in 1968/69.

5. With the decline in public savings and less external aid thanexpected, public sector investment was more than 50% below the levelanticipated in the Second Four-Year Plan. Total capital expenditurefrom public funds amounted to CFAF 33.5 billion. If we include capitalsubsidies to the public enterprises, central government capital expendi-ture amounted to about CFAF 24 billion during the four years of theSecond Plan. Three sectors were eiven prioritv for development, namelYsocial infrastructure (28.8%0), agriculture (24.1%) and transport (16.2%0),which together absorbed almost 70% of the Government's capitalexpenditure.

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6. Foreign aid financed one-third of the central government'sdevelopment expenditure. Budgetary savings financed another third. Theremainder came partly out of the surpluses held by the Stabilization andEqualization Funds, but as the budgetary situation worsened,the Treasurywas obliged to make up the rest, drawing heavily on centralized cashholdings. Faced. however, with liquidity requirements, and rather thanrisk having to negotiate advances from the central bank, the Treasuryopted to defer the payment of some settlement transactions, therebyaccumulating liabilities that will swell the volume of the maturities duein the orvning finanncial yearS.

7. Thius at the hbinning of the Third Plann nmim-erous problemswere facing the Senegalese public finance authorities, all lingering onthe qnmn da ilenmna* honw tn rpleansP biudepanr sav-ingsn. w;it.hoit. which tlhe

projects contained in the Third Plan would be seriously jeopardized.

8. From the point of view of current revenues, the already veryhigh fiscal buLden is a major obstacle to increcasiAng 'pub"lic revenue byraising the rates of existing taxes. This expedient has been heavilyeAxpJoAJJe x n V L e pax U, cIst, U and. ary L.5UliIV± usU4.Lu±uIi UV D vW QCIA .LIUdU WVU..L

undoubtedly encourage tax evasion which is already a big problem. InU±iJ.- 4. ULMe ULLW±tL'1±,U t.JIU1kJdC.±11 IA) LdiUcll UUtU 0411U8ri4J11g bl±Ouurll

desirable, will not suffice to curb a practice which is not entirely dueto Uthe !X±YYe-s .lack U.o. UcVii s.iJri. It, WoU-id appear unau a ZoU±LUUtW

should also be sought in the sphere of fiscal policy. A review of thecustoms tariff, conducted as part oI a more dynamic foreign trade policy,should make it possible to revise some rates whose present very highlevel lies at the root of current tax evasion. In the same way, asimplification of the tax system by consolidating some taxes and abolish-ing those that have a poor revenue performance would relieve tax officestaff of the burden of numerous jobs that yield little return and wouldallow them to keep a more effective check on the basis for tax assessments.Moreover, a careful evaluation of the cost of tax concessions granted tocompanies investing in Senegal would be desirable, since it would givethe Government a clear picture of the effects such budgetary sacrificeshave on the economy as a whole.

9. As for operating expenditures, failing a much-needed cutbackin staff - always a delicate and controversial matter - the authoritiesshould gradually introduce a more selective personnel policy by notfilling vacancies as they occur in the overstaffed lower grades and atthe same time going easy on recruitment at supervisory level. Expendi-ture on maintenance should not be sacrificed, as has been the case inthe past, since it cannot be postponed indefinitely, and purchases ofequipment should be limited to those services that are clearly under-equipped, especially at the local level.

10. It is unlikely that any marked improvement will occur in theimmediate future. The measures taken recentlv to collect income tax atsource and a number of rate increases (poll taxes, statistical tax, etc.)

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should enable the government in 1970 to release the internal resourcesneeded to finance the arrears of the Second Plan.

11. For the development expenditure scheduled in the Third Plan,Senegal will no doubt have to rely largely on foreign aid during the firstfew years. However, the economic outlook based on the sectoral projectionsfor 1974 iustifies a certain amount of optimism.

12. On the basis of these projections (made at constant prices, base1968), the central government's current revenues should rise by more than29% bet.ween 1967-68 and 1973-74, compared with an increase of only i16.5%in current expenditures, leaving a total gross saving of almost CFAF 7 bil-lion for 1973-74. However, th.e central governient's current account opera-tions are predicated on two basic assumptions which must be fulfilled ifthe governm.ent is to be able to contribute ou t of its own- resources to.ardfinancing the Third Plan. The first assumption is that pay increases inexpendit1re on prchase of mnterial .rill be held to 2.5% a year; the sec-ond, that effective steps will be taken to combat tax evasion and smuggling.The municipalities shou d be able to make a contribution to investment ofabout CFAF 500 million in 1973-74. This saving could be made availableif the r-.unicipa Ities continue their current policy of financial reorganiza=tion and persevere in their efforts to cut back on staff. As for the stateenterprises, -whose annual gross savings have been in the region Of CFAF1.3 billion in recent years, it seems reasonable to expect them to contri-bute at least as much in the next few years. The difficulties which theCaisse des Prestations Familiales (Family Allowance Fund) is likely to facein the near future may be offset by the improvement in management of tneTransport and Railroad Authorities as the result of steps taken by theformer as regards traffic management, and by the latter as regards staffingand fares policy. The government agencies' share in gross savings has beenconservatively estimated at CFAF 1.5 billion in 1973-74.

13. This would give a total of almost CFAF 9 billion to be providedby public sector gross savings in 1973-74, against CFAF 1.3 billion in1968-69. Obviously, this improvement will only be possible if economicactivity recovers as predicted for each sector.

I. TREND OF TET LAST FIVE YE4PLS

Scope of the study

1. The crite a used to selec+ the vnrio- c^Pnnts of t+e p-b_I-^

sector whose economic and financial operations are covered in this report.wee asedo at consideratior,s tabher uth, or, a.,^"Ut-e ana'ysis o.L

the legal relationships between them. That is why, in addition to theawUUrLi .LLL pUroUI e- L.. t. c 'llt ~ LoveL-±.Vd_L ,dLU Ulilh regr ' U±

local authorities, we have included those public bodies directly respon-s5blUe 1 rlseULULLUdJ. WIU andJ.dLk.LI DIfaals Iajveri Uo tlhe appupv±iaue JInIIsLr.Les.

These bodies, known as public "agencies" or "enterprises" depending ontheir activities, are in fact closely linKed to tne central goverrr-.entas regards both the formulation of their budgetary policy and supervisionof their activities. Tnese agencies and enterprises are listed inTable 19. The list does not include a number of bodies which, thoughtaking a notable part in Senegal's financial economyn, have not suppliedall the accounting or statistical data needed for an analysis of theiroperations: these are marketing offices for certain agriculturalproducts. Likewise, a number of other bodies such as semi-publiccorporations have been simply omitted since they are corporations whosecapital is, as their name indicates, owned jointly by the State and theprivate sector, and their activities are in every respect comparable tothose of private corporations.

2. Another point to note is that inadequate information made itimpossible to consolidate the operations conducted by the public sectorcomponents listed for the entire period under study. They were, how-ever, consolidated for the last two years of the Second Four-Year Plan,thereby making it possible to erpress the position occupies by the pub-lic sector in the Senegalese economy in figpres, if only for ashort -oeriod. Consequently, only the operations of the central gov-ernnent and the r egional authorities (cconsidered joint2y), on theone hand, and the finances of the local communities (municipalities),on the other, could be consolidated for the entire duration of theSecond Plan. The onerations of the public enterorises will thereforebe dealt with in a separate section.

Methodology

3. Some changes were made in the classification of budgetaryoperatio.nse andl ofW t.he arrrTn+l< specia:lacoruntnl in ordenr ton alignthem as far as possible with the categories used by the UN Depart-ment of Ecoom4c an.d Social Affairs Account "as also talern of the

adaptations and simplifications made by that organization in the budgetAreclassificto for-- -- Africar co-,tries (Reor of -the -- 1 --kpo~~~ ~ .%C U.L'JLA JJ. t.L. 0 ~'UI L .L %.LL.'UV%J.L i 'J.L VL&%- UV'0.L Z%.QJL%Jj SJ1I

problems of budget reclassification and management in Africa - AddisAbUab, L145) Septe,iUbe 19617U)J. AUlUeLtion IhaUs bUeen Ura-v,. tUo tLhesa A c

in the text relating to the accounts concerned or in footnotes to the

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tables. A case in point is the change in the classifications of currentbudget expenditure, particularly the inclusion under personnel expensesof Senegal's contribution to foreign technical assistance costs. Thenumber of chanees has been kept as small as possible so as to ensurethat our presentation is not too different from that given in the offi-cial r-e;orts of the Senegalese IInistrv of Finance. These changes weremade in order to point out the significant balances .ind figures, anid toavoid duplication and artificinl inflation of fimires.

General trends for the period 1964/65 to 1968/69

4. Movement of the current account. The salient features of pastdeve-Lopmentsi . "Senegalls pubic nan&ces aeclearly i"us+r-ta+e Jn the

graph on the next page, which shows the movement of gross currentsavings an-d in,vestm.en.t by central ad local gover-nm1ents for the fivefinancial years 1964/65 to 1968/69.

5. This graph, which is based on the figures given in Statistical Ap--?endix Table 1 shows clearly the diametrical'ly o-pposed moverients of cuirentrevenue and expenditure. The former, expressed as a percentage of theGDP(at current prices) so as to eliminate the influence of prices, showa clear 9% fall over the period, despite a slight recovery towardsthe end. Current expenditure, after being contained and even reduced -

in relative terms - at the beginning of the period, was 2.2% higher inthe last year than in the first. Several factors account for theseadverse movements.

6. There were three main reasons for the falling off in currentrevenue. The first is the reciprocal tariff concessionsbetween the Common Market countries and the associated African andMalagasy States, which began to take noticeable effect in 1965/66.At the same time there was a marked drop in imports during the firstthree years of the period under review, followed by a recovery towardsthe end. Finally, there was a drop in export revenue caused by thereduction in the tax on groundnuts necessitated by the adverse inter-national market and by two successive bad harvests in 1966/67 and1967/68. The compensatory fiscal measures taken by the Governmentaffecting both indirect taxation and income tax were insufficient tooffset the decline in revenues which, despite an upturn at the end ofthe period, were still, in absolute terms, lower than in 1964/65.

7. At the same time the government, well aware of the adversefactors affecting public revenue performance, endeavored to holdcurrent expenditure down to a level close to the movement of thegross domestic product. It therefore followed a policy ofausterity desiened to remain in effect until 1966/67. Accordingly,for the first four years current expenditure decreased as a percent-age of GD.nP- The slight increase iD personnnnel eXpeDii;tures was

¶ uvKNI1rLr bAVIM70 MWiJ lNrvrakr1LL

ki ;n peFctnLage o' wDP)

TLUIOI FAUCR ENT !REVENUE

+ 19% -

I 'i

+ 17%

I ; . CURRENT| 2XNDITU

+ 16% I

6 %

I ^, ~ ~ ~~~I a

+ 5% CAPITAL EtPENDITURE

+ 3%

+2% 1+ 2% _ WKKENT MVINGS

+ 1%

-1 4

-21% T,AL:FIT

- 2/o

-4%- ] 1964/65 1905/66 1960/67 1967 /68 1960/69

offset by a leveling-off, or even a reduction, both in absolute valueand as a percentage of the GDP, in the other categories of expenditure.However, this trend was reversed at the end of the period. Followingthe disturbances in May 1968 the government was forced to grant heftywage increases to public service employees, and persomnel expenditurerose by more than 10% in nbsolute vnliipe over the Iast tw.o vears;- andby the end of the period current expenditure was 11.9% higher than in196)V-65.

8. The opposite movem.ents of the central governm.ent's currentoperations inevitably resulted in the gradual disappearance of itscurrent- O-C--n-sA hese drope aw- Just over CFAFM 4 l'o. ir.14- June~UJJ. ~L L DdVL~ o LIUO U1LVjJjJt:U LUI JLAL U IJI.vuJ. Q.L-V 14 LI..L1 I-LULJ.L .JLL UULiAlz

1965 to practically zero at the end of fiscal 1968/69. For their~~~~~~~~_ 1 A _ |L_ 4 __ oL_.- _-- _ __-L _L_- pardl ,s lthe grUos siaVLngs UO. U lt, JjIjLLJ_U t )d±l D.Lt. dI-u 1IUUgIl; LU lV GkaVt, UeiL

about CFAF 1 billion and those of the public enterprises in the regionof ura' 4.5 billion during the last five financial years. rruul±csavings for the period can therefore be put at about CFAF 14 billion,including 7.8 biilion for the central government. Tnis figure is infact only two-thirds of the target set in the Second Plan for publicsavings.

9. Despite the rather low level of public savings, the govern-ment, obligated by actions already committed during the First Planwhich had to be partially paid for in 1964/65 (the last year of thatPlan) and also by commitments made when the Second Four-Year Plan wasdrawn up, had to make an investment effort which, though well belowthe level planned, had to be sustained throughout the period. Theinvestment effort should be evaluated at three levels: central govern-ment expenditure including investments on foreign aid (although theseare recorded in the special accounts of the Treasury), investmentsmade by the municipalities, and finally those made by the publicenterprises.

10. For the four years of the Second Plan the central government'sinvestment expenditure totaled more than CFAF 24 billion (see StatisticalAppendix Table 7). The buLk of this money went to four sectors which aloneaccounted for 63% of investments. In order of importance these werethe rural sector, accounting for 83% of the expenditure on improvingagriculture, particularly the groundnut sector; transport and publicworks; housing; and lastly, to a lesser degree, education.

11. The information on investment expenditure by the municipali-ties and nublin enternrises does not Drovide an exact idea of theirshare in public investment. For some years no precise figures areavailable and for +he .mvnicipnits t.heren is no hrenkdown by sector.However, the data we do have suggest that the municipalities' investmentduring the Second Plan.was about OFAh 2 billion, while that of thepublic enterprises amounted to some CFAF 11 billion. The formerconcentrated ?YnAnllr on hv rA" w4 engineerng, vnw . 4i-nn1 facil ti+es and

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housing, the latter on transport, communications, housing and

12. This lpdi t.o a total actuanl public sector investmentduring the Second Four-Year Plan of almost CFAF 34.5 billion. As wje havesaid, this fgure seems small compared T.ith +he estanrtes .mnde in thePlan, which, in its revised version, called for a total of more thanGFA 73b. Il-A-t,tal pe.fo .nce thus cm less - _. * way -_meeting the Plan's targets. In fact, if we deduct expenditure on

ments made during the First Plan, viz. CFAF I).C92 billion 1/ the

e.L. U. v ml__ UDLI * I _ __ _t r U WAt* ou _ _ _ * l

13. ne Iinancin.r1gIT±CU± z iaing thILe puulcL ;t::L;SUe IUX-Lwgthe period under review, which we shall now discuss, undoubtedly helpedto slow down the rate of public investment. They can be attributed tuothe gradual dwindling of public savings over the years, the fact thatforeign aid was less than expected, and problems of treasury liquiditythat have been growing steadily in recent years.

14. Since our information on municipal and public enterpriseactivities is incomplete, we shall have to discuss their financingseparately, in the interests of clarity. We shall deal first withthe role played by the Treasury in financing central governmentoperations. Two short sections will then be devoted to themunicipalities and the public enterprises.

Role of the Public Treasury in the performance and financingof Senegal's Government operations

15. In French-spealcing African countries, the Treasury playsa central role in public financing since, in addition to collectingrevenues and making payments for the central government, it performsthe functions of public sector banker, among other duties, as weshall see.

16. To help in understanding the system we have devised asummary table of Treasury operations based on government accountsdata (see Statistical Appendix, Table 8). Part I of this table cofi-crises the performance of budget operations provided for in the annual

innn TnhTS i.P. hicirlet onerations Droner and soecial TrPnsurv naccount,

operations. If the overall balance of these operations shows a deficit

1/ This figure includes CFAF 943 million spent in 1965-66 underaccount 30.16 "First Plan settlements" and CFAF 549 millionrepresenting total payments between 1966 and 1969 on creditsunder the infrastructure budget head 899 "First Plan arrears".

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(Thich has generally been the case in Senegal), the negative balance repre-sents the central government's financing requirement. Part II of the tabledescribes the transactions that were made to finance the overall deficit,grouped under two main heads: long-and medium-term borrowings andTreasury operations proper.

17. In Senegal the Treasury acts first of all as the State'sticashierif and is thus repnnsib1e for hAndlino nublie monies. Tnaddition to making collections and payments in the course of budgetnerformanee the Treasurv keepns trArle of Pment4i tiresq and revenuAeq of

special accounts. These accounts record the performance of specificoperntions, the outeco.e of which zwaeu e o n gosheorndA the snninlbudget framework and which are largely financed from special appro-pa+o nTJ.&%e ci-ctfnces 4us te J hir.. b,e4n6 S..n&lA oside the

regular budget, although the special accounts are subject to annuallnme tiv+J nrn. T4* - b,- -- +-A *1.h+ ,.+-- 4h1, - "-, 44 v;rvi,.nA-6 ^ v_ _ w - 1A - ^ 6v w _C*a v y ww LAWW^% vW4v . VVLLacL WAJ Issw vLsW*ycsvsvW from earmarked resources they do receive a budget appropriation and inC& ever.t there is an Cre.ua3'-otdci' ong ar-JLAC e.nd-0of-yVear dfiiwhich they may cause. Special account balances are carried forward fromyear to year but since all goverXnment J-L-IeU are cetr-a' ze anthTreasury these balances, whether surplus or deficit, affect the financing

__O1 w*X: __ 4>1*A_4r s

18. hne nuwber of special accounts varies; in financial 1968/69there were forty-five. They are usually grouped in seven categories:special appropriations accounts, trading accounts, internationalsettlement accounts, monetary transaction accounts, loan accounts,advance accounts and guarantee and security accounts. without goinginto the details, which would be of little interest here, we shalldeal only with those that merit further comment because of the economicand financial importance of the activities to which they relate.

19. Of the special appropriations accounts, three groups deserveparticular attention. First of all two special funds: the Road Fund,for expenditure on road infrastructure and related public works. Thisfund receives an allocation from the equipment budget. Its operationsare consolidated with those of this latter budget for public investmentanalysis purposes. The other special fund is the National Pension Fund,which receives an allocation from the ordinary budget. This showed asurplus up to and including 1966/67, but the steady rise in expenditureover the last five years caused a net drain on the Treasury of CFAF 233billion and 415 billion for 1967/68 and 1968/69 respectively. Correctivemeasures, such as an increase in employers' contributions, should be takenpromptly to upset the present trend.

Investment expenditures from foreign aid (see balance ofpayments) are recorded in some ten "special appropriation accounts"depending on the source and nature of the aid (loans or grants). These,too.have been consolidated with other capital expenditure in the tablesshowing the total public investment effort. These are tied loans fromthe FAC. USATD and the Federal Renublic of rtermanv.

7-

20. It sometimes happens that expenditure on tied loans is settledhefnre the lons have actuanlly been diz bursed. Tn this case the mareasuTradvances the funds which thus represent for it a supplementary expense,in Some cases the situ-tion is reversdA Thuls in 196OA/66 nnA 1O64/67the Treasury had to advance funds totaling CFAF 50 billion and 128billion respectively, T-jhile - other years it received supple.enTr

resources of CFAF 124 billion (1964/65) and 144 billion (1968/69) dueVW the~ fac+Il t.otZ VLhe aiLd disbursed in1 those ye'ars -was -L,ore thcu .acualC

Treasury expenditure.

21 To understand the tables included in this report, it

should be noted that part of the investirents financed fromexternal aid does not appear in either the development budget or thespeciai accounts. This part consists of certain expenditures out OfFAC grants and those subsidized by the EDF, the funds of which are madeavailable to the beneficiary and entered direct into CCCE (FrenchCentral Economic Cooperation Fund) accounts, i.e. they do not appear inTreasury accounts. However, this investment expenditure has beenincluded with the rest in calculating the total amount of public invest-ments in the years under review.

22. A third group of "special appropriation accounts" deservesmention insofar as it represented a fairly large volume of resourcesfor the Treasury which helped to offset other expenditures by theTreasury during this period. Under the Decree of June 30, 1966, thecredit balances of the Stabilization and Equalization Funds for a numberof agricultural produce items (wheats and flours, other cereals and foodcrops, sugar and groundnuts) were taken over by the Treasury. The mostimportant of these were the surpluses held by the groundnut pricestabilization fund and the groundnut transport equalization fund. TheseFunds are maintained (see paragraph 93) by the proceeds from earmarkedtaxes collected at the moment of export or sale to the consumer of oilsor groundnuts and by the re-unds they receive - normally 6% - of theexport levy on these products. They also receive EDF aid to subsidizegroundnut exports. The basic function of these two Funds is to subsidizethe groundnut marketing authorities, i.e. make up the difference betweenthe proceeds from exports or sales of groundnuts to local oil manufactur-ers and the total cost of marketing. They also bear the cost ofequalizing trnnsportation costs and distribute the Furonean grantsdesigned to promote groundnut production. The surpluses of these Fundshad to he depnnois.ed in t.he Trepnmrvfs -,nepial P ctirnts for the firsttime in 1966/67 (Decrees of June 30, 1966 and July 19, 1967), the yearin which the Treasurv cnmpleted the centrn1i7itionn of all public Thincis.

From that time on the stabilization funds' surpluses have helped financethe bud-et defiort to theo t spne of a out CFAF 6sol.5 bil seion.

the loan and advance accounts. The distinction between them is a matterof duratior, and i.-,terest r-ae. T- -r ge-P-" +.hy m h-arn two

years and carry interest at least equal to the central bank's rediscountr A-ances are 'or less thar. 2 years, noI.LL, y wihut .intre+

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and liable to be consolidated into longer_term loans in the event of non-reimbursement on maturity. During the period under review the Treasurymade advances of this type totaling over CFAF 6 billion; 2.5 billion ofthis went to the public enterprises (mainly the Transport and RailroadAuthorities and the S.D.R.S.), and the remainder to private entities andsuch public bodies as the B.N.D.S. (National Development Bank) to financegroundnut fanming. Of these CFAF 6 billion, almost 4.7 billion were re-imbursed or consolidated in longer term loans (more than 2 vears). In thesame period loans totaled CFAF 2,259 million, of which 1,498 million wererepaid- The mnin recipienits of these lonns were the Transport Authorityand the B.N.D.S. At the end of the period the Treasury held assetst.t.glina (l"AF < _( hillinn irn l.^nn_ nnA _ 1r_n,_c- Th_ .^n^q+.inn _nriqaq t..

what extent these tied-up assets will be recoverable in the near future.The answer' clearl y depends on the solven.cy of the pm-cip- Adebtors. Aswe shall see later, however, for years these debtors have been troubledby administration diffic Uties which reguJarly res ,t in operatingdeficits. In other words, Treasury loans to the Transport Authority,

exnp e arA775A_A +1 A1- _ : --_A 4A AZA 1- 4 r -_ - 4- 1A 'D M 'n cZ.J. QCI. .- I.pLL WII Eiv LXJL VCLOA , C.4AVLA UV CiJIV t--I'. UU U CZ-LOU U UII AJ M J. . -* .,j

are unlikely to be repaid and in effect amount to adjustment subsidieswhcilh one way or anotllUer are U hleavy bur-dn L onJLLt.; S li iC.LLCQ

The net receipts these last two years on the loan and advance accountslave undoubteUly gone some way to easing the burden onl the Treasury butthey are likely to be a short-lived trend unless the borrowers make aspectra c-JALar recovery.

