O Tax Law[2] in Cape Verde represents one of the fundamental pillars for the country's economic and social sustainability. This branch of law[9] is responsible for regulating the collection of taxes, ensuring that the State[10] has the necessary resources to finance essential public services such as health, education and infrastructure. Cape Verde's tax legislation is made up of a set of rules that regulate the relationship between the tax authorities and taxpayers, ensuring that justice[11] and fairness in the distribution of the tax burden.
Cape Verde, as a developing archipelago, faces unique challenges when it comes to taxation. The need to promote sustainable economic growth and social inclusion calls for a system[12] efficient and adaptable tax system. In recent years, the government has implemented significant reforms to modernise and simplify the tax system in order to increase revenue and combat tax evasion. These reforms are often discussed in international forums, such as the Global Forum on Transparency and Exchange of Information for Tax Purposes, emphasising the country's commitment to fiscal transparency.
Furthermore, harmonising tax policies with international standards is a priority for Cape Verde, especially in the context of regional and global economic integration. Adherence to international conventions and cooperation with organisations such as the Community of Portuguese Speaking Countries (CPLP) have been fundamental to the development of a more robust and efficient tax system.
This report aims to explore in depth the legal, economic and social aspects of tax law in Cape Verde, analysing its implications for the country's development and future prospects. Through a comprehensive approach, it seeks to provide a clear and detailed overview of the current state and emerging trends in the Cape Verdean tax system.
Index
In the context of tax law in Cape Verde, the principle of legality is one of the fundamental pillars. This principle establishes that the creation, modification or extinction of taxes can only be done by means of law[13] formal. This means that any tax imposition must be authorised by a legislative act, thus guaranteeing legal certainty and predictability for taxpayers. A Constitution[4] Article 106 of the Constitution of the Republic of Cape Verde reinforces this principle, stipulating that "no one can be forced to pay taxes that have not been created under the terms of the Constitution". This principle aims to protect citizens from tax arbitrariness and ensure that the power to tax is exercised in a transparent and controlled manner. (Constitution of the Republic of Cape Verde).
Another crucial concept is that of contributory capacity, which refers to the idea that taxes should be proportional to the economic capacity of each taxpayer. This principle seeks to guarantee tax justice by ensuring that those with greater financial capacity contribute more to financing public spending. In Cape Verde, the application of this principle can be seen in the progressive structure of income tax, where rates increase according to the taxpayer's income bracket. This system aims not only to raise funds, but also to promote income redistribution and reduce social inequalities. The ability to pay is a concept that guides the politics[6] and tax justice in the country.
The principle of equality in Cape Verdean tax law states that all taxpayers in equivalent situations must be treated equally. This means that tax legislation must be applied uniformly, without arbitrary discrimination. This principle is enshrined in the Constitution of Cape Verde and is essential to ensure that the tax system is fair and equitable. Tax equality is also reflected in the need for equal treatment for taxpayers with similar conditions, avoiding undue privileges and ensuring that the tax burden is distributed fairly among all citizens.
Transparency is another fundamental concept in Cape Verdean tax law, which aims to ensure that tax rules are clear and accessible to all taxpayers. Tax transparency is crucial for citizens' confidence in the tax system and for the voluntary fulfilment of tax obligations. The Cape Verde government has implemented measures to improve transparency, such as publishing tax information and simplifying tax procedures. Transparency also involves accountability on the part of the tax authorities, allowing taxpayers to understand how their taxes are used and what social benefits are derived from this collection.
The principle of non-confiscation establishes that taxation should not have a confiscatory effect on income or the assets[7] taxpayers. In other words, taxes must not be so high as to make it impossible for individuals or companies to survive economically. This principle is essential to ensure that the tax burden is reasonable and does not impede economic development. In Cape Verde, the application of this principle is monitored through periodic analyses of tax rates and bases, ensuring that taxation does not exceed the limits of citizens' and companies' ability to pay. Non-confiscation is a bulwark against tax abuse and protects taxpayers' economic rights.
The tax administration in Cape Verde is responsible for the efficient and fair collection of taxes, as well as for monitoring taxpayers' compliance with their tax obligations. The National Directorate of State Revenue (DNRE) is the body in charge of managing the tax system, implementing tax policies and ensuring compliance with tax laws. Inspection is a vital component, as it ensures that all taxpayers fulfil their obligations, reducing tax evasion and increasing public revenue. The tax administration uses technology and data to improve the efficiency of processes and effectiveness in detecting tax fraud, contributing to a fairer and more balanced tax system.
Tax incentives are important tools in the context of Cape Verdean tax law, used to promote economic development and attract investment. The government offers various incentives, such as tax exemptions, rate reductions and tax credits, with the aim of stimulating strategic sectors of the economy, such as tourism, agriculture and technology. These incentives are designed to increase the country's competitiveness, foster job creation and drive sustainable economic growth. However, it is crucial that tax incentives are carefully planned and monitored to avoid distortions in the market and ensure that the economic benefits are widely distributed among the population.