24. Taken all in all, te execution Of budget and extra budgetoperations resulted in a accumulated deficit for the 5-year period ofslightly over CFAF 10 billion, but this figure is not, strictly speaking,representative. At this stage it is preferable to pinpoint two balances:the budget deficit proper, which for the same period amounted to CFAF16.1 billion, and the overall deficit disregarding the StabilizationFunds' surpluses, which came to CFAF 16.8 billion.

25. It is this amount that had to be financed either from theFunds' surpluses already mentioned, from borrowing, or failing that byTreasury transactions. We have seen that the Stabilization Fund, asthe first line of financing, provided CFAF 6.5 billion. Althoughdiverted from their original purpose, these surpluses are a donesticresource of fiscal origin wdhich can fairly be added to the State's grosssavings.

26. Mediums.and long-term loan resources, the second source offinancing, provided CFAF 4.4 billion. This figure was made up of 3.3billion in external loans and only 1.1 billion in domestic borrowing.The latter also represents a very special type of borrowing sincesubscription was compulsory and it was levied in the same way as a tax.It was issued in February 1969 and subscribed by companies in the amountof at least 50% of the tax on their profits and by individuals on thebasis of 205 of the general income tax. Although the "subseription"raised no major problems, amounting in fact to a loan paying 4% p.a.interestj rpAdpemnhle in equnil instalments over 12 vpars starting on March 1,

1970, wnith the oDtion of advance repayment should the subscriberperman.ently leave the coun.tvry +th is method Of- calling up savings hac allthe disadvantages of a forced loan. The government will have difficultyir repeating such a procedure m.ore th- a few +es. It slou'dA -+at

consider appropriate measures to retain private savings which, ineve Vo .ntrie, are.J eithe.Ur1l. . .U. LC.UtU Vrp iaLtd L w lenthy elonUV o. Lforeig.

companies, or, otherwise, invested elsewhere than in public funds.

Treasury transactions

27. In addition to its role as cashier of central and local govern-ment, the Senegalese Treasury also acts as financial intermediary. Itis literally the banker of the State and of part of the public sector.It is in this capacity that it accepts the deposits of iocai authoritiesand public agencies, transferable by clearing or by check. It thus hasa money-creating power since it can clear itself from a debt, e.g. abudget allocation, by making a credit entry for one of its clients inits books.

28. The Office des postes, (Post Office) which operates the postalchecking system which holds part of the liquid assets of individuals andenterprises, is the Treasury's largest client (correspondent). In factthe bulk of the liquid assets of the postal checking system have to bedeposited with the Treasury. The Treasury, for its part, makes some ofits payments through the Post Office. To do this it simply credits thePost Office account in its books and the Post Office, in turn, creditsthe postal account of the payee.

29. It is also in its capacity as banker that the Treasury makesshort-term credits available to private individuals and enterprises inthe form of promissory notes i.e. bills signed by persons liable forindirect taxes due to the Treasury and guaranteed by a bank. Thesedrafts are discountable at the Central Bank. As we have seen, it alsomakes short-and medium-term loans to the public agencies, local govern-ments and various bodies and individuals.

30. However, as a holder of sight deposits, the Treasury must meetliquidity requirements like any other bank. The credits it extends mustsooner or later be converted into central bank money. It cannot inflatepostal deposits, which anyway represent only a small part of the money su'ply,.Moreover, its customers' deposits are liable to fluctuate widely, whichhas immediate repercussions on the treasury liquidity position.

31. To obtain liquidity the Treasury may issue short-term bondsufThinh it. places. F.A+.th ba.Qnl-s ori insurance. comane andt sqnm.tnP+AnP -. th t.he

public. The scope for such action is in practice very limited owing tothe ti-ghtness, if not actual non-existence, of the rmoney market. It cnot,however,oblige the banks and other financial institutions to place partof their reserves in bon.ds, which has the effect of reducing still furtherthe already limited possibilities for the banks to support the econom-.

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32. However, if it is temporarily unable to meet its payments, theTrensury can turn as a last resort to +he Central Bnnk wi.Tchi if the

Treasury has exhausted the possibilities offered to it by the discountingo,f 17?n Th - r ,j-cnYr vnr%+_c ~ e -i;r i-. n QInn"v'_-.o m !rr3 ~ r -ir-1t a nq q nccnofpronds_o._oes, v-.-gv it a short-erm... advnw.ce, x ----l as -----as more revenue is obtained.

33. Two noteworthy facts mark the Treasury's transactions over thePn ..sTAN- 4 -; ..- ,3- - P A 4- - U + 1 - tk-- P- - -4 ht15Aw A,_ -

iL V adL 5L V. -L'VU .A. XUtLI X V.LZVVSW * i.l. Ul VU6 Ur v 1 o %J'; L d W .LI a1 0. vw '

deficit and increasingly difficult liquidity problems, the Treasury hasnotu hidU tU rsLorU tO LIite Uentral_ Bank, ei4her for e r-edisco'ingothe promissory notes it held in its portfolio or, after exhausting thispossibilitUy, for a direct advance. In fact it restricted itself to theusual treasury transactions listed below:

Table 1: TREASu1-ix FNANCI'Gi

(in CFAF millions)

1964-65 1965-66 1966-67 1967-68 1968-69

1. Deposits bycorrespondents -143 -2888 +2789 -1134 +46

2. Treasury bonds - +434 +53 -50 -275

3. Account with theFrench Treasury -120 -1543 +843 -9 +141

4. Operations withother clients -2226 -1545 +44 +1562 +25

5. Liquid funds(+ = decrease) +4273 +2757 -1773 +2101 +2000

Variation in cashbalances (+4292) (+2392) (-2097) (+2201) (+1986)

Promissory notes ( -19) ( +365) ( +324) ( -100) ( +14)

6. Non-classifiedoperations -322 +289 +57 -934 +220

7. Suspense accounts +1276 +2531 -3790 +54 +1100

Total +2738 + 35 -1777 +1508 +3257

Sorc-es: Mi.nistry if Wirac,r'. %rvnw r w Tr+,rrt

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34. The deposits which correspondents are required to make in acurrent credit account with the Treasury fluctuated widely during theperiod under review. It will be recalled that among the Treasury'scorrespondents (municipalities, public agencies, various public bodies)the Post Office is the largest depositor: the credit on its currentaccount represents almost half of the total deposits. The fluctuationsin P.O. deposits with the Treasury partly reflect the fluctuations incash denosits and withdrawals by nrivate individuals and comnanies withpostal check accounts. Postal check holdings themselves undergo monthlyand seasonnl varintionn whic-h may 'h sizebhle depend;inag on the papermoney requirements of account holders. Furthermore, deposits vary fromyear to year; dulring the period unTder review withdawSt.als appeared to beon the increase. The net result of all these fluctuations has a directeffect on Treasw, "r lie-t,(14AT J this effnect T.;a 0 n+lrT -;r a ir. 1965-66 OYe

1967-68 (withdrawals exceeded deposits by CFAF 521 million and 230-'re l positive in 1966=67 t--l - of4 OVAP 283

million).

35. All in all the movements that affected correspondents'uepuo.LLs represent:ieU a IeIt L oU.ai Ull UldI 11-U LLI-Y WILJch 'Uo soiUie extentmust be attributed to the public agencies' cash difficulties. Taking1966-67 separately, huwever, the public agencies' current accountsimproved considerably, reaching a net surplus of CFAF 2.325 billion inJune 1967. In tihe same year, however, the Treasury had granted themnet loans of just over CFAF 1.5 billion to settle debts they hadaccumulated from previous years. These new loans correspondinglyreduced the resources obtained through the increase in deposits.

36. Treasury bonds with maturities between 6 and 18 monthsrepresented only a tiny source of funds during the period. A smallissue subscribed in 1965 mainly by banks, insurance companies and anumber of funds brought in just over CFAF 400 million. Consequently,the new subscriptions in 1966-67 were largely offset by redemptionsduring the previous two years. At the end of the period the Treasurybond portfolio did not exceed CFAF 162 million. Clearly, the virtuallack of a money market in Senegal is an obstacle to any seriouspossibility of financing through this channel.

37. The "Compte d'operations avec le Tresor Frangais" recordsreciprocal settlements between the French Treasury and other treasuriesof the franc zone. These mutual services are the continuation of apractice inherited from the time when French Treasury services alsocovered overseas countries. By and large, during the five years underreview the balance of these reciprocal flows eometimes worked out infavor of the Senegalese public Treasury and sometimes not. In 1964-65, 1965-66 and 1967-68 payments received from abroad and offset by theTreasurv exceeded those made bv Senegal. This meant a cost to theTreasury of CFAF 120 million, 1,543 million and 91 million, respectively,in those years. Tn the other two years the onnosite hannened. nrovidingresources of CFAF 843 million in 1966-67 and 141 million in the last year.

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38. Accumulation of outstanding payments is certainly one of theriiosu -used mieans of fLin1cing the budget UdU±L.c. I1n V.Erch--Ustyl

Treasury accounting the "outstanding payments" are generally lumpedtogetner in a group of accounts called by a variety of names: inSenegal, they are termed "operations with other clients" (group 53).This group covers a mixed bag of items whose common feature is thatthey represent private claims on the Treasury. They may take the formof deposits, sureties or funds earmarked for payment orders or trans-fers which have been held up because of delays in centralizing book-keeping entries or lack of funds available for the payments.

39. During the last five years the "operations with other clients"accounts showed movements as summarized in the following table:

(in millions of CFA francs) 1964-65 1965-66 1966-67 1967-68 1968-69

- Outstanding payments -2,151 -1,833 -205 +1,205 +538

- Other clients/2 -75 +2t,L +259 +357 -513Total -2,226 +44 +1,562 +25

Source: Treasur-y Department.

/1 Comprising transactions under accounts nos. 53.01 to 53.07and 53.19.

le Comprising the other group 53 accounts.

4o The variations in outstanding payments over the last fiveyears fairly well illustrate the financial difficulties, which havegradually worsened during that period. Thus, while it was possibleduring the first two years to settle some arrears, in 1967-68 and1968-69 outstanding debts piled up. It is hard to make a validappraisal of this trend without lkiowing the nature of the claims orperhaps even their real importance.

41. The fact is that some of the expenditure settled or even payorders approved during a given year are not actually paid out untilsubsequent years. The "suspense account" appearing in the last line offinancing thus acts as a "hinge" between two years. To the "'otherclients" accounts proper, therefore, we must add the net changes in thesuspense account which by definition are grouped with outstanding pay-ments or at least represent sums deposited with the Treasury butbelonging to third parties. For instance, it should be taken intoconsideration that in 1968-69, the last year of the Second Plan, CFAF1100 million in infrastructure expenditure committed but not disbursedduring the year were carried forward through the susnense account tosubsequent years for payment.

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42. Lilewise. the variations in cash balances indicate fairlyr clearlythe State's treasury difficulties during these five years. Iiost Treasury debtshad to 'h settleH in f-lntrl Bnnk money. with the inevitahle heavw drain onTreasury liquidities. Liquid funds in fact dropped CFAF 8,774 millionA i,-nr, +the pr--iorA r-nlTr in 1966-67 was +there a sllght. increa in the

cash balances,thanks to the massive transfers from the stabilizationfunds, which morAe than -ply overed - theb defici + At+ the en of

June 1969 (see Statistical Appendix Table lO),the Treasury held a total ofF'srnr E1 blo. ha- - of A -sV,a -in1 a.1L.. p r +henO Central

Bank. To these cash balancesshould be added a number of transit fundsWhLli were heLdU JL thLe UluspenJL1 s AA%ULU1U PU.cc..L.PdP1J pe n ap LoLUra 1i aU,.

amounted to CFAF 490 million in 1965-66 and 1277 million in 1966-67.Auccorduig to the TeasL-,dj these suiiit -were caLs res-ves ubtweeu uiieTreasury and local offices. The fact is, as we have alreadymentioned, the Treasury has to respect certain safety margins like anyother bank. It must be able at all times to meet the liquidity require-ments of its correspondents, in particular the Post Office, requirementswhich often result in unforeseeable and occasionally sizeable fluctuationsin their current account holdings. It would certainly be difficult andarbitrary to put a figure on the Treasury's reserve margin, althoughtheoretically it could be calculated. At all events a large part of itscash balances must be kept available at all times, or at least immediatelyconvertible into Central Ban'c money. To this safety reserve should beadded the "petty cash" needed for normal Treasury services. The requiredsums must of course be kept to the absolute minimum, but the multiplicityof funds and paying cashiers and, sometimes, the difficulties of trans-porting cash, particularly for offices badly served by comnunications, alljustify relatively large current cash holdings. However, the public cashreserve is now down to a very low level. If the trend of recent yearscontinues,the Treasury might first have to mobilize its "promissory notes"with the Central Bank and sooner or later resort to Central Bank advances.

h3. This possibility of obtaining Central Bank advances is subjectto a number of limitations as to duration and amount, as set out inarticle 15 of the B.C.E.A.0. statutes. Briefly, the duration of suchadvances is normally 240 days, whether consecutive or not, and the amountmay not exceed 10% of the tax revenue received during the foregoingbudget year. If need be, the Treasurv could obtain an extension of theduration of -these advances up to the first working day of the followingyear, bv special decision of the Board of Directors. The ceiling canbe raised from 10% to 15% at the outside. Finally, the statutes specifythat the overdraft effectively available to the Treasurv may not exceedthe maximum laid down in accordance with the above provisions, afterdeducting the am-oulnt of trnnsaetions on Treasqmrv honds; carried out bythe Bank in application of article 15, and the amount of placements withthe Treasury made by bnnks nnd credit apngniciz with the Central Bank'sassistance.

44. Thus, in optimum circumstances the Treasury could obtain aClen+ral Bar' Adva.c grossing abot CAF 5f billion, fr,.M .";J the

claims of the banking system against the Treasury would have to bededucte.-

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h5. Determination of the financing of municipal operations is veryproblematical. In contrast to the central budget accounts, the munici-palities' accounting is not yet mechanized. There is a considerable time-lag before transactions are centralized. Certain accounting practicessuch as incornorating nrevious surnluses in the current revenue of thepresent year and loan resources in the budgetary accounts,make the taskrat.hr difficult, especinlly since the drta obtained is still verv sketchy.The balances that can be struck at current account level or regarding theoverall dr1efic r-. r%r, l arn+. significant, sin they.br are workvi outon the basis of payments and collection and do not take account of unpaidexpen.diture, the acc,m-1ation. of w.oril-h droes "not actr-+.im1-v nnnnr nnyuhoorp

in separate entries. Be that as it may, the data furnished indicatesthat the .rqicpliis transaction.s represen.ted a f-an^ capacty ofCFAF 25o million in 1966-67, while in the other years they showed an over-a" J def i cit va-Lyrig in size but allways --r sma"" in aboue or relAativeO.J.J .L.A.~L V LJJ1~ ..LI ~ LJ&~J .J.d. VU .Y IM-JL. .I C.U %JLUUV .J. . &QVJ.V

terms. Financing was made up of loan resources from the Treasury and theLJda1J.f'Ks a ndU ULU8UU-.y siUdiesUL0. Thie re,,-inder . was- USinaanLced bIyL the use eocash balances, some of which deposited iwith the Treasury. It may beexpecedu uiau whten bihe dJrLUrL± brabiV rVoIrga1JJa'.4U.ui Lolfl MW 1ULJ.LLLU.LI. ti.LZJ±

is complete it will be possible to get a better idea of their financialposition and the real importance of their contribution to whe Senegaleseeconomy. The financial position of the government agencies is likewisedifficult to assess as a whole for the entire period under review.Balance sheets for these agencies have on]y been published for thelast three years, followJing installation of a modern data processingunit for centralized accounting. For the earlier years we have to madedv. with estimates.

46. Nevertheless, the data available on these last three yearsindicate that the CFAF 11 billion gross fixed capital formation achievedby the government agencies during the Second Plan was financed asfollows: about 5 billion from own resources, just under 3 billion fromsubsidies, mainly of budgetary origin, and the rest from foreign aid,State loans, and utilization of cash in hand and short-term bills.

47. One point should however be mentioned about the liquid fundsof the government agencies. As noted earlier, they are required todeposit their available funds in a current account with the Treasuryand to make most of their payment and receipt transactions through thisaccount. In practice a single credit account is opened with theTreasury in the name of the central accountant of the agencies. Thisone account is itself sub-divided, on the credit side, into as many sub-accounts as there are agencies, thus enabling deposits to be creditedindividually. Withdrawals, on the other hand, are debited jointly tothe central account.

48. From the practical viewpoint this method allows each agency,but not all, to receive an overdraft, since it will be offset by thesurplus on the other accounts. This facilitv has freontently beenused in past years by certain agencies to marce up cash deficits.

h19. As a case in nnintt the Pailroad and Transnort Authorities; thetwo undertakings showing the biggest losses, financed part of them bylncresngA;n t.he iinoverPedA bha1nrA_ nn .thpir ni' ron+. nrnacint. with the.Treasury in 1968-69 (in the case of Railroad, from CFAF 42 million to5~71 m-illinvi n, " in t+.ha f thegm T Authri4+:v f-rnm 1LQ .n.llion ton

352 million); this represented a total financing of CFAF 732 million. Innaras+-+ 4, in + i-s s.e Jr ar the Pos+ Off4c- -A +the A, +^nn.^ss, DPor+ OP

WLIUSVA. Otv , a. ±5 ~~~ fU UU .-XSVW IA Si . IV .*I. -_SI flI ZA IJS AIA-I&. -. Id. - -IJA

Dakar increased the net credit balance on current account by CFAF 288a-nd '381 -- '?-;1on, respec4tive3-y, a 4to-&'l of C&IADI 689 .140n.

J..?WL JILLA..J.L UL, . UJ-V L.J.J 0. UI.J -50J J. 5J±AI.± ISLI? AII L.LJ.I.JALL

50- TI.L0 sAr.M11J.LU lrWd.LyLJ silows £LUW tLhe cUiLLjJYL±iEaUUry Lac Uor

of the system described above can finance the operating deficit of someagericl es out of the surp'uses o others -w"ich are btu'4o-any rate show a profit. It will also be noted that, within the limit ofthe net assets accumulated by the whole group of agencies on theircurrent account with the Treasury (which amounted to just over CFAF 3billion on June 30, 1969), those operating at a loss have in theory noliquidity problems since they can finance their expenditure by drawingon their Treasury current account beyond their assets. This facilityis certainly not an incentive for them to improve their cash managementor adopt measures to remedy their financial position.

51. Moreover, if the cash problems of some agencies can be solvedthrough the Treasury's "monetary circuit", in the final analysis it isthe Treasury that has to bear the brunt of variations in the agencies'central current acccunt, which sooner or later result in a direct drainon the "central bank"' liquidities held by the Treasury.

II. STRUCTURE OF THE CURRENT ACCOUNT OF PUBLIC AUTHORITIES

Current Exoenditures of the (State) Central Government

52. The structure of the central government current expenditure hasnot undergone any radical changes over the past five years, though therehave been shifts in favor of personnel expenditures. On the basis of aneconomic classification, the following table shows how the major currentexpenditure categories have evolved over the period 1964/65 to 1968/69, andgives their structure at the end of the period.

Table 2: ECONOMIC CLASSIFICATION OF CURRENT EXPENDITURES OF THECENTRAL GOVERNCENT, 1964/65 - 1968/69

1961k/65 1968/69Billions Billionsof CFAF Percentage of CFAF Percentage

.ianes and salaries 16 29 50=l 19.75 55-4

rn.,nnr1cq q-d qPTJ-q 9_71 27_n _P 7

Miscellaneous 1.03 3.2 1.54 4.3

Transfers andsubsidies 5.4R 17.0 n94 13.9

Tub1,14- A.debt A 077 2 . 0.46 1.3~ -- ~-' '~L~;L'L~ %J. It I '*'+ ''w f-

32.28 100.0 35.62 100.0

53. Two preliminary observations are called for. Since this is a classi-fication by category, it has been decided that the government's share intechnical assistance costs should no longer come under miscellaneous andspecial expenditures but be included instead in wages and salaries.In the same wayv we have now included the cost of renting governmentpremises and housing in "Goods and services" and not in "Mliscellaneous

xnmenditures l.

Sreconilvy in onrntxns t.n other tables. we have includedthe refunds to municipal and other public bodies, with the resulttht oiur fmim,re- are more or *ess nomnrable Twith those nihbllshed by t.heMinistry of Finance. Not being a current account item, the (estimated)amortizatiorn charges have been excluded from the transfers.

1 7

.L It 'J.L. L) Lb I kAZIA la t LIU tLdLLU0 wages adslre -tltU Uby La-.L thL

largest item, and in 1968/69, accounted for over 54 percent of all currentexJonduUL Ue. mneir relative Jm-ortance nas increased steadlLy over thbe pe1LUo,particularly after the pay adjustments which took place following the eventsoI lay/June i96o.56. Recent statistics show that the government employs about36,800 persons in its central and regional offices. About 1,700 of theseemployees are serving under the foreign (mainly French) technicalcooperation program.

57. A total of CFAF 17.7 billion (after deduction of technicalassistance expenditures] was paid in 1967/68 in the form of wages andsocial contributions to 35,000 Senegalese civil servants, an average percapita outlay of about CFAF 503,000 a year. In fact, the annual payreceived by over 70 percent of Senegalese civil servants is less than thatfigure. Only 29 percent of them have any qualifications and only 12 per-cent receive an annual salary of more than CFAF 720,000. It will also benoted that according to the national accounts published by the Ministryof Planning, the total outlay on salaries by the public authorities(central government and municipalities) accounts for over one-third oftotal earned income.

58. Current expenditure on goods and services has decreased overthe period in relative if not in absolute terms. though it still accointsfor one-quarter of all current expenditures. Maintenance expenditures,nart.iii1arl v o-n pnnhlVi nronpr+ie_hare miffm-er1 the most from +he

government's austerity drive over the past few years, representing0,8 percent of GDP in 1968/69 against ( 0 percnt *n 1i1o/.f< Rrminm.na.expenditures and costs of renting government premises and housing alsodecreased ir, rellative te-rms .,+ +o a less -ten

59. The government cannot go bn cutting down on these exDendituresin order to offset wage increases. Th.e govJernment huildings are of com-paratively recent date, in the capital at least; equipment and facilities arem-odern. by comparison wit-.h hose existing in. many other developing .ou-=tries. The government recently invested large sums in data-processingequipr.er.t, pr-vidir, the, Mir,istry ofP Virr-- -wit;. ve p-t 4-At4e elec-. 'LkAfir5&.L U JL%J V .LL4AAL6 ULALU r.L4.L_L0LQ -. Y %J .i X£ C4L,1 VW.LWA V~LJy 9AjJ-VI-A G6.&O.L-

tronic apparatus and facilities which have undoubtedly made a largecontri.J.UUU.LIiL LAto tAIV r,JUVro-V-UdLL ! 1;.L.J fJinar,ci1L1, .L1U IAJ Ua U bettr ta0..

collection performance. However, the use and upkeep of this infrastructureare aLedy pro-ivng to beJ d La havy i.UIL111.c±.l LUJrdL VLI Sita Oi. Ute., aL uLrden

that will get heavier and heavier in the future if one allows forhigher price ofpar 4pats higher l^bor costs anA the recurr-lngjJ±t,B-._ .. LUU0 Ul OUlJ-.t; jJdJC.U_jCiy ~~1.610± 4.e.IJ'J. 1, .v. L .L

expenses involved. Operating expenditure of the central government atpresent totals 13.8 percent of GDP. The place held by aUiM S trration -n1

Senegal's economy is not a new phenomenon but a legacy from the timewhen Dakar was the administrative capital of a large federation.

- .LU -

Although that era is over, life ir Seni--al still follows the ancientpatterns since the country has been incapable of scaling down its st-yleof living to a level compatible with its true potentialities. It is notin fact certain whether the central goverrment and its services reallvneed 36,000 employees to do all the work that is necessary for thehealt.hv nrogress of public affairs- There is even a likelihood that thesystem could operate properly with possibly half the manpower, if the workwere dis-tribi+utd onr mnrnrn vM-i rn+AnA1 qi - bhi0t of cornii t,n +.he cn-sequences such a cutback could have on employment and on the entire economyin a cou^ntnry those ahso,rtion capacity is nrot T14m4 +4ed It would bepossible to pick around this question for ages, but as will be seen in the

i--sq par4- ox +1-. - s4-.dy -c4-4 - 4 1- 4-kr-. 4;' 4-t-h --v..wnvwns 4-o-flL 'a j,a V .4 L"SQL 0 VLL¼.J , O'a .0.JU *AU.0 VL& A U 0 L 4¼¼,L . LJ . 10 5 v OL110 W-.*110 11

produce the public savings that the country needs for its development.

61. Transfer expenditures have also been dropping steadily over thep s' r1 -- A3- _ - ---*o: 1^* v n L.LVt YUCLIe yer.as a.L.-teaCUy r1t1UenUL1tne, VW,- OJl t2ie causeOs 1IS O 0-1-t-Jea"

rather than economic origin. The amount of the customs receipts thatSerLegal is obliged to pay back to M1auriLtaia under- th1 e cuStomas agreem,1 entbetween the two countries has been constantly on the decrease over theperiod, being fixed at roughly 8.66 percent OI the proceeds Of tne impUrtduties levied by the Senegalese customs authorities (this rate originallycorresponded to the proportionate value of goods unloaded at Senegaleseports in transit to Mauritania). The amount actually refunded toMauritania dropped from around I billion in 19964/65 to a mere 55 millionin 1968/69. Several reasons have been adduced to explain this decrease.More and more of Mauritania's imports are being unloaded directly atNouakchott. The Mauritanian authorities do not produce the supportingdocuments required for implementation of the agreement. And Senegalhas paid out too much in previous years. It is not for us to give anopinion on this dispute, which,in any case, seems to have been the objectof a recent settlement.

62. It will be noted, however, that it is partly due to this gradualreduction in transfers that the ordinary budget has registered a surplus overthe past few years. It was the smallness of the restitution made in1968/69 that allowed the current budget for that year to achieveequilibrium: the 1968/69 Finance Act had set aside a budgetary appropria-tion of 835 million to cover restitutions to Mauritania, and had this sumbeen-fully utilized, transfer expenditures would have totalled 5.72 insteadof 4.94 billion, in which case the budget would have shown a currentdeficit of 780 million instead of the equilibrium actually achieved.

63. Transfer expenditures also include subsidies to governmentagencies (715 million in 1968/69), chiefly to the radio, the Senegalesepress agencv and student housing facilities: subsidies to Drivate schools(228 million in 1968/69); fellowships and grants for research and train-ine7(almost 1 billion in 1968/69). and particinations in international andinter-state organizations (480 million in 1968/69).

64. A large part of transfer expenditures represents statutory taxrefur,ds to the municiDalities and to various publiT- funds and institItions(Family Allowances Fund, Groundnut Fund, etc.) which are merely shown astransitorv items in the ordinarv bhriit These rf' in,is +.n*11eri1.6 billion in 1968/69 against 1.95 billion in 1964/65, a drop of almost18 percent, attributable chiefly to the down^^.swing*n customs receiptsmentioned in Part I.

65. Two other categories of expenditures remain, both of which arerela tI I .slr.S� +.4"n.e - -firstVS'- 4f these isJ4 p

The ordinary budget lumps the interest and principal payments on this debtoe Ute r CLas a single ie. The share ofL | pin-lL .LYCipa-_jl=Lpa ye n s in this ite

has therefore had to be estimated, and this estimated figure has beenucbUU.eUd from culrrientexpedb ipT1uXU'.res. * Vevert'neIe, aLL aVailablJe ILniUUma-

tion points to the fact that interest and supplementary charges on thepublic debt represent a relatively Olw proportlon oI total current accountexpenditures (1.6 percent in 1968/69). The public debt of the SenegaleseState (including that of otner municipali'ties ana public Dodies) is infact very small (about 10 percent of GDP) compared with that of manyother African countries. rThe volume of interest should, however, tendto increase as a result of the two loans mentioned in Part I.

66. Miscellaneous expenditures constitute the last category ofcurrent expenditures, and very little information is availableon these because of the nature of the sums involved. These expenditureshave increased slightly over the past few years, particularly in 1968/69,when the government spent over 500 million on the Centre ComptableAndr6 Petavin and the Centre des Etablissements Publics, where medium-capacity electronic equipment has been installed to process the accountsof the Treasury and the government agencies and also to mechanize thetasks of tax assessment and collection of the various taxes credited tothe budget. Special and secret funds are also included in thiscategory.

67. General services have absorbed 47 percent of the centralgovernment's ordinary budget. As already mentioned, this very highpercentage is the result of a greatly overstaffed administration, a legacyfrom the old RFA and later the Mali Federation. Apart from some 9,000men in the armed forces. in the police force or in the security service,the general administration employs about 5,000 persons in the Ministriesof the Civil Service, Finance. Information and Justice, and the Ministryof the Presidency and its related services. The armed forces, the policeforce and the security service cost Senegal around CFAF 7 billion:the country has, however, for some time been having trouble withPortuguese Guinea. The Presidencv, the legislative and the Law Courtscost Senegal some CFAF 2.5 billion a year.

able 3: F1UlGTIOQIHL COFaSSIF1CATI01 O CURRENT EXPE2JDITURESOF THE CENTRAL GOVMMN=IENT

(in billions of CFAF and as percentages)

1965,/66 % 1986 %

Ceneral Ie. '.cets '. fO.J7 16 7 A 1.'7

(General administration) (5.8) (0.18) (5.9) (0.17)(Defense) (3.9)~ (A 10O (4.4 L (0.12)

(Justice and police) (3.3) (0.10) (3.6) (0.10), . v .. to e ....to .... % n7 /n ON In nQ\E(i;ot classified) (.2) 0 (2.U) (0.08)

C,nlt and - soci'al-

services: 11.4 0.35 13.6 0.38rublic works, 'Urarspor-tation, housing (2.7) (0.08)1 (2.8) (0.08)

Education, art, culture,sports (5.5) (0-17) (7.3) (0.20)

Health (3.1) (0.09) (3.4) (0.09)

Economic services: 2.5 0.08 3.0 0.08Rural sector (1.6) (0.05) (2.3) (o0.6)

Unclassifiable 3.4 0.10 2.3 0.07

32.8 100.0 35.6 100.0

68. In 1968/69 comiunity and social services represented 38 per-cent of current expenditures, against 35 percent in 1964/65. Senegalhas for some time been devoting considerable attention to education,art, culture and sports, and the outlay of the Ministries concerned hasrisen from 5.5 percent to 7.3 percent of current expenditures. Theyemploy around 9,500 persons, or just over one-quarter of the totalnumber of civil servants, about 700 of whom are working under technicalcooperation programs. The Ministry of Health comes next, with atotal staff of some 5,000 distributed throughout its various services,and last comes the Ministry of Rural Economic Affairs whose expenseshave risen,-in relative terms, from 5 to 6 percent of total currentexpenditure.

69. Unclassifiable expenditures include public debt interestand su=plementarv exDenditures, refunds to the municipalities and tocertain public funds, and certain miscellaneous expenses. Most ofthese have already been discussed in the section dealing with economicclassification.

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Tahle )_: flTMPR. T P E.PKMTTETTPR OrF THT. TITK1Th.TPAT.TTTES

(in billions of OFAFv)

1964/65 1965/66 1966/67 1967/681/ 1968/69j/ 1968/691/

rages and salaries1.28 1.19 1.08 1.20 1.39 1.40

Equipment and

Others 0.09 0.06 0.09 0.10 0.5 1 0.10

a4 4 nt _ mm mI at n -m n r a U_AV O,d e.c IsfO;: e.LJ4 eU ,U .O .zI.U- 4)

lotal 2.16 1.7 24 2.0 3.05 28

1/ Estimates by the mission.2/ Budgetary estimates.

Source: Ministry of the Interior. Department of Municipal Affairs.

70. The current expenditures of the municipalities represented alittle less than 8 percent of those of the central government. 95 percentof these are expenses on goods and services. Uages and sa 1 aries inthis category held relatively steady up to 1967/68, but wage adjustments hadto be made the following year to riatch the increases in the rest ofthe public sector. Since all the accounts have not yet been closed atcentral level, there are as yet no precise data on expenditures for thelast two years of the period under review. It is estimated, however, thatexpenditures on equipment and maintenance have been sacrificed in favorof wages and salaries, which are now the highest, being in the neighbor-hood of CFAF 1.4 billion. Small sums have been earmarked to meet varioussocial expenditures and the municipalities share in the operating costs ofcertain public services, such as the firefighting service. The figures inTable 4 are based on very provisional estimates for the years 1967/68 and1968/69. 'When considering the period as a whole, certain reservationsshould be made as to the significance of the amounts given because, bearingin mind the accounting system of the municipal authorities, outstandingexpenses are not included in the figures supplied by the Ministry of theInterior.

Current revenues of the nublic authorities

71. Current revenues of the public authorities (central government andmunicipalities) fell from 20.05 percent of GDP in 1964/65 to 18.10 percentin 1968/69. Budgetarv revenues-from tax sources represented 17.1 percentof GDP at the end of the period. This figure does not adequately reflect

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Senegal's total gross tax burden, as it does not include the proceeds oftaxes paid Ai.rectly to various funds and agencies without passingtthe State budget. Thus, in absolute terms, the total proceeds of taxesco'lected in Senegal in l967/68 amounted Tw 38.7 bil ion, of wnich37.4 billion went to the public authorities and 1.3 billion to the Equali-zation and Stabilzation Funds for Groundnuts and the Family AlLowancesFund.

72. Senegal's gross tax burdeni/ for 1967/68 totalled 18.8 percentof GDP, one of the highest percentages found in any of the French-speakingcountries of Africa. This high tax burden makes it very difficult, ifnot impossible for the moment, to make any increase in existing tax rates,particularly if one takes account of the tightness of a "Imonetarized"economy. It encourages fraud and tax evasion, which have now become majorproblems in Senegal. To add to this already heavy tax load is likely tolead to still larger losses of revenues. Barring radical tax reforms, whichwould be no easy matter under present circumstances, emphasis would haveto be given to improving tax administration. Bearing in mind that highrevenue return should not be expected in the short term from adminis-trative re.'orms, Senegal's geographic position further complicates theproblem. The enclave formed by The Gambia and the thousands of kilo-meters of frontiers between Senegal and its other neighbors raise a multi-tude of obstacles to the establishment of an efficient tax enforcementsystem (see paragraphs 97 to 104).

73. The revenues of the municipal authorities will not be dealtwith in a special section. They represent a very small percentage oftotal current revenues of the public authorities (about 7.5 percent in1968/69). Furthermore, a large part of this income comes from direct taxesrefunded by the central government such as the fiscal minimum tax, and25 nercent of the land tax collected during the fiscal year within eachmunicipality. The balance is made up either by a surcharge (centimesarliciifonnel) On State tnxes (dircf. taxes) or by a mvriad of small leviesbased on visible wealth (livestock, rental value of a house) or onservices rendered (road-sweening tax. sewage disnosal tax, etc.).The revenues of the municipality of Dakar alone account for about 60 per-Gent ofn total minicipal rPvenius in Snegal-

75. The followig tabhl shows the movement of rcurren+. rpvenei offthe central government's ordinary budget between 1964/65 and 1968/69.

1/ Excluding social contributions. If these were intin1uiLd +.he grosstax burden would be around 20 percent of GTP.

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Tabie 5: CUT'Kr REVENU OF TrMU- UzB LWVIIO J MV.rtlW'MNIT

(in billions of CFAF and as percentages)

1964/65 % 1968/69 %

Total current revenue 1/ 36.74 100.0 36.19 100.0

Total tax revenue 1/ 34.01 92.6 34.20 9h.5

Direct taxes 7.23 19.7 8.44 23.3

(poll taxes) (1.09) (3.0 (1.06) (2.9)(inc,.omA t>es~) (L..95) (13-. (6.29) (17.L)

(other direct taxes) (1.19) (3.2) (1.09) (3.0)

Indirect taxes 25.68 69.9 24.78 68.5

(on foreign trade) (19.15) (52.1) (17.35) (47.9)-1.ors I(15.68) (12.07l (14. 77) ()u.o A. ";0 - / A4(.Of/ \"-+#I I / \4

(exports) (3.47) (9.4) (2.58) (7.1)

and consumption)2/ (6.53) (17.8) (7.43) (20.6)

Registrations and stamp 1.10 3.0 0.98 2.7UU L,.Lr" D

1/ Gross revenues, i.e. including earmarked taxes (refunds).7/ Including, for 1968/69, the payroll tax.

Source: Ministry of Finance.

75. The figures included in budgetary accounts of the centralgoverrmient (see above table) are gross amounts and should reall y bedecreased by the amount of the refunds to the municipalities and theFamily Allowances Fund which ap-ear onl-y as transitory items in thegovernment's ordinarSr budget.

76. The proportion of tax revenue in total budgetary receipts rosefrom 92.6 percent in 1964/65 to 94.5 percent in 1968/69, while the pro-portion of revenues from other sources decreased over the period.

77. Direct taxes accounted for 23.3 percent of the total in 1968/69against 19.7 percent in 1964/65. This increase is accounted for by thegrowing percentage of progressive proportional income taxes, which at the

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end of the period were 27 percent higher than in 1964/65. The relativevoluMe of indirectV taxe, hoWeVer, though still by far the iarger percent-age, dwindled from 70 percent to 68.5 percent over the same period, withlevles on foreign trade iosing a little ground in relation to indirectdomestic levies.

Taxes on International Trade

78. As in many other developing countries, foreign trade constitutesSenegal's principal source of tax revenue. In i968/69 customs duty accountedfor 50 percent of total tax revenue and almost 70 percent of actualindirect tax revenue.

Table 6: FOREIGIN TRhDE TAXES AND LEVIES(in CFAF billions)

1964/65 1965/66 1966 67 1967/68 1968/69

Import duties 15.68 14.31 15.19 15.75 14.77

Export duties 3.47 3.21 2.87 2.67 2.58

Taxes on foreign trade 19.15 17.52 18.06 18.42 17.35

(as percentage of totalrevenues) 52.1 48.9 51.0 51.3 47.9

(as a pecrtg P t-revenues) 56.3 51.8 52.8 53.2 50.7

79. Still, even though customs dutv and other levies on fcreign tradeare likely to dominate Senegal's tax system for a number of yoars, the relativeimnortance of this tVpe of tax will probablv continue to follow the steadvdown-ward trend evident over the past five years.

80. The decline in customs duty over the past years can be tracedback to nimhom br orf4 fac+ors a1ready ment±on.ed ahbre ( paragraph 6).Some of these are of a permanent nature, and can be ascribed both to theeDlultion. of Se-neg"al's forei.g trade and +t the tari-ff poli adop

by the members of the West African Customs Union,, while the others arem.ore of an accidental or cir-,,,s+4.tial rature, SU as the poor grounAvnut

harvests during the past few years and an upsurge of smuggling and evasion,, ,P us4.as.^ I-.-: l-,t^

81. Import levies represent by far the major charges on foreign trade(85 percent in 1968/69). These levies fall into six categories: customsduty proper, fiscal duty, statistical tax, standard tax, turnover taxand special or specific levies on certain products. The enforcement ofthis tax structure is a somewhat complex process, as it is based not onlyon tariff regulations "under the ordinary law", but also on agreementsmade with customs unions. Table 7 illustrates the general characteristicsof the system as it now stands.

Table 7: SYST'EM OF II4PORT LEVIES IN SE'N3AL (June 1969)

Other import levies Other indirect taxes 6n importsCustoms Fiscal Taxes on

duty duty importsOrigin of imports Statistical Standard Turnover taxl!' special or

tax tax specific

I. Member countries of theEuropean Economic Com-munity and French over-- Franchise N o r m a 1 s y s t ie mseas countries

II. Member countries of theWest African CustomsUnion

A. Ivory Coast, Dahomey 13.50% except forand M!4ali goods specific- Normal1. Goods produced in ally exempted.(Law system

these count:ries Franchise F' R A N C H I S E of May 28, :L966)

2. Goods originating 50% of global taxation which would be imposed upon similar goodsin these countries Franchise impcrted for member countries of EEC, with a minimum tax liability

equaL to indirect taxes (turnover tax and specific taxes)

B. Upper Volta anl Niger Franchise Same conditions as for the goods in A.2.Turnover tax not

C. Mauritania Franchise F' R A N C H I S E levied on goods Normaloriginating from systemthe internal mar-ket of this coun-try?! _ -

III. Following other Africancountries: Cameroon, CALR,Congo (Brazzaville), Franchise N 0 R M A L S Y S T E MGabon, Chad, Togo,Malagasy _ _-

IV. Burundi, Congo (Kinshasa) Rebate ofSomalia 40% on

minimum N 0 R M A L, S Y S T E Mtarif'f

V. Afghanistan, Albania, GeneralAngola, Argentina, Bolivia, tariff 3Equador, Ethiopia, Iceland, times theIran, Iraq, the two Koreas, minirmmJamaica, Japan, Jordan, tariff N 0 R M A L S Y S T E MLibya, Mexico, Nepal, Portu-gal Portuguese Guinea,Ra]3edor, Satiri Arahin,Sudan, Thailand, Trieste,Uruguay, Yemen

VI. Other countr:es not deno- Minimunmi-natecd above tariff N 0 R M A IL S Y S T E M

7T Tluniover tax levied cn imports.2/ Except for fabrics.

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The someuhat erratic pattern of customs levies shoimn in Table 8 is duepartly to the implementation throughout the. entire period of the tariffagreements u7ith thle EEC, the mambers of the WeCQt African Customs Union(UDEAO) and a number of other African countries, and partly to an increasein the statistical tax, the stLndarci tax and the turnover tax. Table 9 shouldgive a fairly clear picture of the changes in customs policy over the period.

Table 8: !IMlRT DUTIES (in billions of CFAF)

1964/65 1965/66 1966/67 1967/68 1968/69

A. Imports 44.0 40.0 37.6 40.3 46.-4

B. Irport duty 15.68 14.36 15.19 15.75 l4.77

Customs duty 0.61 0.45 0.48 o.48 0.39Fiscal duty 3.85 3.54 3.10 3.25 2.80Statistical tax 0.21 0.48 0.78 0.75 0.76Standard tax 5.80 5.43 5.26 5.-42 4.80Turnover tax 3.89 3.32 4.45 4.65 4.84Refining tax 1.31 1.14 1.12 1.20 1.18Other duties 0.01 ... ....

B as a percentage of A (35.6) (35.9) (40.4) (39.1) (31.8)

Average: Import duty 36.4 percent.Tolt-al imnorts

82. In practice, import duties have not always followed the sametrends as imports themselves. For example, in 1968/69, imports wrentup by 15 percent while import duty dropped by 6.6 percent. The reason forthis discrepancy in a year when the tariff structure remained unchanged wasthat the composition of imports differed from that of the preceding year.Foodstuffs, industrial capital goods and, to a lesser degree, semi-finishedproducts, accounted for most of the increase. These are commodities thatare subject to little or no duty. By contrast, imports of consumer goodswere lower than in 1967/68, and these are quite heavily taxed. For thisreason, there is not much point in making an over-all comparison betweentotal imports and the duty charged on them. If such a ratio must becalculated, however, we would put it at an average of 36.6 percent, anestimate which is nowhere near the true import tax burden. For instance,basic foodstuffs and raw materials, which are either duty-free or subjectto very little duty, represent almost 35-percent of total imports. In addi-tion, part of the capital goods and semi-finished products for industrialuse (over one-quarter of all impoerts) are also duty-free or subject to littleduty. Putting the share of duty-free products very roughly at 40 percentgives us an over-all rate of taxation of around 53 percent, which iscertainly much closer to the true figure. However, this percentage includesthe turnover tax on imports. It should therefore be compared with thenormal rate of 9.89 percent levied on internal trade. The differenceindicates that the average level of protection of the domestic markcet isapproximate2y 43 'nercent.

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Table 9: CHANGES IN THE STRUCTURE ANRD PATEOF fiPORT DUI3ES

1964/65 1965/66 1966/67 1967/68 1968/69

Customs duty EEC Treaty Treaty signed Exemption-/:Dec. 1964 with UDEAO Ivory Coast,EKemption June 19661/ Mali, Dahomey,

ExermDtion- 50% of alltaxes3/

Fiscal duty Normal system.T -er V7oltaNiger

Statisti al tax 1 - 2% 2% 3% June(Feb.1965) 1966

------ _------_-____-_______------__---

Standrard tx 2, 6, 2 2.1,6.,20.6,(4 rates) and 30% ditto ditto 30.9% (July 67)

22% 25% 33.33% ditto

1/ Implementation of treaty starting December 1966.2/ Exemption for the first 4 taxes on goods coming from the Ivory Coast

(May 1967), Mali (October 1967) and Dahomey (December 1967).3/ Taxation restricted to 50% of all (taxes) for Upper Volta and Hali

(May 1967).

83. Customs duty proper, i.e. the duty levied for protectionistpurposes,is applicable only to goods coming from the countries listed initems IV, V and VI of T-blc 7 and for which three rate scales are given.The minimum tariff applies to all countries not covered by special arrange-ments, for which the rate varies from 2 to 75 percent of the value of theimported goods (ad valorem tariff) but which for most products ranges from5 to 20 percent. Goods for item V countries are subject to the generaltariff, which is three times higher than the minimum. The three item IVcountries are allowed a 40 percent reduction on the minimum tariff rates.Exports to Senegal from EEC members and associated countries and terri-tories, as well as from the majority of the French-speaking Africancountries, are fully exempt from customs duty.

- 29 -

84. Customs duty proper has never in fact been a very large sourceof revenue for the Senegalese government (0.2 percent of import levies)Basic foodstuffs and capital goods are exempt, for instance, and theyaccount for a substantial share of imports. Moreover, the entry intoeffect of the Agreement of Association with the Common Market (December1964) and the establishment of the West African Customs Union (June 1966)have both contributed to the decline in customs duty performance. At theend of the period, total receipts from customs duty amounted to scarcelyone-half of the 1963/64 figure. Fiscal duties (fiscal duty proper,statistical tax and standard tax) are, as their name indicates, chargednot on a discriminatory but on a fiscal basis, and are thus imposed withoutregard to the origin of commodities. However, "local" productsY' fromthe Ivory Coast, Dahomey, Mali and Mauritania are exempt. Products"originating",2' in those countries and also goods from Niger and UpperVolta are subject to a reduced tariff procedure which brings the amountof duty navable down to one-half the total amount of the fiscal leviesand indirect taxes to which similar products imported from the EEC countrieswould be suibject, tholugh the mininTmm amount collected must not be lessthan the indirect taxes (turnover tax and special levies).

85. Fiscal duties as a whole represented around 60 percent of totalimport duties over the period. F scal duty procer (19 nercent of total

import duty), the rate of which varies from 1 to 25 percent but more oftenfrcm 5 to 20 percent, is charged on the rajority of consl-mer goods,while capital goods are the most frequently exempt. The 3 percent9tatist-cal tax (c peren-t o- the total.) is lPeied on r11a products excepntcertain basic foodstuffs and capital goods which are generally exempt.The "stan,dard tax cr, transactions", wf.hose title sa sls-vival n'rorithe past, but wihich is in fact a customs surcharge imposed for fiscalpuirposes on the Uotal -value (inclu-(ng customs. andd fiscal dues)of most imported goods (with the same exemptions as in the case of theother two levies). It comprises four rates: 20.6 percent (normual rate),30.9 percent (a higher rate for certain products already being manufac-tured locally), and two lower rates: 2.1 percent for inuustrial capitalgoods and 6.2 percent for newspapers and periodicals. Its performance in1969 accounted for 57 percent of fiscal levies and 32 percent of Uotal

import charges.

86. Turnover taxes on imports, whose yield is the same as that ofthe standard tax, will be studied along with other similar levies ondomestic production. There are two rates: a higher rate of 33.33 percenton luxury goods and a normal rate of 13.5 percent. They are assessed onthe total c.i.f.value of the imported goods, including the other leviesmentioned above. Then there are certain commodities that are subject tospecial or specific customs taxes, and these will be dealt with later on.

1/ Entirely manufactured or harvested in the country or origin.2/ Partly or entirely manufactured with imported products.

- 30 -

We shall just point out here that petroleum products are s-ubject to arelining tax, which provides the State with a relatively large source of-ncome (8 percent of import revenues). The rates of this tax vanryaccording to the nature of the commodity in question and are based noton real value but on official list-prices (valeurs mercuriales) establishedby lau. This refining tax does not preclude payment of the other importlevies.

87. Erxort duties account for no more than 8 percent of Senegal'stax revenues and a mere 15 percent of all foreign trade levies. Groundnutsand their derivatives represent 95 percent of export tax revenue and therest is mainly accounted for by phosphates.

88. Groundnuts and their derivatives are subject to a rather complexfourfold tax svstem: fiscal duty. research tax. pronessinz tax and astandard tax, to which are added certain. .urcharges. The rates haveremained the same for a numhbr of years .-, but the tax base Which isnot the export price but the official list-price, was changed at thebeginning of 19G6. So this is really a syxcstem of snpcific taxes basedon an official price list, that is, a list of flat-rate values per tonfixredb h-er +.ha Gov.ernment. For eachn %on of ed grounnut products(shelled groundnuts, oil and cake)A/ there are several official prices

VV VAL- LlJ.L&.LLi VJ. LJ1jW PLUAUt.LU d.LU U,AB: UL,4A UV WILUA1L LU~ -LO OULJtVQL,L.

Table 10: OFFICIAL PRICE LIST OF GROUNDNUT PRODUCTS

(CFAF per ton)

Before 1/1/1966 After 1/1/1966Fiscal duty Standard Fiscal duty Standard

TR & TC tax TR & TC tax

Shelled groundnuts(in bulk)

Senegal 36,000 37,400 21,260 37,400Casamance 32,950 34,000 18,220 34,000

Raw oils (in bulk)Senegal 70,000 72,900 4o,o0o 72,900Casamance 63,ooo 67,100 33,000 67,100

Refined oils 74,000 76,700 42,300 76,100Oilcake 11,000 12,400 6,500 12,400

1/ 12 percent for fiscal duty, 1 percent for the research tax (TR),0.5 percent for the processing tax (TC) and 5.4 percent for thestandard tax (including the surcharge).

2/ Groundnut cake is exempt from research and processing taxes.

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89. Fiscal charges per ton are obtained by applying tax rates tothe official prices.

Table 11: FISCA'iL CFIARGES / PER TON

(CFAF)

Before 1/1/1966 After 1/1/1966

Shelled groundnuts 6,811 4,801Raw oil 13,02hL 9,031Refined oil 13,391 9,724Oilcake 1.111 930

1/ The figuresin Table 11 are based on the assumption that 15 percentof total exports of shelled armiindnuts and n-mide oil came fromCasamance. The charges have also been consolidated.

Source: Senegalese buidgets.

Q0. +Aa.Tfirtste toards in+.anle +.vitin he nnccoeniuenceq of t.hegradual disappearance from the groundnut market of the system ofprinces guan ranteed by France, th-e Government dc'ided to reducetaxes on groundnut exports with effect from January 1966. To do this,

charges per ton down by around 30 percent (taxes on shelled groundnuts,

for ex&,.pe, drop.pe by J±cu 2per±kilo)

groundnuts oil oil Oilcake

1963/64 Crop year

CIF price for thefrarc area a/ 52.500 95.600 i12.000 i3.000

Fiscal chargesper ton 6.811 13.024 13.391 1.110

Tax rate 13% 13.6% 13.1% 8.5g

1967/68 Crop year

CIF price b/ 38.450 62.050 67.100 25.000Fiscal chargesDer ton 4.801 9.148 9.707 930

Tax rate 12.5X 14.7% 14.5% 3.7%

a/ Price guaranteed by France.b/ Average world price for the crop year.Sources: B.C.E.A.0. and Senegal's Finance Nlinistry.

- 32 -

91 For the 1963/64 crop year when the French-guaranteed price wasstill CFAF 52.5 per kilo for shelled groundnuts.the ad valorem rate ongroundnluts were around 13 percent, except on oilcake, which was chargedat a much loner rate (8.5 nercent). Tn 1968/69. the vear when the nriceguarantee finally disappeared, but also when the world price for shelledgroundnuts was at its lowest (rFAF 38=),) the rates wP-re hardly chanopd

at all. Specifically, they fell by half a point for shelled groundnutsnnd rose fro,m 1 to 1.5 for nli Th.e tax on oilcake, on the other hnnd,the price of which had practically doubled in four years, fell by almost5 points frnm 8.5 percent tn 3.7 percernt.

00')t.n.,4

, 4'4m 11 ,-o.4-;+ ,4' -,4 - +I, -.. n- 4,- .44,,, ;.nm C+ 92.#~.* F-o.L he fis. c po int of V.Lew, UthLe LwaL Vir.LA.L%L th ha VLU is

distributed among the shelling stations and the crushers does not makeq.Ai LT L.t-u I. 1CI1L;t IjL ULL LAjLU. _1-, *P Lilt: U.L.L.L1..LM± i-.zz±~ a4Llu li%1~Lt; #4l±

rates, were calculated in such a way that the tax revenues would be aboutthe sam,e. Tulus, supposing that a marketed harvest of U85,0vv '0ons ofgroundnuts in the shell (595,000 tons wfhen shelled) was to go entirelyeLnter to the crushers or to the shelling stations, or 80 percent of i t thecrushers (which would be the case with the new arrangements concludedbetween the crushers and the government), customs receipts wo01 d fLuctuateby a very small margin, between CFAF 2,526 and 2,487 million.-

93. And lastly, the time lag between marketing upstream (producers,marketing bureaus), marketing downstream (exports) and the collection ofthe corresponding customs receipts helps to cushion the impact of cropfluctuations on public resources. Thus, during a given fiscal year (July1 to June 30), customs receipts are influenced both by exports of theprevious harvest, which go on through the first half of the fiscal year,and by exports of the current harvest, which begin during the second halfof the fiscal year. The arrows in Table 12 are an attempt to show this.

Table 12: THEORETICAL AND ACTUAL CUSTOMS RECEIPTS=/FROM GROUNDNUTS

1964-65 1965-66 1966-67 1967-68 1968-69

Theoretical customsreceipts from thegroundnut harvest 3,7 3,2 2,3 2,7 1,9

Actual custops or i 1 receiDtsZ/ for i\ \the fiscal year 3,5 -::fi3,2 2-'9 7s2,8 >9 2,6

1/ Tn billions of GFAF.2/ Groundnuts account for around 95 percent of customs receipts.

1/ Assuming that 77,000 tons (shelled equivalent) is processed byn .c,Fin,..c for, n,l nnn eIl,ns+- pinf

- 33 -

in addition to the taxes already mentioned, groundnut exports are subjectto a series of "earmarked" taxes, the proceeds of which go to the GroundnutStabilization and Equalization Funds. The total amount of these levies isCFAF 1.4 per kilo of shelled groundnuts (CFAF 3 :.or raw oil and CFAF 3.3for refined oil).

94. Although these taxes do not supplement the State's currentrevenues, they still provide funds which have in the past helped indirect-ly to make up the budgetary deficit (see the section on financing). Inthe groundnut accounts for 1967/68 the entire range of fiscal and "para-fiscal" taxes came to around CFAF 6.20 per kilo of shelled groundnuts, i.e.14.3 percent of the average CIF Europe price estimated by the Senegaleseauthorities.

95. Phosphates are subject to a statistical rate of CFAF 3 per ton,and calcium phosphate has to pav a fiscal charge of 2.5 percent for thefirst 500,00o tons exported and 5 percent thereafter. Customs receiptsfrom phosphates account for around 3 nercent of total export revenues.

96. 9iggl ing has eomrne a majnr fnatnr in Senegal. An inDortant.rell-documented article recently appeared on this subject in an Africaneconomic jourinalr Informed nirnlpn, frnminntntly put loss or trx r2venueat 3 to 5 billions CFAF. In the absence of statistics on smuggling,it is both rifficult and hazardous to r-e any estimates. The prob-lem is nonetheless real. It is a kno-=n fact that two-way smugglinggoes on be+trv.een Senega -vand n.- G- nmh bia ,T, *m f. a n1,- 1 lrong encl-aseparating Casamance from the rest of Senegal.

97. Taxation in The Gambia is considerably lowier than in Senegal.Offic-4 ial---4-- sttstc on G--a.,4ba - ore- gn trade i ndi4cate ar. extraordnJ -

increase in imports, in terms both of value and of weight. From 1964 to196 the Q oa vH-u -4f- ____4rt wer I--u 0y7 -per --crt - h-,spot ofeail±L7UU AI U 'UGL,-. Vdi.L&t= U 0± ilip LU±LO wflL ULU U WI PV1_k;i±LU. .LU1jJUI.LJQ V.L VCOL.~

transportable commodities, mainly certain fabrics, cigarettes, radio sets,toilet soaps, etUc. have dJ4IIU',t U dLU double nd.LLjIQ sr,Vil, e Uv.nLt.Led LIL fIJUL

to five years.

98. Groundnuts are smuggled into The Gambia from Senegal. The Gambia'sgroundnut exports have certainly gone up considerably. Since it is harUlylikely that weather conditions in The Gambia can have been different fromthose in Casamance it is difficult to explain tnis sudden upsurge of Gambianproduction. In terms of volume, exports of shelled groundnuts rose by 57percent from 30,238 tons in l964 to 52,170 tons in 1908/69. it is possibleof course, that groundnut plantations, and hence productivity, are expand-ing, but hardly in such large proportions. In 1967/68 the average pricepaid by the Senegalese distributors to the groundnut producers fell fromCFAF 20.4 to 17.7 per kilo.

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9 9.. LTs J 0.1. oLf rpr-cetiL, (ju.L,.LJ V-Lltl Ulth jPA±VU±U) pouse uy thesystem of "tic!cets" (see Volume ITI, .griculture), has obviously encouraged

100. Tnere is also smuggling between Senegal anid Mauritania, orrather defrauding of the customs, since certain importers are apparentlyabusing the customs privileges applicable to goods for sale in Mauritania.A customs pool does exist between the two countries. Goods unloaded atDakar for M4auritania can be either cleared in Dakar or transported on atemoorary duty-free basis (transLt bond-note system) to the frontier forcustoms formalities to be carried out there. It can happen that goodstravelling on this temporary duty-free basis fail to arrive at theirdestination (Mauritania). They have thus not been subject to any dutyand are resold in Senegal at prices that are both competitive and remuner-ative. The reverse process is also conceivable (from Mauritania to Senegal).It is said that customs officials close their eyes to these activities, thatfalse custo;,ts sta:ips are used, etc.

101. It seems that smuggling and fraud are also becoming more wide-spread at the oort of Dakar. Here the practice is to use the system offictitious warehouses. Importers are allowed to use premises approvedby the customs authorities to store goods for re-export or products onwhich duty will not be paid until the time of their sale in Senegal.Using fraudulent practices, or aided and abetted by people on the spot,the importer can readily indulge in fictitious reshipment activities; some-tLnesthe goods do not leave the port by sea at all but are diverted iniland:in both cases they end up in Senegal. Another practice is that of under-invoicing or false invoicing. There are other ways of defrauding thecustoms, but this is hardly the place to discuss them in any furtherdetail In any caseAsxmigglina and f rniid have bhen such a sri ous problemin Senegal that the government recently introduced a series of measuresto curb these activities. Ana nti-fraund cor'mntYe+.a ln been s up ineach region, composed of customs representatives, administrative officials,mermnh,os of the +. a eter and Forestr nnd P-rine ontrnl TDepnrt.ments nnd of thepolice force, and also of the Department of Lands. The conmittee meetsonce a mont+h to pool its experience an. disclss fuiture coursps of' act-iorn.

At the central gov;ernment level, there is a National Anti-FYaud Coimmittee,preside.d VoSJJ by th .. Jstr of .&.-na.,. t.d c.ose ofrepesetatve

of the other ministries concerned. The customs administration was re-J CLr-LL zeJJ in UL.LI 19767, .o a6 cetair.LOC eLxtent LA,ita.L± U.L ne 1 vd.L it

some exceptions, customs officials have now been put into uniform andare ±.Lable ut Iiihe s-,Le kir,d U.Lo penalties as those .i osed the .

A new customs personnel code became law on October 30, 1969 and wasi.-,.ler,er.U by Ueree,-:V VIA Dece,-lseAr 10, 1969 . =Lec-'",&eLt:1 Or custo,i44lipjJ±Lemel.teu IJ_ -_I 'If%ii1~ ±j70 £LU WI ±LL Loms

officials is nowi based on much stricter requirements as to qualifications.The parl-ilitAry structure has Deen coniLLrrredu, adrI the rUles governSling

the officials are defined in more rigid terms.

10.W G '.ese m,-easur-s as a -w-ho'0e shw,,l .help vo inp.,l-ve the situauion.Nevertheless, it is not enough just to reorganize the administration. Theproblem irasus lbe attaukAe"d atu its rootU. dsL mient.LIoneA in thne balance o-rLDayments section, Senegal has no proper foreign trade policy, let aloile agood custormis policy, except Lor certain agreements with the Iranc areaand the EEC. With a fear exceptions, tariffs have remained unchanged formany years. Tnere have been a few improvised measures which have takenthe form of higher rates of import duty. A whole range of goods, parti-cularly non-essential consumer goods, is very heavily taxed when comingfrom countries to which the general tariff applies, e.g. Japan and otherAsian countries.

103. The question arises whether it would not be possible to considera tariff adjustment for certain commodities that lend themselves to srrug-gling by their very nature and by the exorbitant rates of duty charged onthem. The result of such downward adjustment would be to discourage smug-gling and at the same time to bring into the State coffers the proceedsof duties wJhich would admittedly be lower but which would be assessed ona considerably broader base than that at present declared at the customs.The first stage of such a reforti could cover a limited number of commod-ities carefully selected from among those whose actual crossing of thefrontier it is difficult to control. Implementation of this measure wouldprobably not malre imch difference to public revenue irnrmdiately, but itmight have quite far-reaching psychological effects. The uncontrolleddevelooment of smuggling activities which the government is physicallyunable to check can have a demoralizing influence on taxpayors' atti-tudes, not to mention disastrous consequences on local trade and on theother sources of taxation indirectly affected. Senegal does not have thephysical means to police its borders and administrative action is thereforenot enough to remedy the situation. The most the government could andshould do, however, is to devise and introduce a system of sufficientlysevere npnal tie s fnr viol-ators . in adciti on all1 dooubtfuil elements shouldbe removed from the corps of custorms officials. This reform should bestudied very thoroughly;. but not within the context of this report. Itcould be undertaken with the help,and maybe even the guidance,of anexpert from an independent organi zation who, wlitholut the da nger of inter-ference, could conduct the necessary research work and suggest suitableaction.

104. However, the problem of smruggling. threatens to become evernmore serious in the near future. Senegal is already experiencing greatdifficlties with its tax revenrue. Its current public sav-ing.s are dis-appearing. There is, therefore, no time to lose before the adoption ofsan efFetions. oli_,- to prevent th seloussituations.

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Taxes on production and domestic conz,,uPtion

105. These taxes Lall into two categories: the turnover taxes anda number of special taxes on certain consumer staples, most of which arein the nature of excise taxes. Total pDroceeds --rom these taxes in 1968/69accounted for 43 percent of indirect taxation and 21.6 percent of totaltaxation.

106. The turnover tax iwas overhauled iwith effect fro.I July 1, 1966.Following the recommendations of the Hallstein Conmission, the overhaultook the, form of a kind of value-added tax (TVA), limited to the productionstage., The following are therefore liable to this tax: producers,i.e. processers, building contractors, small craftsmen, and service con-tractors. Tmnorters are also liabhl to this tax. On the other hand.transactions undertalcen by the other sectors of the economy are exempt:mainly exPorts, insurance, pnhli trnnsnnrtation; hankins7 transactionsand sales "as is" by merchants. Also exempt are imports or sales ofrprtain prnoiduts nr anngos in particuilar nprtain fooistuffs- an-d the sale.repair and remodeling of certain sea-going vessels, river craft and aero-planes. Being lImited to ma.ufacturers, -n i orters and a srnll number ofmerchants, the tax is thus applicable to a very small nlumber of taxpayers,which makces its admin.istvration.. T.c eas . It is to a v- r o-n valueadded, bearing in mind the followJing concessions offered to those liable.'Po. 1av pr¢e that roducers m.ay deduct the vaxr collected ii+ram.,~Me in.,~~ -r-r4- £k++~+~~1,rfr y

on imported raw; materials, and that merchants (exercising their option)

purchase price of imported or locally purchased products, collacted up-stre am. TMhUe refOrmL a]so contains a "Thuffer rule" in that the deduction oftaxes collected upstream (mainly on imports) cannot in the end serve torefunLd ar aro-unt of tax higher thnaII that chargeable on the selling r-rice.Also, the marumacturers can deduct each month from the tax due on theiroperations the almoulnt of tax included in the cost of capital goods or In 2/overheads, acquired or incurred to meet the requirertments of their business.-Tney- may also deduct the tax inciuded in the cost of services utilizedfor the maintenance and conservation of products qualifying for the

107. Tne rates of the turnover tax have been altered several timesduling the period under review:

j/ W1ith an option for merchants selling their goods "as is" (en iletat) tothe producers.

2/ Excluding vehicles except for internal maintenance vehicles, equipmentand fuel used by them.

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Tab±ie i3; u'WiAi i S I i4' -MR-M I5.1 T 1X a/

1961/65 1965/66 1966/67

ImportsNormal rate 10% 1 2% 13.5%Higher rate(mainly luxury goods) 22% 25% 33.33%

Local salesNormal rate 11.1% 13.64% 9.89%Lower rate (mainly sugar) n.a. 4.16do 4.16%

Services 6.4% 9.29% 9.29%

a These are the usual rates. The tax is actually charged on itself.

108. Prior to the reform, the turnover tax wTas chargeable only once.Manufacturers established in Senegal used to import or buy locally, tax-free, the products and raw materials required for manufacture. They wereallUoed to deduct from their taxaole turnover all raw materials used inmanufacturing the final product. It will be noted that the tariff usedis discriminatory, since it protects locally manufactured products. Thevery high rate levied on luxury goods also leads to tax evasion. Tnepresent system does have a number of advantages, however. It obviatesdouble taxation and encourages companies to modernize, since they candeduct tAxes charged on ca;iotal goods.

Table 14: PROCEEDS OF TUPd-OVEi. TAX(3in bilon %f' rFWAR)

I 6A/64 1964/65 1Q65/66 1Q/A7 1967/68 7 Q6-/,Q

on imports 3.5 3.4 3.3 4.4 4.7 4.8

Turnover taxon local -2- °. A 2.htransactions

Total 5.6 5.6 5.9 6.8 7.1 7.2

As. percentage ofe ve ne s _ 7 A J a t K c n 7 I. Cv - A n Cl n < e

uo UC1 ua -L I v_- 10 -% .j -L 1 4/0 A A 7 71 fj ,/0 e J- p K * 1

revenues

- 38 -

Tne trends in turnover tax performance more or less follo.,- the c,hangesin its rates. As a whole, the trend is fairly clear, both in absoluteterms and as a percentage of total tax revenue. It is quite reasonableto think that, bearing in mind the anticipated pattern of imports and ofindustrial production for the years to come, the turnover tax shouldconstitute an increasingly important source of tax revenue.

Ihost of the excise and other taxes on doioestic consuimJtion have comeinto existence in recent years. In 1968/69, the proceeds of thesetaxes accounted for 14.2 percent of total tax revenue. In 1964/65 therewere six principal taxes: specific tax on tobacco (e.g. CFAF 20 perpacket of top-quality cigarettes), excise tax on alcohol and alcoholicbeverages (e.g. CFAF 200 per liter of alcoholic beverage with an alcoholcontent of over 200), a tax on electricity consumption (CF,AF 1 per klJL.T.), an ad valorem tax on oil (1 percent) and a special tax on movies.

109. Three other excise taxes were brought into being in 1966: atax on carbonated beverages (CFAF 1 per liter), a tax on cola nuts (CFAF 10per kilo) anad a tax on green tea (cFAF 100 per kilo).

110. In addition to import duty, petroleum products for local con-suxmtion are subject to tuo specific taxes: the refining tax, which iscollected by the customs on products distilled from mineral oils (thisexcludes the turnover taxes. and the rates are based on official prices)and the specific tax on petroleum products. The rates of these two taxesvarv according to the nature of the pr6duct.

Table 15: RATES OF TAXES Oil PETROLEUMI PODEJCTS

Ief ni / Specific aax

1.12gua1ar gaso-1ine tL" N3 r 2 n r )n .

Premium gasoline (El:) 95-112 F') 2,66S.9 F'n -t, nat.g kerosin.e (T) 7173 F Yn03 - * . I CAJ, )L 1

Gas oil and diesel oil (HI) 782.56 F 2,078.94 fDo.estic fuel oil (m'etr-ic tons) 3,4iJ4.16 r 1J9,0950 FHeavy ,-uel oil (metric tons) 401.O00 FLru (maetric tosjil 5,o93.24 - 5,1i9.00 FLubricating oils (EIL) - 2,00.00 F

1/ Tax calculated by basing tne rates on official prices.2/ Diesel oil is subject to a reduced rate w.lhen it is to be used for

certain purposes of general importance to tne economy. In 1968/69the total proceeds of taxes on petroleum products amounted toCFAF 4.2 billion, or 17 percent of all indirect taxes and 12.3 per-cent of tax revenue.

Direct taxation

Tn1hlo 1t6 TTRPrr.T TAYR 196/65 - 1968/69

1964/65 1965/66 1966/67 1967/68 1968/69

Total tax revenueel/ 34.01 33.76 34.14 34.61 34.20

Direct taxes1/ 7.23 8.43 8.29 8.36 8.44

A. Proportional and progres-sive tes on ncom-- e-,/ I.7n ).U4 n . .J1 _ __

of which:

Industrial and commer-ei.a.L jr.JL.L±±b k\ I. kJI I I I ._?Uj k Ol.lJ kF I IJ

Income from securities (0.63) (0.67) (0.49) (0.56) (0.54)Wages ard s aa.ries -0 ) (I.2 7) (1.02) (1.26) (1.26) (1.33)General income tax (1.03) (1.09) (1.17) (1.02) (1.10)

B. Other direct taxes 2.28 2.59 2.68 2.46 2.15

a. Poll tax 1.09 1.20 1.17 1.21 1.06

(Regional tax) (0.70) (0.74) (0.73) (0.76) (0.67)

b. Taxes on presumedincome 1.19 1.39 1.51 1.25 1.09

(Business andlicenses taxes) (0.46) (0.52) (0.55) (0.43) (0.42)

1 /Gross amounts, before refunds.7/ Excluding pay-roll tax.

111. During the five years under review, direct taxes rose both inabsolute terms (16 percent) and as a percentage of total tax revenues(from 21.3 percent to 24.7 percent) and of GDP (from 3.8 percent to4.1 percent). At the end of the period, they represented approximatelyone-fourth of total tax revenues. This increase is all the more encour-aging since it is due entirely to the proportional and progressiveincome taxes, which. x&b +z ena or the period, accounted for approximatelythree-fourtf-. ur the direct taxes.

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Table 17: GRO TH OF DIP3CT TAXES (AS PERCENTMGE OF TOTAL TAX REMIJE),1964/65 - 1268/69

1964/65 1965/66 1966/67 1967/68 1968/69

Proportional and pro-gressive taxes onincome 14.6 17.3 16.4 17.1 18.4

of thiph-

Tndustri2l and

co=nercial profits 5.0 4.6 4.6 5.8 6.2Ttages nncd saln-;9 -7 pi 3. '7 3 7 3 0

OtheL~. UJ.-ecb.>e

Poll taxes 3.2 3.6 3.4 353Taxes on presumedinco^ . I 4. 4 4 v-' -

Totwal 21.3 25.0 24.2 24I

Total direct taxes aspercentage of GDP 3.8 4.3 4.1 4.1 4.1

112. The system of proportional and progressive taxation ofincome is directly patterned on the old French system. With theexception of company profits, income is first taxed separately onthe basis of individual schedules, and then overall at the "fiscalhousehold" level. Three categories of individual income (schedules)are taxed separately. These are (a) industrial, commercial andagricultural profits, (b) income from the liberal professions and(c) income from securities. In view of its special fiscal features,this last-mentioned category should be treated together with companytaxation.

113. The schedular tax on industrial and commercial profits is byfar the most productive. There are two wTays for determining the taxableprofit: one based on the '"actual incorme" and the other an the "poresumedincome". The latter is applied only to small enterprises with a turnover notexceeding CFAF 20 million or, in the case of service enterprises,not exceeding CFAF 7 million. The taxable profit of such small enter-prises is assessed by the government on a presumed basis determined inagreement with the taxpayer, in the light of various data provided byhim. The actual profit is the difference between the value of netassets at the close and at the beginning of the financial year, after

ded-u-cti-ng _nr addition-al caital surp-lied an,d 2addiia a--V drawi.nap m-nde-

by the taxpayer in the course of the financial year. For practical~~ *44.118 ax a bl _++ 4. ~_-l t 4.t~ di4 -m^ 1% +i.t on 4+^+-m

pu~* ~/~ A. W 4. ..L4J..U .e U.J .A ULLs e to . diffe. bebweez. CSobal

proceeds and total charges incurred in realizing the profit (generale LLene, ±Jld1.nadlJal charges, depreciatior. a.A. provi9lons). The first

CFAF 100,000 of net profit is exempt from tax. The following bracket,froml CFAF 101,000 to OFAF 150,000, is taxed at 10 peren.t. Finallthe portion exceeding CFAF 150,000 is taxed at 20 percent. On the otherharnd, witin the framework of tne schedular taxes, taxpayers are grantedpersonnel exemptions, the amount of the tax being reduced by 10 percentper de:endent, with a maximum of CrAF 3,000 for each such person.Rather similar rules apply to the profits resulting from the exerciseof the liberal professions.

14. Company profits are taxed twice, first when they are made andsubsequently when they are distributed to shareholders. The rules forestablishing the taxable profit are the same as those for the "actualprofit" referred to above. In this case, however, a flat rate of30 percent is applied, without any standard deduction. Furthermore,companies have to pay a minimum profit tax of CFAF 300,000 per annum,even if they fail to make a profit. This tax, which is not reimbursable,can if applicable be set against the tax liability on industrial andcommercial profits. Company income distributed to shareholders is sub-ject to a distribution levy of 16 percent for dividends and 10 percentfor interest payments on bonds. The amount payable is withheld at sourceby the distributing company for payment to the Treasury. There are anumber of exemptions for certain types of securities. There is also afairly complex system of capital gains tax on the sale of fixed assets.It should, however, be noted that these capital gains are not taxed ifthe enterprise undertakes to reinvest in Senegal in fixed assets, thevalue of which must be at least equal to the capital gains themselvesplus the cost price of the assets assigned. This exemption for reinvest-ment is subject to certain conditions as to timing and minimum amountof investment. In the case of assignment of an enterprisel the capitalgains, if any, are included in the tax base, either as one-half is theassignment Ar termin-ation of business takes lxrae 1ess than five yearsafter the start of operations, or as one-third in other cases.

115. Income already taxed under the schedular taxes is taxed againunder the general income tax. This taic is assessed on the total incomereceived by each household and levied on the head of the household.In addition to the categories of in-ome mentioned above, wages, salariesand pensions are also subject to this general income tax.

116. Each category of income is established in accordance with therules applicable to the schedular t. An aAditnal stndad deduction of10 percent is granted on wages and salaries as an allowance for professionai.exer.ses. Th'll-e totlua"l .-.etl u xx"--t t l 4nome is 4vd-Led_ ;-to 4ncor.- sp'4+ts

the light of the number and status of the persons supported by the tax-r/ II U J liuubfcilu-Lu k~Ldill-L... . ....... U±I...1U . . IL. .. J ..-.4. ...

- 42 -

is npnliA 4-n atoeh of4 +.haQ irincma splits, t first brGkt of

CFAF 100,000 per portion being exempt:

CFAF 101,000-200,000 ... 2%CFAFP 2O01,0 00=3 000 - 10o%

CFAF 351,000-600,000 ... 15%VAL ' 01 000 ....r....oOin rV0n

CFAF 901,000-1,500,000.. 25%UV1r I f u vu n 0 0CFAF 2,501,000-5,000,000 50%avu ve uraF 5,000, w 0 ............. 0

117 (. As5 l o 7 199 a surchau-ge has been applied to te nr

income tax, equal to 20 percent of the annual assessment, with a limitof CFAF u00,000; a reduced rate oI 15 percent applies for large families(with five or more children).

118. Wages and salaries are not subject to a schedular tax, but theyare subject to a 'solidarity" tax of 2 percent for the Caisse desPrestations Familiales (Family Allowances Fund). In addition, employerspay two levies on wages: a "housing improvement" levy, also of 2 percent,on that portion of wages that does not exceed CFAF 45,000 per month, anda payroll tax of 1 percent, without any upper limit. Finally, the indi-vidual's income (wages, industrial and commercial profits, income fromthe liberal professions) is likewise subject to a development levy,charged at the rate of 3 percent on the portion of annual income betweenCFAF 240,000 and CFAF 360,000, and at the rate of 8 percent on theportion exceeding CFAF 360,000.

119. The income tax system described above in rather broad outlinecalls for a number of observations. It will be noted, firstly, thatcompanies are treated as fiscal entities separate from their shareholdersand that their profits are taxed more heavily than those of individually-owned enterprises. In practice, the distributed profits of companies aretaxed three times: first at 30 percent, then at 16 percent (distributionlevy) and finally, when they are in the hands of the recipient, underthe general income tax. Companies are, in addition, subject to a minimumtax liability whatever their financial results may be.

120. Most individually-owned enterprises have a low turnover figure,unlike companies. Many of them escape taxes in view of the abatementsapplied. When thev are in a taxable position, their profits are subjectto the schedular tax - the rates of which are more favorable - and togeneral income tax.

121. There are no complete or sufficiently recent statistics availableon direct taxation. Nevertheless, sample surveys have been made and thesegive n idrle of +he cont-rihution marde bh eech categ'orv of' ta,maver to theschedular taxes (see table below).

Table 18: INDUSTRIAL, COPMERCIAL AND AGRICULTURAL PROFITS, 1968

Number of Profitsassessments declareda/ Net tax paida/

Companies 431 6,797 1,797Individually-owned enterprises 2,587 1,368 204Craftsmen 68 25 1Farmers 5 2 -

3,091 8,192 2,002

ex/Tr r1T?A T; - I

Thus it can be seen that while companies represent 14 percent of the numberofL Ud.ax- ~L,L4~ d.U J L.LU Lq 4LvaLVw.lv±I l U.) pu~l±CDl 01 5110 DAd Jd-.Lof U payer-s, t- 1ey ear., a profit e-l-' a-lent t 3preto h oadeclared profits; individual entrepreneurs, on the other hand, account forUL4 percen' o' iA1i ) UdJ. L1Un W LXcAIJc y' v UUA U. I 0 U-dU x 1-

cent of the profits. The average profit declared is CFAF 15 million fortle first category and only FAr 529,000 for tlue secvnd. Finally,companies contributed about 90 percent of the taxes on industrial and com-m-lercial prolits i-n 196'.

122. In 1968 also, the total amount of income declared in 26,931general income tax returns amounted to CFAF 19 billion, an average ofCFAF 707,000 per return. The tax levied amounted to CFAF 4-9,70 per tax-payer, giving a tax/income ratio of 7 percent only. This shows clearlythe effect of deductions for personal exemptions.

123. A further important point is also worthy of attention. In 1966,of 22,163 general income tax returns, 5,846 were from French taxpayers.The income declared by these French taxpayers represented 47 percent of thetotal income declared for general income tax purposes, and the tax leviedamounted to 71 percent of the total for general income tax. The populationof foreign origin has remained fairly stable in Senegal for some time, fol-lowing the exodus in the wake of independence. Further departures could,however, occur in coming years, and this would have fairly serious con-sequences on the yield from direct taxes. Of the total of 26,931 returnsmentioned above, 23,219 were from wage and salary earners without othersources of income.

The problem of personal exemptions

124. Regulations concerning income taxation contain numerous provisionsgranting preferential treatment for taxpayers with dependants:(1) a 10 percent tax reduction for each dependent child applying forschedular tax liability; (2) the "family quotient" system for determining

the amount of general income tax payable; and (3) the arrangementWLet:Luy wage ±earnLers car, Ude:UduCtb 'L.--i Lheir lv tlot.a-l La= earU-gsbo

received btr virtue of their family position and obligations. These.. -vi'ege --- a- e o T-ua-e --w!u2 dep,erdents arever costlyv-for tbe

budget.

125. It can also be asked whether such benefits can be entirelyreconciled with a policy of family limitation. In any event, it is hardlynormal practice to deduct the amount of family allowances from the taxableincome. Family all owances constitute additional income and as such shouldbe taxable, in the same way as actual earnings. This provision wouldcertainly seem to call for review.

126. Other direct taxes, a survival of the colonial era, aregradually disappearing. In 1968/69 they accounted for only 6.3 percentof tax revenues, while - after deducting the proportion collected onbehalf of the municipalities - they contributed little more than 3 percentto State budget receipts. They are made up of a host of minor taxes, mostof them assessed on visible wealth, i.e. levied on the basis of outwardsigns considered to be more or less indicative of the taxpayer's abilityto pay. However, the poll taxes, classified under this item will, forsome time to come, continue to be the only practical and reasonably simplemeans of taxing the rural population, although groundnut farmers arealready taxed indirectly by the export duties on groundnut products.Be this as it may, all these levies are archaic and regressive in characterand give rise to a lot of administrative headaches for the tax authorities,who currently devote a large amount of time to establishing bases for thesetaxes which could certainly be more profitably employed, e.g. on checkingincome tax returns in the industrial and commercial sectors. Furthermore,the administration of some of these taxes that are refunded to the muni-ciDalities should be antrusted to the municioalities themselves. whichwould then devote more attention to their coUection, as they would bemore directly affected bv the tax vield: the municinalities are alsocloser to the tax source than are the departments of the Ministry ofFinance. Some of the minor b1dget.arv tnqs onuld hp aholished withoutresulting in heavy losses for the State, if - as stated above - thismeasure were to be annomnanied hv redpnlovment of the officials concernedon more profitable tasks. The government has just abolished the levyon nersonal nronPrty, which was based on +the rental vanue of housing

accommodation. The yield from business fees could be timproved" byincorporating license~ fesand cr'S.ryg twhrough a complete revision of thetariff. Such a better structured tax would permit more effective coverageof marginal craftsmen and shopkeepers, wh.o at present avoid other taxeson income. However, in the current context, it is rather dangerous tosuggest the aboliio4 o .oifc;ir.o -P^wfom.s ofP tavion. Ne ntVless, a simplification and modernization of the current system, carriedoil Jn st+aes, 4u ld-, Pi4- v f ly..ear n,-t -,,l4 , -nr. s n. i r.

collection costs together with a higher yield from the retained or remodeled4-vaxesa.

'TRX ;ncc 11it re-s 'or investment n Senegal

127. A first group of incentives is provided under existing tax legis-lation. 'in the first place, enterpri-ses - whether individually-ownLed orin the form of companies - of an industrial or commercial nature, togetherwith individuals subject to taxation on the profits from non-comimercialprofessions, who - within the framewrork of the four-year development plan -

Use part of' their taxable profit for enlarging industrial, mining, ag.--cultural, forestry or other establishments, may deduct half of these invest-ments from their taxable profit. This deduction is subject to certainconditions and limits. The minimum amount to be invested is CFAF 1 million.The investment must be made within three years of the date of submissionof the investment program. Finally, in any year the deduction may notexceed 50 percent of the profit realized during the year in question.Any excess may be deducted from the profits for the seven following years0In addition, taxpayers subject to general income tax who do not pay sche-dular taxes (essentially employed persons) may deduct from their taxableincome during the eight years following the submission of the investmentprogram, 10 percent of the sums they invest in Senegal in the manner dis-cussed above. This reduction is limited to 5 percent of their net annualincome subject to general income tax.

128. The Investment Code also contains numerous measures providing taxrelief for certain categories of enterprises. The extent of the tax advan-tages granted to enterprises depends on the status they have been givenby the State: "priority enterprises" or "concessional enterprises".

129. Priority enterprises, i.e. those thqt submit a program for eithera minimum investment sum of CFAF 4±0 million./ to be realized over threeyears, or the direct creation of at least 40 permanent jobs!/ for Senegales7supervisorv staff and labor. and are approved by the State, may receivethe following tax advantages: (1) exemption for five / years from the taxon industrial and commercial nrofits. nrovided "the suim of cumulntive tax-able profits from the setting up of the enterprise is lower than theamount of the investments made and envisaged in the approved program";(2) deduction from the assessment for tax on industrial and commercialprofits of sums eaual to those actuallv re-invested in fixed assets inSenegal; (3) fifty percent reduction in the tax on income from securitiesfor a pnrind ofrf t.hreen yo_; and (4,'O) exeriptinn frn firar year from husiriP.c:fees (eight years for enterprises outside the Cap-Vert region).

_~~~~~~~~~~~~~~~~~~~~~~~- __ _ :/ Ths 'i1 .s .are …~ SLA.e to '.JA 20 m-lir and 20 'jLbJ S'r'-''"'- 5

for enterprises setting up operations outside the Cap-Vert region.

g/ Eight years for regions other than the Cap-Vert area.

- 46 -

130. Priority enterprises may, in certain cases, be granted furtherfiscal incentives such as exemption from taxes and duties levied on importsof certain goods from countries other than those in the Western AfricanCustoms and Economic Union, exemption from turnover taxes for certainoperations, exemption for a maximum of 10 years from levies on exports,etc.

131. Certain enterprises whose investment program is of particularimportance for the development of Senegal may conclude an establishmentagreement with the State providing - in addition to the tax advantagesgranted to priority enterprises - for the freezing of tax provisions 1/for a given neriod depending on the amortiz-ation nerind of thhe canit21invested under the approved program. This arrangement guarantees stabilityin the ta-Y pr-si-n arrli:cable to the operations of the aprproved enter-prise as defined in the agreement and as in force on the date of signing.In the event of faorable changes In the tax system, the enterprrise mayrequest that the changes be applied to it. What is involved here is thusa gLarantee agnist ar.y inc.re,ase inw t-+-ion.

132. No statistical irformation could be obtained that would makeit possible to evaluate the fiscal sacrifices accepted by the State fromthese aar-ge-.e1ts Nor are ILLhere aiy fiures available regardng 4LL1e

investment effort of these enterprises. It is therefore impossible tosay anhng; cor.cretIe aboutt *he r-es-aLvant uen.Ltt or dLsaudvantage joSenegal. A study of this type should, however, be carried out and keptcon-stantly- up to date by the authorities responsible f-or the economicpolicies of the country. Similar studies in other countries have, insome cases, revealed tne limited benefit from such tax incentives. Suchstudies have, in addition, shown that in some cases the tax advantagesare seco-ndary factors in a decision to invest; enterprises may paygreater attention to such factors as political stability, the absenceof exchange restrictions, etc.

133. It is, in any event, warranted to consider that all these exemp-tions, when granted on too liberal a scale, for excessively long periods,together with the 'Ofreezing covenants", may seriously handicap the fiscalpolicies of the developing countries. They should, therefore, be grantedonly with great circumspection and In full knowledge of all the facts.

Operating accounts of the public enterprises

134. , tatistical Appendix Table 3 presents, for the period 1966/67 -1968/69 - , a consolidated picture of the operations of the public enter-prises. This consolidation shows that total gross savings fluctuated around

g/ This "freeze" is in principle granted only to enterprises investingat least CFAF 500 million over three years.

2/ Period for which balance sheets and operating aceounts are available.

Table 19: SEMIEnAL. OP-?ATIONS OF POTBLIC ENT7ERPRISES

1966-67, 1967-68 and 1968-69?

(in bilLtons (if CFA francs)

1966-67 196i7-6i 1965-9

Erpenses Receipts Grois Erpenses Feceipts Cross a Stocks E-l"nense_ Receipts Garose Gr__ss Stocks

savingsi sztvings capit~al RCips ro Go Sckformation 8x~~~~~~~svings capital

__ _ ___ _ ffmoation

a) zntA rs of a camrcial or

T-1 tIEa r ys~- 3.*7 .0.12 3.16 3.11. -00 .1.3 -0.15 3.22 3.314 C0.12 .0.59 O0.0

2. Public transportation s"stem o98 0.99 *0.o0 1.1.7 .O) -. h *c o3 -0.I I. 0o96 -C.12 ..

2. Poblic transpotation sy5t~S 0.4 .'Y +0.25 C.h9 0.914, 0.35 +0. T 6 +C6 01 0.,56 1.02 C.h~ +05

3. Plort of' Dakar 17 2.C6 03-I. 7 2. 16 .0.33 +0 24.12.7*.5 02

14. Plostal systeaS 11.1 2?17 3.0.33

5. Corporation for Rico,.. 05 .1 . 06 01 . ,7.+3 +.6.I0

Development 0-5. C 75 0.17 50.23 4;0,06 .0.0y2 0.17 01234 0,30 R 0,3 +o 06 +CL07

6. S.A.E.D. 0__ 0 l .7 023 4,6 0 2 .. 040,0-,60

7. Comptoir Exportation - Poissons 0-12 0.12 ... 0.13 0.1;3 ... ... ... 0 0.07

8. S.E.M.A. Boulel 0-c6 c -c,5 -001 o.o.05 o.o; ... ... 0*04 0.03 *-C- O101

9. Handicraft office 0s07 0.07 ... 0.05 o.0, ... +0. 01 -0.01 0-09 0-9 -

Tot4_2 ;) < -42 0*l7 7139 ; Th 72-.3 +?-2 -0.23 '+o .i 7!*37

b) Rat rises of social interesit

11. Fami.ly allowances tend 0.03 0.13 +O.05 0.09 0.15 o 06 *100 0.14 0.28 0.O.14 +C. 45

Totl b) 2.03 2.56 .0.5;2 2.1' 2.61 0.43 +0.1 - 2.33 2.59 +0,26 +0.05

TotaLk~~~~~~. 2.11~Yi 2.69 O0:5 -2.7 -"s -"0.19 - 85 1 .0-,50-

c) Enterprises of an administrative

Eurei77Vteran's ofi'ice

13. C.O.U. 0.-2 ^.n? * * 0.02 0.02 - - - 0.03 0.03 -

1l. Sorsno Theatre 0.21 2.22 -0.01 0. 23 0.27 o.0o4 +C. 09 ... 0.21 0.18 -C.03 -0-05 ...

15. Radio Senegal

16. Agency for information O-2 0.$2 C.. .02 0.02 ... +0.04 - 0.02 0-03 +0.C1 +0c-O1

O-.' -06 -0.01 0. 03 O. -C:02 ... - 0.12 0.10 -0.02

___ 0.25 2.33. .0.06 ~~~~~ ~~~~~~~~~~0.25 C. 314 00 00 0.29 0.32 .0.0 33 +.0Totall c) O <2 -- 3 *0. oh O'G *31 C 09 *0.03 , 0 ° 3°i 3 +C 07

TOTAL 2.0 _ 5 - 0.05 05 ... +0.o02 - 0. .0 _

10; _-7? i~41 1051 11. 66 +1.15 +3.76 -0.23 1063 11924 *L29 .1.90 .0.16

1/ Before amortization ard other depreciation allowances.

7/ Current subsidies included.

3/ For O.H.L.N., ineluding long.-term credit.

Sources: Balance sheets and profit ard loss accounts. Centre des Etablissenents iPublics

et HinistAre des Finarnces.

- 48 -

CF',P 1.3 b1 i'linn rlii rng +.he -r period. These sav s inrcludre

operating subsidies received, in large part, from the State budget.These subsi'ches averaged OFAF 800=850 milo per annum.. C-ross aproper therefore amounted to approximately CFAF 550 million each year.After d-ed-uctior. -ov tppro r(vtlyC 00 r llio;n fPor annual depreciation-and amortization, the net savings proper were therefore negative.

135. Ilowever, this consolidation masks significant dispanties in thesituation of each o the p-ublic enter.-prises concerned. For a better -u.der--standing of operations, it is necessary to regroup the enterprises depend-in,g on tvhe nature of their operations. r nree major groups of public enter-prises are shown in Table 19: the first group comprises enterprises activeIn the commerci-al or agricultural field, competing with ule private sector.The second group encompasses those agencies active in the social field.Finally, the agencies of an administrative nature are grouped separately.

136. The gross savings of the enterprises of a commercial or agricul-tural nature varied, during the period under consideration, betweenC.AF 5)0 million and CFAF 890 million. One can speak here of savingsproper, insofar as - with some exceptions - these enterprises are notsystematically subsidized by the State. These overall savings coine largelyfrom two agencies whose results are well in the black, viz. the PortAutonome de Dakar (Dakar Port Authority) and the Office des Postes (PostOffice). The other enterprises in this group showed positive or negativegross operating results, depending on the year. Of these enterprises, thetwo most important are the Regie des Chemins de Fer (RCF - RailwaysAuthority) and the Regie des Transports Sen5galais (RTS - Senegalese RoadTransport Authority). Both have run into great difficulties. RCF hasheavy personnel expenses (80 percent of current operating receipts), hasa totally unrealistic tariff structure and is meeting with serious diffi-culties in collecting its debts. RTS, for its part, provides an urbanpublic transport service that is experiencing very serious competitionfrom private transport enterprises. It has an impressive fleet of vehiclesand operates with a frequency that is not justified by real needs or itsfinancial resources. After providing for depreciation on installations,vehicles and rolling stock. these two enterprises incurred net losses ofthe order of CFAF 600 million during the past two years.

137. The Office d'Habitations a Loyer Mod6rA_ (OHLD4 - Low Rent HousingOffice) and the Caisse des Prestations Familiales et des Accidents duTravail (Family Allowances and lWorkmen's Compensation Insurance Fund) have,on the whole, operated fairly satisfactorily. The first agancv is respon-sible for the implementation of a program for the construction of low-cosbhousing for public sector employees and employees of enterprises payingthe housing improvement levy. 95 percent of its income is derived fromthis lev y- nid hy workers and emplovers - OHLM is reg-arded as a non-nrof itorganization, as it sells the housing it has constructed at cost or rentsat very low rates T Its possibilities are iTmited, and rpnnntly the numberof applications for housing amounted to 12,000 for 4,000 units available.

- 49 -

The Family Allowances Fund, whose income also derives from employer andworker contributions, has had a steadily declining surplus over the years.This surplus has come from the provisions for workmen's compensation.However, social security payments are rising faster than contributions,and - unless the raise in rates currently under study is carried through -the surplus must be expected to disappear in coming years, probablyfollowed by an overall deficit.

138. The agencies of an administrative nature are responsible forthe services undertaken, in Senegal, by the State, such as information.university activities, public entertainment and food research. Theyare therefore largelv subsidized bv the State. to the tune of a sum aDproach-ing CFAF 400 million, more than half of which goes to "Radio Senegal".In this sense; therefore; the gross results which they show- are not signi-ficant,-since the State regularly ensures that their accounts remain inbalance. They could inst as well be incorporated in the hbdget or in thespecial appropriations accounts.

III. PROSPECTS FOR 1973/74

139. The nrojectinns of nArts of the rcirrent acrcunt for +he pulblicsector in 1973/74 are the result of a certain number of calculations(see Apperrd1im made on the basis of the yenr 1968 (in cnnstant rFAF,basis 1968).

140. The projections for current revenues and expenditures of thec-ent-r-nl goveromen.t show gross angs of CFAP A A l at tbe end

of the financial year 1973/74, as compared with CFAF 1.94 billion in1967,/68.

141. The percentge rat+es of increase in +he major +nes, togetherwith changes in the structure of revenues between 1968 and 1974, aresSo . .. UCh - o o.J -r.g tab.l:.

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Table 20: PROMICTED CIJRPUNI RDTi17u7,i/ OF THE CETM I GOVEPNM I1967/68 - 1973/74h

(in CFAF billion)

As % of As %oftax tax Percentage

1967/68 revenues 1973/74 revenues increase

1. Direct taxes 8.35 24.1 10.73 23.8 28.5

Poll taxes 1.21 3.5 1.48 3.3 29.3Other standard

taxes on income 1.25 3.6 1.30 2.9 4.0Proportional andprogressivetaxes on income 5 R9 17.0 7.95 17.6 35.0

2. Taxes on foreign-trade 18.42 53.3 24.18 53.7 31.3

Tmports 15.74 45.5 20.55 45.6 30.5vcpcrts 2.68 7.7 3.63 R81 35.4

3. Txs on Anon,es-

tic productionand cons- a mplp 06.286 t98 II 2. 31

_ _

E V d 4.) L..'JI uU.t'-es- .. J.8J 4

Levy on petro-leum products 2.70 7.8 3.21 7,1 19.0

Turnover tax 2.36 6.8 3.53 7.8 49.6Payroll tax 0.22 0.6 0.32 0.7 45.5

4. Other taxes andlevies 0.96 2.8 1.00 2.2 4.0

5. Other revenues 1.25 1.25

TOTAL 35.84 46.29 29.2

(of which taxrevenues) (34.59) 100.0 (45.04) 100.0 30.2

1/ Gross revenues. including restitutions to municipalities and governmentagencies.

- 51 -

In projecting revenues, it is aesumed that tbo tax rates in force in

October 1969 will not be changed- Thus, as can be seen, the structure

of the tax system remains unchanged in 1974. Direct taxes stillrepresent approximately one-fourth of tax re-venues, and taxes on foreign

trade still retain their number one position. The largest percentageincrease is shown by taxes on d -mes+ic tur.nover (namn.ost 50) insofar asthe value added by the taxable sectors should itself rise quite sharply,Iruom CAFar -n 33.L)1Li''i 4 4 1jjfej AJ UL t 0.9 bX -lin 10734/71- Most

other taxes and levies will rise between 30 and 35% during the projectionperiod. This is the case particularly with taxes on foreign trade.While the share of lightly-taxed products in total imports is to increase,the raise in the statistical tax rate should ini part offset this salrl

difference. As far as groundnut exports are concerned, the increase induties wili come solely from the larger volwues projected for 1973/7)4.

However, the yield from taxes on foreign trade could be seriously

endangered if the battle against smuggling is not waged on, all fronts,

i.e. not only at the customs level but also on that of tariff policy.

in this respect reference is made here to the recommendations given 4L

the body of this report. As regards taxation of wages and salaries,

the introduction of a withholding system reform implemented atthe-end of 1969 should permit ixprovement of collections, by

considerably reducint payTrent arrears, since taxpayers should not

experience difficulties in paying their tax debts insofar as payment

will be made by the employers direct by means of wage and salarydeductions.

142. The current expenditure of the State should develop as shown

in the following table:

Table 21: PROJECTED CURREiTT EXPEIlDITUPLE OF MEXCENTRAL GOVERKMNT

(in CFAF billion)

1/ Percentage1967/68 increase 1973/74

W!ages and salaries 18.65 16.7% 21.77

Equipment 6.55 15.8% 7.59

Maintenance 2.30 26.5% 2.91

Transfers 5.24 13.5% 5.95

Public Debt 0.39 28.2% 0.50

Miscellaneous 0.77 0.75

Total 33.90 16.4% 39.49

1/' The figures given for equipment, maintenance, transfers and miscellaneousdiffer from thoQe in, otner taDles in the report becarse it proved nece6-

sazy for the projections to undertal.e a more detailed breakdown cf

fl,.S_e1LafeOuS cpexga.itures~ w.-hic-'h contained smas belonging 4o otihler cate".

gories.

- 52 -

143. IWhile the average increase in current expenditure does notexceed 16.5%, two categories of expenditure show a much sharper increase.The first of these is maintenance. As has already been seen, maintenancehas been very much neglected in the past and should receive greaterattention in the future. The second item showing an above averageincrease is interest payments on public debt. While remaining withinstill tolerable limits. Dublic debt should increase quite substantiallybetween now and 1974. In addition, the government will have to payinterest on two loans floated in 1968/69. As against this. exnenditureon personnel and equipment should not increase by more than 2.47o perannum if the Povernment follows through its ansterity noliev. withoutwhich it cannot hope to achieve public savings. As far as wages andsalaries are concerned, these reflect. only the cuimulative arnwth in netrecruitment, which has been fixed at 800 per annum. No increase insalaries is envisaged;(these projectio.ns are also made in constantprices). Expenditure on materials should be limited to the replacementofW exiz+; -irf ;+:rA "A ^ +^ +In- mQ+ r _U;ennnA_ ^f' +.hI n,=Q ii"eqnYIqInn,A

sections (hospitals, schools and departmental services). Requirementsfor buildings, vehicles and office eqipment for centr-' se-Ies sh,ouldbe severely restricted, as the equipment currently available seems quiteacceptab,le cc,,pared -wilh that,4 4n oterdeelpngco-nris

V~U.~~AjJQJ.'~ ~4. IL Li.4. -X .1.1± JUiJ -- ~ 4 ~.1, .JL U. + + A'

llt.LL414 * dV4I Vli Uloth pJaLrt oLf lthe IIcLpLIL .Lti.es huaive ueen est UJ.iimaLtUedAat CFAF 500 million in 1973/74. This represents more a pious hope thana projection, in view of thudef absUnce of statistics on which to base thenecessary calculations. Be this as it may, the financial organizationof the municipalities is tne subject of a current reform. However, itwould appear that - after absorbing the liabilities accumulated overpast years - the local authorities could, while following a policy ofcutting back on current manpower achieve savings of some hundreds ofmillions of CFAF to fimance their own development expenditure.

145. 1/ The public enterprises have been able to save some CFAF 1.3billion- over the past three years, despite the operating deficits ofthe Road Transport and Railways Authorities. It wouid now appear thatthe Railways Authority has decided to embark on a policy of financialreorganization, concentrating on two major aspects: a reduction in man-power and a raise in current tariffs. As the Road Transport Authority'sstructural deficit is due largely to an overambitious traffic policy, ageographical reappraisal and a reduction in service frequency wouldcertainly result in an appreciable reduction in current expenditure. Inthis way, improvements in the operations of these two enterprises shouldmore than offset the deficits which the Family Allowances Fund may incurin the future if it refuses to raise member contributions. The savingsof the public enterprises in 1973/74 are estimated at CFAF 1.5 billion.

1/ Gross savings, before depreciation.

- 53 -

146. Total public savings will increase as follows between 1967/68and 1973/74:

(in CFAF billion) 1967/68 1973/74

Gentral Government 1.94 6.80(Revenues) (35.84) (46.29)(Expenditures) (33.90) (39.49)

Municipalities 0.07 0.50

Government agencies 1.15 1.50

3.16 8.80

APPENDIX I

PROJECTED REVENUES IN THE ORDINARY BUDGET OF THE STATE

A. Taxes on Foreign Trade

(1) Taxes and levies on imnports

lo In the absenco of data on the yiold frcm clustcms duAties percategory of products and of information on the volume of goods inportedfree of duty, the rat-ios show.n at h foot o' table a . 1 h Wre beenused. The pattern of imports will change only very slowly between 1968an.d 1974, although there -dill be a shift from, non-food cons-wrer articlesto capital goods for industry, which bear a lower rate of duty.

2. In order to determine the probable amount of duties and leviesI , -V , I -I -I 4-collecteLd on ent-Lur-y in ]L /4 f)feS l ower VharW -di 1h Ose showvrn at 4,L±thue fUoou

of table !lo. 1 have been used. 3; ha^s been taken ho_r (), l24.6y, appeared probable for kJ). 7Lv

In other words, 0)= 381o x CFAF 34.22 billion = CFAF 13.04 biilLci(k)

Xj) = 24.6-A x CFAF 52.57 billion = CFAF 12.93(f) billion

3. Import duties should amount to close to CFAF 13 billion by theend of the oeriod.

Table 1: PATTERN OF INYPORTS BETWEEN 1964/65 AND 1973/74(in CFAF billion)

1964/65 1965/66 1966/67 1967/68 1973/741__(%) (a) (%)_ _%)_ __

(a) Food, beverages,tobacco 15.68 (38) 15.66 (42) 14.47 (39) 13.64. (34) 18.35 (,5,

(b) Raw materials 1.32 (3) 1.91 (5) 2.30 (6) 2.33 (6) 3Q11 (_,

(c) Semi-manufactures5. 7 7 (14) 3.82 (10) 5.02 (14) 5.17 (13) 7.31 C.i4'

(d) Capital goodsfor industry 5.85 (14) 4.85 (13) 4.83 (13) 5.82 (15) 9.17 (17)

(e) Consumerdurables 12.63 (31) 11.33 (30) 10.52 (28) 12.51 (32) 14.63 (28)

(f) Total Y 41.25 (100) 37.57 (100) 37.14 (100) 39.57 (100) 52.57 (100)

(g) Taxes and-dutieson import s i.68 lii, 3 15.19 15-

J Excluding petroleum products.

- 2 -

1964/65 1965-66 1966-67 1967-68 1973-74

(h) Less turnovertax (-) 3.90 (-) 3.33 (-) 4.45 (-) 4.65

(i) Less refininglevy (-) 1.31 (-) 1.14 t-) 1.12 (-) 1.20

taxes andlevies on 10.47 9.89 9.62 9.90entry

(k) =(f)-(a) 25.57 21.91 22.67 25.93 34.22

(1)= A 25.14% 26.3% 25.9% 25.0% Y

(m)= t; _ 44

(n)* (g) 38.0% 38.0% 40.1% 39.8%

(o)= (h) 15.2% l5.2 %- 19 6%o3/ 17.c%

2/ Implementation of TWestern African Customs and Economic Uniontariff concessions.

3/ Increase in turnover tax rates in 1965/66 and subsecuently in- 1966/67.

- 3 -

4. For the turnover taxes (imports) it was considered that, on thebasis of existing legislation, a rate of 18.2% would be fairly close toreality for (h). In other words,

(h) = 18.2% x CFAF 34.22 billion = CFAF 6.22 billion,(k) rounded off to CFAF 6.2 billion.

5. Finally, having regard to the projections made for petroleumproducts, the refining levy should bring in about CFAF 1.35 billion at theend of the period.

6. Total taxes on imports collected by the customs departmentshould aggregate CFAF 13.00 + 6.20 + 1.35 = 20.55 billion in 1973/74,representing an average annual increase of approximately 4.5%, as againstan annual growth rate of 4.8% for imports (excluding petroleum products);the diffeArnne nf n=3 mny be reaMrdeda S reflecting the sRliht nhlngein the pattern of imports referred to above.

(2) LT.vieson i ov- +

76 Cn thne basis O-f se-cto-rial proecton -Pe-,-r 1071 andn '-74,groundnut product exports should show the following breakdown:

1973 1974

Shelled groundnuts 190,000 tons 180,000 tons

Raw oil 194,000 " 200,000 "

Refined oil 57,000 " 65,000 "

Groundnut cakes 290,000 " 300,000 "

8. On the basis of an average calculation for 4 years (1964-1967)groundnut product exports can be distributed as follows between the firstand second halves of the calendar year:

First half Second half

Shelled groundnuts 2/3 1/3Oils 50%P/ 50 5%Groundnut cakes 45%; 55%

9- in the course of the financial year 1973/74 Export taxes-/bongroundnuts will be applied as follows:

Second half 1973 First half 1974 Total

Shelled 190 x 0.33 = 63 180 x o.66 = 120 183.000 T

Raw oil 194 x 0.50 = 97 200 x 0.50 = 100 197.000 T

Refined oil 57 x 0.56 = 28.5 65 x 0.50 = 32.5 61.000 T

Cakes 290 x 0.55 = 160 300 x 0.45 = 135 195.000 T

10. Applying the present rates to these quantities, we obtain:

Shelled 4801 x 183.000 = CFAF 880 million

Raw oil 9148 x 197.000 = CFAF 1802 i

Refined oil 9707 x 61.000 = OFF '92

Ceakes 930 x i9.n000 = AtF 181a

Total CF.4F 3455 "

Fmw-rtLq in 1O7A/7)i -n terms of shelle I qu-vale.t woi1 be%:

She1Thd 183,000 x 1 183,000 tonsF.wI oiml 197,000 0.45 I n3,500^

P ,efir.ed oil 61,07 so.48 r1 27, 0 ii

I A rvv' n. r 0 ,'7 rnrnr itJ.J'L V.LJ. %JL,%JIJI. '..VL4U .LC I 1 UUV

Total 743,000 tons of shelled equivalent

The cu9stms duty yield on 743,000 tons of shelled equivalenv is 743,000 x4801 CFAF 3,567 million.

11. Customs revenues from groundnut exports should thus amount toapproxMateUly FrA U3billio n Ln 9(_/7[4- If accounT is also taken orthe quite marked increase in exports of certain other conmmodities, suchas phosphates, cottIon anid fish preserves (all of wnicn bear a very lowrate of tax) total export duties should bring in approximately CFAF 3.63bi Ion at the end oi the period.

1/ It is assumed that the official prices remain unchanged until-1Q73/7h -

12. Taxes on petroleum products should also increase substantially.The following table shows the items on which the estimates have been based.

Projections for 1973/74Taxable R efi i,ng Spec .icQuantities-/ Levy~' Duty-

Gasoline (1,000 hl) 934.0 880 2.L91Illuminating Kerosene

lnnn hi) i10n. 24 180Gas oil and diesel oil

(1.00n hi1) 497.0 390 1,23_Heavy fuel oil (1.000 t) 185.0 Ex 74T;gh+ fuel oil (,-n +)f 13.0 18 4)

LPG (1.000 t) 1.8 11 9

1.323 3.210

The refining levy is already included in the import duties and levies.Te specific duty ^- 1 n1M+w4rqi4 nmr (l''sm 3 .0 b1in

to the budget in 1973/74, compared with CFAF 2.85 billion in 1967/68.

1/ According to sectorial projections for 1973 and 1974.

2/ In CFAF million

3/ Diesel oil is subject to a reduced rate of tax when it is usedfor general economic puposes.

B. Taxes on Domestic Production and Consumption

(1) Domestic turnover taxes

13. in 1967/68 these taxes represented approximately 7o of tnevalue added by the sectors subject to these taxes.

-6-

1967 1968 1973 1974

Value added by

1) Industr'#' 22.19 24.13 35.16 37.892) Buildina, 5.81 6.42 l.71 9.263) Services-/ 4.10 4.40 5.30 5.50

32.10 34.95 49.17 52.65A Average (fiscal year) 33 .52 50.91B Turnover taxes 2.36 3.56B/A 7% 7%

Domestic turnover taxes should therefore produce approximatelyCFAF 3.56 billion in 1973/74.

1/ Excluding water, electricity and mining.

2/ It has been assumed that only one-third of "other services" wassubject to turnover tax.

(2) Special or specific duties

14. These duties levied on certaim nrodue-ts of e-lirrent cAonmuptionproduced CFAF 1.57 billion in 1967/68, a figure which should rise byapproximately 4.7% per annum.

1964/65 19656/6 1966/67 1967/68 1968,/69 1073/74

Tobacco 0.78 0.72 0.68 0.66 0.78 0.80

Alcohol 0.75 0.61 0.5 0.55 0.641 0.70

Electric power 0.05 0.05 0.05 0.o6 0.06 0.07

Edible oils 0.03 0.03 0.03 0.03 0.03 0.81

Cinema 0.01 0 0.01 0.01 0.01

Aerated beverages = 0.03 0.O0 0.04 -. 03

Cola nuts O - 0.17 2.17 0.17 0.25

Green tea _ 0.09 .6 0.07 0.07

Totals 1.62 1.42 1.66 1.57 1.80 2.07

TLhis increase will be due largely to the excise duty onalcoholic beverages, the rates of which were raised in 1968/69, to the

- 7 -

duty on fats, which has replaced the duty on edible oils and covers a sub-stantially larger field, and, finally, to the duty on cola nuts, which hasbeen raised from CFAF 10 to CFAF 15 per kg as from 1970.

C. Direct Taxes between 1967/68 and 1973/74

(1) Poll taxes

Average 1964-68 1973/74

Minimum income tax 0.23 +40% 0.32

Regional tax 0.73 +12.6$ 0.92

Livestock tax 0.19 +13.6% 0.24

1.15 1.48

15. In past years, the minimum income tax, the regional tax andtl,e tx onr '4 vestock have together poAd,uc,A I Iroxa+er PFA 1

billion on average. The yield from the first two taxes has not keptpace wit . h4-, 4 r,c. s- enU 4o-Auai 4n A- io A- f-P 'ti-+e nvi

collection, particularly in rural areas, where farmers' cash income hasdeclin,ed steadily as a result of poor harvests and the drop in groundnut prices paid by the marketing organizations. If, as one may reasonablyassume, ths price is s abilzed in f-uure --ncreed productionof groundnuts and other agricultural commodities should lead to asubstantial growth in the yield from capitation taxes. A similarincrease should also result from the recent raising of the rates forminimum income tax (increased by between 33 and 40% depending on thecategory of taxpayer). In addition, the fact that this tax will bewithheld at source for employed persons should also improve the yieldfrom the capitation taxes. This does not, however, solve the difficultproblem of collecting these taxes in rural areas. For these variousreasons, an annual growth rate of 5.8% has been taken for the "fiscalminimum" and 1.8% only for the two other taxes.

(2) Other standard taxes on income

16. As the tax on household occupation was abolished in 1969, theprincipal remaining direct taxes are real estate levies (income frombuildings or land) and business and licence fees. To offset to a veryminor extent the loss resulting from the abolition of the tax on house-hold occupation, a surcharge of 5% has been imposed on business fees.

17. Over the past five years, the yield from these taxes hasaveraged CFAF 1.25 billion. Unless there is a major reform of therather complicated tariffs for business fees, no improvement in theyield from these taxes can really be expected in coming years; proceedswill, instead, remain at roughly the same level. A figure of CFAF 1.30billion is thus envisaged for 1973/74.

(3) Proportional progressive and taxes on income

18. An unusual feature of the schedular taxes on industrial andcomnercial profits anr.d insome from the liberal pronfssionq is that theyare collected on average a year and half after the financial year inw.>ch_1 'he tamble ea.,.s.;gs were made. Thsprftse-re i h

calendar year 1967 are not in principle taxed until the fiscal year196,'6. le .,ssion Ioes nolIt,-- have 4- sttistics ava-;' ole- showin gAL'J./1 J7 * 1.4 IIL.L .LJ1 ULJO J..LJ JI.vu cv ouau. vJ LO -. 5

the growth in declared profits over past years. In the absence of suchinf.rmationLU "e value added uy the var-ious sect As d forschedular tax purposes has had to be taken as a basis, although there

-- -'…±.±- ~~~~~~~~~~~~~~~~~~~ I. .Ls notuu necessaril'y ariy close correlation 'ue'uween profitsu C.Unud va.Luadded. It should, however, be noted that this value added (see tablesshowing GDP) rose by 21% between 1962 and 1966, while schedular taxesincreased by 20.3% between 1963/64 and 1967/68. For the period coveredDy the projection, i.e. 1967/68 (1966 income) to 1973/714 (1972 inceome)the value added by the sectors in question should increase by 38.4%.Although company profits tax has been raised from 25% to 33.33% as frum1969/70, a yield increase of only approximately 30% will be assumed hereto allow for the fact that many enterprises set up during the period inquestion will be of a smaller size and are unlikely to make substantialprofits during their first years of operation. The schedular taxesshould therefore produce something approaching CFAF 2.73 billion in1973/74. An increase of 3076 has likewise been assumed for the tax onincome from securities, which it is estimated will rise from CFAF 550million in 1967/68 to CFAF 700 million in 1973/74.

19. The 2% levy on wages and salaries paid by both workers andemployers (over a maximrum salary of CFAF 40,000) should increase byslightly more than 5% per annum. Approximately two-thirds of the wagestaxed are in the private sector and the remaining one-third in thepublic sector. While wage earners of the private sector are expected togrow by close to 6.3% per annum, the number of public employees shouldnot rise by more than 2.4% each year. This should give a weightedincrease of approximately 34.7% over 6 years. The levy paid by employedpersons should therefore increase from CFAF 720 million to CFAF 970million. The portion paid by employers would - in view of the ceilingapplied - rise from CFAF 540 million to CFAF 720 million. These twotaxes should therefore together produce approximately CFAF 1.69 billionin 1973/74.

20. The development tax payable on industrial and commercialDrofits. non-commercial Drofits and wages, from which it is deducted atsource, should grow in much the same way as the two categories of taxdiscussed above. An overall grnEth of 35% over 6 years has been assumed;so that in 1973/74 this levy will produce CFAF 1.35 billion.

21. The general income tax, together with the surcharge appliedsince 1969, should also increase substantially over +the six-yar period.No full statistics are available. As this tax combines a progressivetariff w ith a "family q+4ier.t" sy+tm., it is extremely dffficult to

forecast its future yield. In addition, this tax, together with a certainnumber of others such as the develoPment levy and the fiscal minimum, willas from 1970 be withheld at source, at least in the case of most wageearners. For taxpavers in this categorv. therefore. the assessment periodfor general income tax will coincide with the year of payment; in aperiod of economic recoverv and increased emplovment, this should contri-bute to a better yield from this tax. It is therefore suggested that ah5% increase in general income tax nroceeds be assumed for the six-yearperiod, viz. an increase from CFAF 1.02 billion in 1967/68 to CFAF 1.48billion in 197?/7).

22_ The aro-^rtinnol and nrogressive taxes should thus rise in aggregateby 4.8% per annum, reaching CFAF 7.95 billion at the end of the period:

1967-68 1973-74

(1) Industrial and commercial profits,.n on -c= c ae r C .a p rofits 2.012.71

Sf S %.. 4IMf~ .. JOJ 'I .J J J I. '.'4 I E

(2) I le-viesLpun LNy_ 1.2 1.6

(3 DUel.,lr le-r 1.0 1..3e~

k4i IDecu-ar- s U..55 0.70L~)J Ve±UJAit~11U ±eV L LU_

(5) :JGeneral income tax plUs surchlarge 1.02 L. U

II. PROJECTED EXPENDITURE IN THE ORDINARY B-UDGET OF T.t STATE

23. Personnel expenditure. The projection has been based on theestimates contained in the third four-year plan, which envisages a growthof 1,000 persons per annum in the establishment of the public sector.Most of the new posts will be created within the Central Government, moreparticularly in the various departments coming under the Ministries ofHealth, of National Education and of Rural Development. It is estimatedthat this net growth will be 800 jobs per annum for the State. It isalso evident from the notes to the plan that the jobs to be created willbe largely posts requiring professional qualifications (teachers, nurses,supervisory staff, etc.). As a result, the per capita charge on thebudget will be higher than the average cost of each official (orequivalent employee) quoted in the report (cf. page 17).). Wqhile thisaverage cost was approximately CFAF 503,000, the new jobs will mostlikely lie in the CFAF 600,000-700,000 bracket. Taking an average figureof CFAF 650,000, the additional charge will thus be CFAF 650,000multiplied by 4800, or approximately CFAF 3.12 billion, raising totalpersonnel expenditure to CFAF 21.77 billion in 1973/74 (3.12 + 18.65).

24. Material expenditure. The Central Government is already fairlywell provided with equipment, compared with other countries of similar

- 10 -

size. Requirements for furniture, vehicles, installations, etc. shouldtherefore be quite small during this period. Health and National Educa-tion, which are to expand steadily during the six-year period, willrequire the largest volume of new equirment. An annual growth rate of2.5% has been taken, resulting in a total of CFAF 7.59 billion formaterial expenditures at the end of the period (6.55 x 1.159%).

25. M4aintenance exnenditure. As maintenance has been relativelyneglected in the past, this item should rise substantially during theperiod in aquestionn An nnnu.Al growth rate nf hL seems reasonable forthis category of expenditure. This gives a figure of 26.5% for the sixyears in qeion, 7nnennnce expenditure shcm lrt therefore rise fromCFAF 2.30 billion to CFAF 2.91 billion in 1973/74.

26. Transfers.

Annualrateof

A7IAA Increase 1072/7),

1. Ta nsfers Jn thLe VedtuUcatior.

sector (scholarships, train-ing, LUI.LVrL'±LUyj, LU.UDj_ ±.-u bsiies 1L .48

2. Grants to government

agencies 0.40 3.8% 0.50

3. Tax refunds 2.07 1.92

4. Contributions to variousbodies 0.89 1.10

5. Other transfers 0.78 0.95

5.24 5.95

The first group of transfers should become fairly sizableduring the six years covered, for two main reasons. Scholarships shouldincrease largely as a result of the growth in school enrollment (whilethe first-cycle enrollment will grow by onj,y 1.4%, the second cycle shouldincrease by approximately 6.7% per annum)I/. In addition, Senegal isslowly taking over from the French Government as regards the expensesinvolved in running the university. A growth rate of a little more than5% per annum has been taken, giving an overall rate of 35% for the sixyears; this is in line with a trend already evident over the past fouryears.

1/ According to a UNESCO study.

27. The operating subsidies to government enterprises have remainedvery stable over recent years. They should not increase by more than25% over the six years examined here, and the bulk of this increaseshould go to Radio Senegal. which receives more than 70X of the subsidies.

28. The tax refunds made by the State to the various budeets(municipalities, Groundnut Fund, Family Allowances Fund, Chambers ofCormnerce) depend very q"atn.1r non r frm +.he +.tnav in qruest+Aonn

Thus the tax restitutions to the municipalities should amount toap,nrnwiTnteP1-, G.ATP Q80 T1lliony in 1071/7), *..nfliz upr as2 foros 1CAF

million).

1973/74

100% of fiscal minimum tax 320

100u of business permits (plus surcharge)andi' licenlce Dees 430V

50?U/O of'L vehicle a.esti 1L00

25 Uof rua!L d± u 1dbaxes _1u

Total 980

InC amount returned to Tne amilLy Al owances Fund will also be propor-tional to the sums raised in 1973/74 fram the solidarity levy and thehousing levy on wages and salaries (rate of increase 5.1% per annum)and also from the surcharge on the standard tax on imports (30.5%increase). The amounts transferred to the Family Allowances Fund shouldtherefore rise by approximately 32% to reach CFAF 690 million in 1973/74.Transfers to the Groundnut Fund should rise by approximately 35% (therate of increase of export levies on groundnuts) to CFAF 240 million atthe end of the period.

29. In the past, the ordinary budget included a transfer creditto the Islamic Republic of Mlauritania. As indicated earlier, thesetransfers have gradually become less important over the years, as goodsdestined for Mauritania are increasingly sent to Nouakchott direct.Although heads of agreement were recently arrived at settling theMauritanian-Senegalese dispute, the mission was not informed of thepractical terms of the settlement. It has, however, been assumed thatin 1973/74 Senegal will no longer have to refund indirect taxes toMauritania, and that discharging and customs clearance operations willbe compensated between the two countries.

30. Summarizing. therefore, total refunds as described aboveshould amount to CFAF 1.92 billion in 1973/74, showing a slight down-turn as a result of the factors mentioned in the nrecedinT paragranh.Some of the transfer expenses represent contributions to variousorganizations active in scientific researoh- crnntrol of Pnirlm.ni cs and

- 12 -

air and marine safety as well as a large number of international organiza-tions of which Senegal is a member. The estimates for expenditure of thistype are based on Past developments. An annual growth rate of 3.8% hasbeen taken (251d over six years). A slightly lower annual rate has beentaken for other transfers (3.3'b).

31. Interest on -nublic debt. To achieve its investment program, thegovernment will have to have recourse to increased foreign aid and thusraise lsons; the nost nf wthinh iTill weigh more henvilv on nubli expendi-ture than in the past. It is predicted that in 1973/74 total charges onthe Gent..al Governm.ent's pTMblic debt will nmou-nt to apnproximntely 3.9< ofcurrent revenues, still a very low figure, but well up on the precedingperiod, despite the fact that the comparison is distorted hy debt serviceexpenditure in 1967/68 having been very much lower than the average forthe period 1964-69. Of a +o+al of IXAY 1.80 illion in 1973/74, a pro.n -mately CFAF 500 million will be required for interest, most of it on foreigndebt. DCt i ndebt v- s * w 1vnl-sv nev l s Ca .e . *_is .ed

gible amount, as most loans of this nature have been almost fully amortized.

LIST OF TABLES IN STATISTICAL APPENDIX

1. Savings and Investments of Central and Local Governments

2. Savings and Investments of Central and Local Governments

as percentage of GDP

3. Public Enterprises: Savings and Investments

4. Public Savings and Investments, 2nd Development Plan

5. Current Budget Operations of the Central Government

6. Second Development Plan: Actual Government Expenditures

7. Functional Classification of Central Government Expenditure

8. Summary Statement of Treasury Transactions

9. Budget Operations of Municipalities

10. Treasury Balance Sheets

11. Taxation of Groundnut Exports

12. Central Government Current Expenditures, 1964 - 1969

Table 1: SAVINGS AND INVESTMENTS OF CENTRAL AND LOCALnln IMcgWr

(ia 1b411-11, o,P CFVA ,fij..1.LU..L.LV vUUr UJ. L J .L O.ALU a

I9 6 ~~/6 16/7 97 /62 92/:4.

Current revenue.V 38. 06 37 J10 3,71 31'.:L;7 3. (Direct taxes 9.5( .T i ,I 1 Indirect taxes 26.l( 2-I`33 2f".5 2 6.tb -,

Other revenue 2 -' 2§I = 1 1 ,

4. /l u i 2/?,_, , , 7Wages and salariesM3 17.>,7 2 i.1 9T .i:1-. 2.]uoods d sae-=sc, a* r 1J-7J U.K, _lO : .+(.

Interest payments O.>i 0 .$- 0.39 O.,/,_. -- .,> .n , f .̂ , .M1n l-ance auls _L. | /) J. . ) a 05U ! I J- I9/ ! |

Transfers5/ 4.h3, § .20 l*l1 3. K;) 3. 65

Non-classified budget operations -0 .9' 5;,.11 bO.1Q -0 *2-1. -0. 5.

Gross savings +Ii .02 + 6 4-3 *36 +1 2 -( 0

Capital expendituresa 10 ,73 lo 75 ; Gross capital formation 7.-1 .;o Wq-Subscriptions - .10 L0.16 0 .0? 0. rlLoans (net) 0.75 l o 2Transfers (grants) c0.28 0.7, n

Overall deficit -7Th] :-?.2? -2 3-Net borrowing 2.82 7 U .Foreign aid i(grasnt - llSurpluses of stabilizationfunds -. '' 0.97 1.05

Treasury financing 2.7' 0.05: -1.7G 1. 5: 3. ?7Other financial items 0,85 0U5 o.49 -0.IC -l.02

V Excluding taxes earmarked for C.C.P.F.2/ Excluding pbUciC debt amortization.7/ Including Senegalese contribution to technical assistance expenses.4/ Including payments of rental for government offices and lodging of public employees.

/ After elimination of intragovernimental transfers.b/ including investments financed by foreign aid (see special accounts of the Treasury).

Sources: Ministry of Finance, Ministry of Interior and mission's estimates.

Table 2: SAVINGS AND INVESTMENTS OF CENTRAL AND LOCAL GOVERNMENTS,AS PEWENTAGNE OF GDP

1964/65 1965/66 1966/67 1967/68 1968/69

GDP (billion CFA Francs,current prices) 189.80 196.60 201-30 205.20 207.90

Current revenue2/ 20.05 18.87 18.44 18.23 18.10Direct taxes 787 49T-71Indirect taxes 14.11 12.88 12.84 12.79 12.39Other revenue 1.51 1.12 o.69 o.64 1.00

Current expenditure 17.45 17.32 16.86 17.2h 17.83Wages and salaries 9.Z6 9*22 9.51 .67 T0.7Goods and services 5.01 5-1h 4.79 4.88 4-9Interest payments 0.31 0.29 0.10 0.19 0.23Mi, - -A1 AtAm 0.54 ° 0 o .42 0.61 A_7),Transfers 2.33 2.14 2.04 1.89 1-77

Non-classified budpet_________ +~~~~~~- J ~ -n 021 +-0-00 A1

-- .. _ I

Gross _nO - 1w n 91 -7 41J _n Al

G ross capital fonmation 7727 T 77 717S._bscri-ptvions oo5e o.o --- ^0 .2QLLUOL~~~~J.LjJ L.ILW I.~~~~J.; V2v v - U CU

Loans (net) 0.39 0.27 o.65 -0.19 0.02Transfers (sr.u8Uj 0-l5 0-3u 0*39 0-3 032

Overa'l deficit -3 -38 - 21 -2 69 1 *93 3 -76Net borrowing 1.49Foreign aid (grants) 0.46 1.00 0.84 0.59Surpluses of stabili-zation funas - - 2.23 0.47 0.50

Treasury financing 1.44 0.02 -0.88 0.74 1.57Other financing items 0.45 0.28 0.24 -0.38 ---

M_an % 3. SIMTna , rurTvCT WTrM1QPTzS±aULu ~~Q; BAmJLAa. LU U~j.jL%O hAA XA.&

SAVINGS AND INVUS'ENTS

(CFA Francs million)

1966-67 1967-68 1968-69

A. Current revenue 11,79 11,66 ii,94

(of which operational subsidies) (0,77) (0,85) (0,92)

B. ODeratin2 costs 10,38 10,51 ir,66

of which: (wages and salaries) 4.72 4,53 4,81(purchases) 1,49 1,53 1,45(tnhnia-I ni n ts) 1,79 1,93 2,07

C. Gross savings +1,41 +1,15 +1,28

D. Investments na 2 < 2_

(toss f4i4eA apt-4+a formaton) __ ( 3, 74' 1 On)\UsvW~ | -%WA rLaVSV ;X I - I ). /

(Changes in stock) na (-0,23) (+0,16)

E. Xl CDLaL; U - Ai na 07

F I inruc ing requirements na Z, 4 0,7u

Net borrowing na -0,23 +0,75(Gross borrowing) na ( ) (+1,02)(ArnorL tiztnj na (-0,23) (-0,27)Equipment subsidies na +0,73 +0,66Short-term assets and liabilities na +2,31 -1,22Cash balance na -_,41 +0,22Current accounts with the 'Treasury na -0,06 +0,29

Errors and omissions _ +o,o4 +0,08

Table 4: SENEGALI. PUElLIC SAVINGS AND INVESTMENTS - 2nd DEVELCPMENT PLAN

(CFA Francs billion)

1965-66 1966-1967 1967-1968 1968-1969

Central Central Central Public Central Pablic

Gcvern- Munici- Goverm- Munici- Govern- Municipa- ENter- Govern- municipa- Enter--ment palities Total meent palities Total ment lities 2/ prises%/ Total ment lities2/ prisese/ Total

A . CurrerLt operations - -- …-

a) Current revenue2/ 2 3' 4.28 2.82 37.1( 33.E6 3.25 37.11 34.'54 2.87 11.26 34.79 2.85 11.74

b) Current expenditure (before trans3rers)! _.30.87 -2.76 -33.6:3 -31.10 -2.44 33.54 -32.118 -2.80 -10.51 *-34 .02 -2.85 -10.66c) Budcget operations to be classified1 +0441 - .o.41 +0.19 - +0.19 -0.21 - - -0.51 - -

B. Gross savs (before transfers) 43.82 +o.o6 +3.88 2.5'5 +0.81 3.76 +2.15 +0.07 +0.75 2.97 +o.26 - +1.08 1.34cd) EMliion of *r4.sfer3T -0.42 -Ohoo l,o -0.40 - -0.20 +0.20

(Current expenditures after transfers) (-31.29) (-2.76) (-34.0;) (-31 .50) (-2.44) (-33.94) (-32.'58) (-2.80) (+10.11) - (--34.22) (-2.85) (-10.46) -

C. Gross savings after transfers +3.4o +O.D6 3446 + 2.';5 +0.81 3.36 +1.75 +0.07 +1.15 2.97 +0.06 - +1.28 1.34

D. Investments ( tertr3nsf-rsTJ 3.80 0.70 4.5o 6.12 o.56 6.68 5.014 0.50 3.53 9.07 6.66 (.50 2.06 9.06

(Inve7aientr (before transfers)) 4(3M ) (r ) ( - -'7M ) 7-T -

(Elimination of transfers) (-0.70) (_) (-) (-0.78) (-) (-0.65) (-0.67) I;-) (-)

a) Gross capital formation 3.70 0.70 4. 40 5. Q6 o.56 6.52 5.02 0.50 3.76 9.28 6.12 0.50 1.90 8.52

b) Chamuges in stocks b) Chungscriptionks - --- - - --. 0.23 -0.23 - - 0.16 0.16c) Sublscript,ions 0.10 - 0.10 0.16 - 0.16 0.02 - - 0.02 o.504 o. 564

F. Financial operations +0.36 +o.614 3.59 -0.25 3.33 +0.43 -2.34 +6.54 +0.50 +0.70

a) Borrowin ro7 +Cn3 e 7 T T +T 7.l +0.1 * +2-.39 Z 5M T 77:

Bo-rarwring (gross) (+0.64) (+0.39) (+0.27) (+0.20) (+..46) 1'+0.431 (-) (+2.95) (+1.02)(miLnus amiortization) (-0.25) (-0.02) (-0.25) (-0.02) (-0.33) (-0.02) (-.0.23) (-0.56) (-0.10) (-0.27)

b) Lolns and advances (nst)J -0.53 - -1.,'2C) Foreign E;id (grpants)7/ +0.1 +320 - +0-~4X0 - ;0.05

c) Foreign aid (grants)?! ~+0.91 - +2.0)1 - .1.72 - - .1.23 -

d) Subsidies and capital participation -0.70 - 0.78 - -0.65 - "0.73 -o.67 - +0,,66

e) Surpluses of stabilizationfundsZ/ -

f) Other special account operations of 4 97 5

the Treasury +0.24 +o.o.4 .94 - -0.76 - - -4.68g) Shcort teos as e and liab3lities -0-94 -0+231-- 1.

h) Cash balances _Ii) Treasury financing+0/ + .0.13 - +0-0 4 +0 12 -0.41 + +0.26 +0.22

F. Errors and cmissionLs +o.05 0 .18 -0.46 +1.52 -0.10 -0o.o6 +3.27 .0.34 +0.9

__ Errors and emissions .o.oi~ - -0.02 - -0.04 - +0.04 +0.06 - +0.08

1/ Except for SODAICA, ONCAD and OCAS.7/ After allowing for tax refunds.7/ Current budget subsidies.

R/ oad fhind expenditure included.§/ Internal and. external borrowing.6/ Capital operations of OHLM excluded - see "investments".T/ FAC, F'ED and USAID subsidies.g/ Capital budget subsidies.3/ Liquid funds deposited with t'he Treasury in 1966--67.

li/ Except for funds deposited with the Treasurys esztimates for municipalities' cash balances.TT/ See "Summary of Treasury Operationsn.17/ Local budget estimates and staff estimates,,

Sources: Ministry of Finance, Ministry of Interior and staff estimates.

Table 5: SENEGAL - CURRENT BUDGET OPERATIONS OF THE CENTRALGOVERlMNT

(4v% bi" ion o GA fr"n"s)

195!/6$ I 3/'>S' 1966/6'j Js yjK 1968/69

I. Current revenue (net): 35.h2 31i.28 33,86 3h, 5)! 3).15

Current revenue (gross) 36.Y71 35.3P) 36.J(Minus tax ref'ndsl/) -i32 ____1_ 1A, 1JIC)

Tax revenue (gross) 3ThDI 33.76 3Ih.JJ 3h.6t 34.20

A. Direct taxes 7.23 8J43 8,29 8.36 8, 4L!1 Poll taxes (n,9) (1, 90) (1,17) (1.-21) (1.06)2. Proportional and pro-

gress.Nive zincome itniran2/(hl.95 (N 8h') :(q.61) (N.9go') (6.29)3. Other direct taxes (1.19) (1-39) (1,5,1) (1.25) (1,09)

B. Indirect taxes .25,68 .24,11i 24,85 25,28. 21,78(1. On internationai u X19,i$) (1.7-52) (18,06) (14,42) (17,35)(a. Imports) (15.68) (14,31) (15.19) (15.75) (JL,77)(b. Exports) 3,47) ( 3,21') ( 2,87) ( 2.67) ( ?.58)(2. On production and I-

ternal consumptionf/)( 6,53) ( 6.62) ( 6.79) ( 6.86) ( 7.43)

C. Registration and stampft._ 1,10 1119 1,00 0.97 0.98D. Non-tax revenue t a 2,73 2.06 1,2h 1.25 1.99

II. Current expenditure (net)Y/ 30.96 31.29 31.O 32.'R 2l,92

Current expenditure (gross) (32. 28) (32.82) (Th02') (23o90 ) ( 35;62)(Minus tax refunds) ( 3,32) (1,54) ( 1,52) (1,32) ( 1.10)1. Wages and salariaeav 162. 9 C) 1. 192. Goods and services/ 8.73. 8.59 8.38 8.52 8.883. Interest pavmentsf 0,59 o,8 0.20 0.39 74. MiscelIaneous and special 1,03 1.05 O. 84 1,214 1,55. Transfers and subsldies 1;34 h,Ih 14.1 3-18 3 5C

IV. Budget operations to be61assifled ..v. +0,IhJ. "0,J9 0.2. _055

V. Balance 2 = savings on +3,61 +3.otu +2,55 +1.75 4-0.06current account

1/ Tax refunds recorded in local and CCPF budgets.2/ Payroll tax excluded for 1966/67, 1967/68 and 1968/69.3/ Payroll tax included for the same years as above.E/ Excluding tax refunds and public debt amortization.

/ Including particJpation of Senegal to technical assistance expenses.b/ Including payments of rentals for government offices and lodging of public employees.7/ Estimates. Includes miscellaneous charges.8/ Excluding tax refunds to municipalities and CCPF.

Source: Senegalese Treasury and Mission estimates.

Table 6: SENElAL - SECOND DEVE,OPMENT PLAN, ACTUAL GOVERlEIET EXPENDITURES

(in millions of CFA 1francs)

1965-66 1 66-67 1967-68 1968-6_ 2hdplan 1965.-6lo0p- Foreign Develop- lorei - edlop_ Devrelop- Develop-

sent aide mant ¶7 Forimg innt Foreig As %budget b adie d a bugeLt aid / budget aidT budg4et id:,e of

and road Total iand road Total and road Total Totalfund fm[L~a d road i'a fzi

- 154 154 - 762 762 953 5 - 5 529 :2,398 2,398 9,8ClroundzLuit progran ___- -

Studies and re,searc;o 43 61 104 114 66 180 isO 84 2324 298 10 308 605 221 826 3.4

Water suzpply 64 64 130 161 291 1114 336 450 685 1224 809 993 621 1.614. 6,6tural spector ~362 143 505 732 282 1,014 568 98 666 812 4599 1 311 2 474 1,022 3,496 14.3AgricL setiore -7 Eb F w ; 'Mr -7E E Y; 7r 477 . z; T.N i,Z ; 7 7ST (10.2)Agriculture 8 27 35 141 13 154 1118 - 1181 142 2 144 409 42 451

Foresltoc 63 - 63 87 83 95 39 26 65 51 20 71 240 54 294Forshtrgy - 437 37 116 - 16 3 3 60- 60ONCAD,,CER, CAR 45 34 79 34 - 35 25 - 45 17 25 .42 141 59 200

Pover 19 19 55 5c5 74 74 0.5

Trade and industry 160 20 180 70 5 75 !;1 14 66 47 3 50 328 116 .421 1.8Tndnustryi; - I O T 7 T 4 r 3 I l 7T rw TOTTrade 18 - i 7 - 7 112 I 12 4 - 4 41 - 41Tourism 127 - 127 43 - 43 23 - 23 23 2 23 216 - 216

Transport and teleccamraications 525 452 977 735 46 .1 203 652 135 787, 840 1314 974 2 752 1,189 3,9L1i 16,2Roads 7T E57 mEf5 77D ,FoT F0F5 -0 W", 9 TU5 m h -9 35§ dZr (14,4)Postal and telecommunicaticns services 23 2 25 1l9 - 15 6 - 6 48 2 50Other 4 * 4 87 19D 277 - 73 73 - 29 29 91 292 383

Social sEector 1.129 545 1,634 1 5134 474 2,o38 1 571 134 1,705 1 571 72 1,643 5 795 1 223 7 018 28.8General education 3 43 5g -N 'i~7 3 7T 2s5i ' 7 17I T8C 7 T,$i8Y (6,1)Technical educatiow 212 22 116 2 118 68 5 73 74 4 78 280 11 291Art, culture, sport 15;2 15 167 124 - 124 1248 - 148E 97 - 57 522 15 537Health 312 277 309 53 53 106 109 38 14f, 152 53 205 346 421 767Housing and mrbanisation 719 16 735 961 33 994 95.4 20 9714 1,070 1 1,071 3,704 70 3,774 (15,5)Information 58 - 58 55 2 57 243 - 43 3 - 3 159 - 159

Adm-inistrative equilment E6 - 86 310 - 310 335 - 33s 317 - 317 1,c48 - 1 ,04 4.3

Subscriptions 1C0 - 100 60 - 60 16 - 16 538 - 538 714 - 714 2,9

Investments ftianced by regional ita 373 - 373 701 - 701 371 - 371 7624 - 7624 2.209 - 2 922C 9,0

- Other, non classified 322 322 201 _ 201 243 - 24! 18 - 18 584 - 584 2,24

TOTAI 3,1224 1,375 41,,9 L,,671 2,237 6,354 3,8711 1809 5,68o 5,890 1,371 7,261 17,502 6,864 24,366 '100,O

2I Tied loans and grants. Special accounts of the Trmury and Gentr-al Fud for EconomicCooporation (FAC amd FED).

Sources: Senegalese Treasury.

Table 7: SCNEGAL - FUNCTI:ONAL cMASSIFrCATION OF C3NTRAL t OVE:R!2ENT XPEINDITIJRE /

(in miLlions of CFA francs)

1965-66 196G-67 1967-68 1168-69current capital total current capita3/ total current PILtaJ.2/ total clrrent capitali/ total

15gt 1Ja 15;1699 1'i,' . 11 -15 ,901 1;6,373 569 1C.942 16,747 62,;A. General servi,:esA.-General servi,-0i 5,,328 ;.9 5,97 5,86i ;51 6,119 6,126 190 6,316 5,919 107' 6,o261. General aftinistration 3,91 6 IC 3916 :3,962 32 3,991 84,071 106 4,1 77 4,449 3Z, 446i2. Defense '3,326 7 233 3,414 27 3,1 3,6S3 39 :3,702 3,555 172 3,727:1. Justice ;i police 2,439 1 2,5' 3 2,167 *iO 2,347 2,513 234 2,747 2,325 303 3,1334. Otherj/

B. Cao-aity and s@Lj2, 11 ,375 7rlIS 1, 051 12,2L42 33,L91 15.733 12.317 2-379 15. 196 13.637 3.!:23 17.060O129 i5 194 126 .91 417 123 45i 579 105z-/ 309 9145,. .watOr ivv* - 2,673 977 3,65o ) 2,62? 21; 3,8175 2,674 769 3, 442 ) 2,764 974 3,7386. Traejportation azid public works) , 735 4 994 97 974 1,071 1,0717. Houaing 5ji291 365 5,656 6,o66 (57 6,323 6,091 391 6,479 7,019 267 7,286El. Education 190 167 357 323 '25 448 335 14E 483 331 97 42859. Art, cultwrG3, aport 3,092 309 3,1401 3,I00 706 3,2o6 3,092 I7 3,239 3,418 205 3,62310. Health 553 3 147 3 011. Other

C. Economic servLces 4>537 542 3, 37 9 2,746 1,952 4,698 2,699 .1.503 4,502 2959 1,964 ,92312. Rural sector 1,587 659 2,246 1 742 1,776 3,513 1,738 1,620 3,358 2,0935/ 1,840 3,93314 grIndultre) ( ) (L73) (4 2 ( ) 34556) 39 3 (375) (I 39 27 2 353)(liviostock) ~~~~(35) ( ) C ) (1i54) ( 118) ( ) ( ) (1i44)(for.setry) C ) (63 C ) 3) ( 95) ( 6) ) , 3):1(fishing) 4 ~ ) ( ) () ( 37) )164 ) 3(other) 79)~12 - 126 :12 h2- 105. 42)13 Po12 d 2: 26/ 126 12-- 2874 17914. Industry and commerce 291 52 343 345 51 396 301 93 399 276 27 30315. Tourism anl information 531 131 66.2 533 00 633 532 66 599 485 23 50810. Telecoimn ucatio - - - 25 25 19

D. Unallocabl.3/ 3 3?,4 ' 1,I 2,610 063 3,576 2,514 431 2,945 2,281 1,320 3,601

TotaL 32/ 8 15 ,5012 37,317 33012 6,896 3; 902 33,903 5,6e2 39,535 35,624 7,332 I

Notes 1/ Actual sxpenditure of the budget and some special accounts (inveettents financed by foreign tied loans).7/ Excluding public debt amortization.7/ Includea general studies (capital expenditure3).b/ Current expenditure allocated on a proportiona)L basis.;5/ ln 1968-69 exFenditure on pover ,knd water wapply was ineluded in that of the Ministry for %Iral Bconomy.l Includes refunds, unallocable subsidies and interest; payments.

Source: Ministry of Finace.

Taole 8: SU1OMARY STATEIENT OF TREASURY TRANSACTIONS

(in CFAF millions)

1964/65 1965/66 1966/67 1967/68 1968/69I. Exeeiiutin o%f' P.dhHnt LT.ni---Ao Budget Operations

1. &J"+GTe recip+ +36866- +3.,2 +35,37 +3, 3,9

(Budgetary receipts) (+36,735) (+35.,825) (+35,379) (+35,840) (+36,193)

miscellaneous) (+ 131)( - )( - ) ( (C. Dudget Bbpendafitures -41. ,0l02U -5)9 - U 8,)U06 -38,15 -4L2,

(Current Expenditures) (-32,533) (-33,069) (-33,264) (-34,234) (-36 1_85)(Capital expenditures) (- 8,649) (- 2,879) (- 4,804) (- 3,881) (-1 5,924)

3. Unclassified budget..operations (nat) - 848 + 415 + 188 - 214 - 513

A Balances - 4,984 + 292 - 2,501 - 2-489 - 6,429

B. Special Treasury Accounts1. Loans and advances - 749 - 543 - 1 319 + 391 - 542. Advances on foreign aid + 124 - 50 - 128 + 2 + 144

(Foreign aid disbursements)(+ 1,523) (+ 1,150) (+ 503) (+ 337) (+ 318)(Investment expenditures) (- 1,399) (- 1.200) (- 631) (- 335) (- 174)

3. Stabilization Funds - _ + 4,499 + 969 + 1,0504. Pension Funds + 593 + 463 + 153 - 233 - 4155. Other special accounts + 1,127 - 426 + 911 - 379 - 240

B Balances + 1,095 - 556 + 4,116 + 750 + L85

Total T = A + B - 3.889 - 264k + 16 - 1,739 - 5, 91,)

II. Loans and Cash TransactionsA. Medium and Long-Term Loans 1,151 + 224 + 168 + 224 + 2,674

1. External (+1,151) (+ 224j (+ 16j ()+ 224j) (+ 1,574)2. Domestic ( -)( - )( - )*( - )(+ 1,100)

B. Treasury operations + 2,738 + 35 - 1,777 + 1,508 + 3,2571. Treasury -bills - + 434 + 9 - 50 - 2752. Deposits by correspondents - 143 - 2,888 + 2,789 - 1,134 + 463. Other deposits - 2,226 - 1,545 + 44 + 1,562 + 254. French Treasury - 120 - 1,543 + 843 - 91 + 1415. Secured notes - 19 + 365 + 324 - 100 + 146. Variation in cash reserves

(+= decrease) + 4,292 + 2,392 - 2,097 + 2,201 + 1,9867. Unclassified operations - 214 + 523 - 143 - 687 + .2358. Miscellaneous - 108 - 234 + 200 - 247 - 159. SusDense Account + 1.276 + 2.531 -T.790 + O, + I. TOn

Total II = A+B + 388 j 9 + g1,732 -'-+ 5931

Arrors and O-missions 5 6 7 13

Table 9: SENEGAL - BUDGET OPERATIONS! OF MUNICIPALITIES

(in billions of CFA francs)

* ~~Flsea~l Fe&rat

1964L-65> L965-Z 19i_ 1967-68 1968-69(3) 1%68-69(L)

A. Current reivenLe 2464 2.82 3.25 2.87 3.80 2 .857-T r-eMZS-17Dm central goverDmit (00-) (0>90) (0*575) ((2) (102)90-Surtaxes (cenLtimeis additionnels) (o4W8) (0.58) (0.c87) (0.68) (1.05) 052-Fiscal taxes (O.34) (0.56) (0,615) ((h44) (O.88) 0.,50-Local. taxes (0.36) (0.65) (0.69) (0.83) (0.74) 0.834Miscellaneous revenue (0.1h) (0.13) (0-214) (0.06) (O .11) o. 1o

B. Current expendLiture1 / 2.16 2.76 2 LL 2*80(4) 3105 2. 85girs 70 "' el) (i1 l9) (I --bTS (.) (1.39) .iO

-Materials-maintenance (0.79) (1.51) (1-27) (L50) (2.52) (1.35)-Social projects participaLtion (0,OC9) (0.06) (0tC09) (().1o) (M.14) (O.:o0)

C. Current gross savingslJ o 040 07-1i1 Q a 75

D. Capital expenditureL 0.55 0.70 )0 -5 (o50(4) 0 '71 0.50

E. Over-all surplus (or deficit (-)7T j-DrT - -- _0.07 -O*64 +0 .25 -(043 ) +0 Oh4 -0. 0

F. Financing +o 07' +0 064 -0 .25 +(,j43 -0 L04 +0.50a. LociEFreserve I'nmds (:-G0)) (+7-27) ( )C TcT2-) (Lt.C)(Th;0r11) 70-:b. Borrowing

afi,a gratttd (HCA12 + 0.*27 +O°37 -?-0.2.8 +0.41(i) (-0 "16) -0.10of which: central goveirmaentJ (+0() (- ) (+00.9) (+0.35 )()_

1/ Not in,cludLing arrears in payments.7/ After amortiza.tion.31 Budget estimates./ Mission estima.tes.

Source: Ministry of Interior.

Table 10: SENEGAL. TREA'3JR! BALANCE SHEETS

(inbJJ.ion3 of CFA Francs)

June 30 June30

Assets 1965 1966 1967 1968 1969

______ _ _ Lia bitima

Budgetary Re sults 3.()30 - 2.3?) 4.hA5I 7." 3'3______ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ugtrlResults 0:1.o __ 73

Budget deficit of the curirent year (2.?''i) ( - (2.53) (2.051) (0213) Budget wurplus of the current year ( - ) ( .900) ( i - ) ! -

Cusulative balances of previous years - ) ( - ) ( - ) (2.400)) (-451) Culative balances oil pr giDus year (:.OOi) ( 191 ( 119) ( - ) ( _)

Budgeta7 operatioms to bs classified (use - - ) ( )gtarr operations 1o be classified ( - ) ( 370) ( SCIl ( 3LI,) ( -

(net) (net)

TreasLry lon (outstandiag amounts) 2.992 73 . 7 2 1l 231 SpAecial count 2.11 61 7.902 1.261 0!2OO

to Municipalities ( 60) I (0) ( ;1) 532) ( 519) of which: Pension funds (1.293) (1.761) (1.9i1) (1.'31) (1.26' >

to Public enterprises ( 292) I 292) ( 9?2) ( 292) ( (/)J) Road fund 1 32) ( 569) ( 1l() ( 71)) ( t3)

to other clie3nts (2.617) (2.526) (2.136) (1.987) ( 1 .J ) Groundnut fund ( - ) C - ) (J.11) ('.12f) (lX.1jlI)

Treasury admvcees I I It2 1.t 6 3' 19I 2.77] 2.Al Sugar fUnd 7hl1 ') (I. 110)

to MunicipalLties ) (o) ( ) ( ) ( D sits of correspendanta" 6.21

L 3.)I;3 6.1 i42 Ob) ;;j5i,

to public enterprises ( 55) ( 610) (2 .1'h) (1.863) (1.833) o0 which:

to other clients (1.054) (1.163) (1.03D) 98) ( 907) funicipalities 4 491) ( 355) ( i'l;) r 920) ( 530)

Public entarprises(2) (5.737) (2.5919) (5.27!1) (."68) (3.6ho)

(of which postal check- ( ) ( ) (2.031,) (2.I :' ) (2.105)

LiquidI assets 10.1B7 7.430 9.203 7.102 5.102 De_posits of lot_r _ l--Lents 3.019 1.__7h 1.51EI 3.(30 3.1_5

Cash in hand (1.655) ( 967) (153S) (7bO) ( 5 37 Pay orders airaiting settlement (2.597) ( 766) 5 5U6) (1.6j1) (2.316)

Bank de5posits (3-734) (2.7'3) (Is.313) (2.832) ( 917) "DepOts et consignations" ( 336) ( 396) ( 427) ( 612) ( 635)

Foreign currencies ( 15) ( 6) ( 4) ( 15) ( 217) Other ( 86) ( 3112) ( 543) ( 777) ( 154)

Custoims bills (1.537) (1.1f9) ( 3)1S) ( 945) ( 931)

Invessnt deposits with the (3.416) (2.500) (2.r00) (2.500) (2.500) Treasury billa ____i 1,37 162Central Bank 347 37.6

Frencih TreasU (ccospte d'opgrationo) 4 451 - _ _ French Treasur' (conpte d'op4ratiau)3nket ~t-1.0192 -32311

Treasuzr Operations to be 395 301Treawi irati , eto be_- _ 262 27 Operations to be classified 45 563 425 -

Miscellaneous _- 39 5ib Miscellaneous 242 8 203

Suspense account (net)(4) _ _ 51 _ 6 Siispense accounit (net)(4) 1.205 3.736 - _ 1.096

Errors and omissiois - 1_ Errors and Omissions 65

EAL 17. 323 12.5' 1 .1 17.4,3/ 13.kS7 TOTAL 17.323 12.535 17.751 37,3 1. ,I5-

T77Msad de aernt Mcli&7/ Net asounts, i.e. after allowing for .sau.y deposit. with the postal checking srystemt.

V/ Data not available for June 1965 and June 1966.

1/ Transitory accoimts used as a "hings" betwreen accountinig periods or accounting systems.

Sources: Ministry of Finance. "Balances d6finitives des comptes du Tr6sor."

Table 11: TAXATION OF GROUNDNUT EXPORTS

Shelled Cruide oilgroundnuts Crude_04__ Refined Ground-

Franc Outside Franc Outside oil nutzone franc zone franc cakes

Crop of 1963/64 zone zone

(1) c.i.f. price per ton 52,50021 47,050•1 95,6001 7,000•! 102,OOQY /13, 00(o

(2) Taxation per ton 6,811 13,024 13,391 1,111

(3) (2) as percent of (1) 13.0% 14.5!% 13.6% 16.9% 13.1% 8.5 %

(4) Earmarked tax per ton 1,903 4,110 4,338 -

(5) (4) as percent of (1) .6 4.% 4.4% 5.3% 4.3%

(6) Total taxation per ton 1,111

(7) 6O) as percent of (1) 10.0n 18O.5% I(.Yn 2 I.4% °.5%

C,-o Of 1947/AA

r~~~~~~I /

(2) Taxation per ton 4,801 9,148 9,707 930

(3) (2) as percent of (1) 12.5% 14.7% 14.5% 3.7%

(4) Earmarked tax per ton 1,403 3,031 3,311

(5) (4) as percent of (1) 3.6% 4.9% 4.9%

(6) Total taxation per ton 6,204 12,179 13,018 930

(7) (6) as percent of (1) 16.1% 19.6% 19.4% 3.7%

1 / G.i f. pr_ce M1-n1M+eedb hWi Vwnruin (4v% MIFA "- a).

l Average world price (in CFA francs).

Table 12 : CENTRAL GOVERNMENT CURRENT EXPENDITURESI mc . j1ACn 1 /

(CFAKr 0bXi1on)

1964/65 1965/66 1966/67 1967/68 1968/69

Economic classification

- Wages and silariesg 16.29 16.93 18.07 18.65 19.75- Goods and services3/ 8.71 8.59 8.38 8.52 8.93- Public debt4/ - 0.77 o.65 0.35 0.45 o.46- Transfers and subsidies $ 5.18 5.60 5A.7 5.o6 L.9h- Other 1.03 1.05 o.84 1.24 1.54

Totals 32.28 32.82 33.01 33.90 35.62

Functional classification

General services 15.51 15.41 16.37 16.75(General administration) (5.83) (5.87) (6.13) (5.92)(Justice and police) (3.92) (3.96) (4.07) (4.45)(Defense) (3.32) (3.41) (3.66) (3.55)(Non-classified expenditures) (2.44) (2.17) (2.51) (2.83)

Community and social services 11.37 12.24 12.32 13.64(Public works, transport) (2.67) (2.63) (2.67) (2.76)(Education) (5.29) (6.07) (6.09) (7.02)(Health) (3.09) (3.10) (3.09) (3.42)

- Economic services. 2.54 2.74 2.70 2.96of which: ru.ral development (1.59) (1.74) (1.74) (2.09)

- Unclassified expenditures i 3.40 2.62 2.51 2.27

Totals 32.82 33.01 33.90 35.62

1 Actual expenditures.y Including Senegal's share of technical assistance costs.Including rents of administrative buildings and housing.

Z/ Excluding amrtization payments.Y/ Including tax refunds to municipalities and public entities.

Sources: Ministry of Finance, Direction du Tr6sor.