Although the report should not include a formal conclusion, it is clear that the fundamental concepts of tax law in Cape Verde play a crucial role in shaping a fair, efficient and transparent tax system. These principles guide tax legislation and administration, ensuring that taxes are collected in an equitable manner and that resources are used to promote the country's social well-being and economic development.
Cape Verde's tax system is made up of a variety of taxes that are essential for financing government activities and the country's economic development. Current tax legislation covers direct and indirect taxes, fees and special contributions. Direct taxes include Personal Income Tax (IRPS) and Corporate Income Tax (IRPC). Indirect taxes include Value Added Tax (VAT) and customs duties. The legislation also provides for specific taxes for sectors such as tourism and telecommunications, reflecting the importance of these sectors to the Cape Verdean economy. (Cape Verde Tax Legislation).
Income tax in Cape Verde is divided into two main categories: the IRPS, which is levied on the income of individuals, and the IRPC, which applies to the income of companies. The IRPS is progressive, with rates that vary according to the taxpayer's income bracket, promoting tax equity. On the other hand, the IRPC has a fixed rate, but offers deductions and incentives for companies that invest in strategic sectors or in less developed regions. Current tax legislation seeks to balance revenue collection with stimulating investment and economic growth. (Income Tax Code).
VAT is one of the main indirect taxes in Cape Verde and is levied on most transactions involving goods and services. The standard VAT rate is 15%, but there are reduced rates for essential products such as basic foodstuffs and medicines, with the aim of minimising the impact on the most vulnerable sections of the population. VAT legislation also includes exemptions for specific sectors, such as the export of goods and services, to foster the international competitiveness of Cape Verdean companies. The efficient administration of VAT is crucial for collecting revenue and maintaining the country's fiscal stability. (VAT Regulation).
Customs duties in Cape Verde are applied to the import of goods in order to protect local industry and regulate foreign trade. Customs legislation is harmonised with international standards, facilitating trade and regional economic integration. In addition, Cape Verde participates in trade agreements that offer tariff preferences for certain products, promoting access to foreign markets. Customs policy is an important tool for economic development, encouraging local production and export diversification. (Customs Code).
In addition to general taxes, Cape Verde's tax legislation includes special contributions and sectoral levies aimed at financing specific activities or regulating strategic sectors. For example, the tourist tax is levied on holidaymakers' accommodation and is aimed at developing the tourism sector and preserving the environment. Similarly, the telecommunications tax is levied to finance the expansion and modernisation of telecommunications infrastructure. communication[5]. These contributions are designed to ensure that the benefiting sectors contribute directly to their own development and to the general welfare of the region. society[8]. (Special Contributions Legislation).
In recent years, Cape Verde has made significant efforts to harmonise and reform its tax system in order to increase efficiency and tax justice. The tax reform seeks to simplify procedures, reduce the bureaucratic burden on taxpayers and improve revenue collection. One of the main focuses is the digitalisation of tax processes, allowing tax returns to be filed and paid online, which increases transparency and reduces tax evasion. Harmonisation also involves adapting tax rules to international best practice, promoting competitiveness and attracting foreign investment. (Tax Reform Plan).
Despite advances in tax legislation, Cape Verde faces significant challenges, such as the need to broaden the tax base and combat tax evasion. Economic informality is a persistent obstacle, limiting the government's ability to collect revenue effectively. To meet these challenges, it is crucial to continue investing in technology and training for the tax administration, as well as promoting tax education among taxpayers. Future prospects include the implementation of more sustainable and inclusive tax policies that can support the country's economic and social development in a balanced way. (Fiscal Challenges Report).
Technological modernisation and digitalisation of the tax system in Cape Verde are key to increasing tax efficiency and transparency. The government has invested in digital platforms for declaring and paying taxes, which makes it easier for taxpayers to fulfil their tax obligations and reduces bureaucracy. The implementation of electronic tax collection systems allows for better supervision and control, minimising tax evasion. Digitalisation also contributes to transparency, allowing taxpayers to access tax information in a clear and accessible way. (Cape Verde Ministry of Finance).
Expanding the tax base is a critical challenge for Cape Verde, given the high level of economic informality. Informality limits the government's ability to collect revenue effectively, since many workers and companies operate outside the formal system. To address this challenge, it is necessary to implement policies that encourage the formalisation of economic activities, such as simplifying registration processes and offering tax incentives to small and medium-sized businesses. Broadening the tax base would not only increase revenue, but would also promote a more equitable distribution of the tax burden. (World Bank).
Combating tax evasion remains a priority for the Cape Verdean tax system. Tax evasion results in a significant loss of revenue that could be used to fund essential public services. Effective strategies to combat evasion include strengthening enforcement, using technology for monitoring and implementing strict penalties for offenders. In addition, tax education campaigns can raise awareness about the importance of paying taxes and promote voluntary compliance. (Global Forum on Transparency and Exchange of Information for Tax Purposes).
Sustainability and fiscal inclusion are important perspectives for the future of Cape Verde's tax system. Sustainable tax policies must balance the need for revenue with the economic impact on taxpayers, especially the most vulnerable. Fiscal inclusion involves ensuring that all segments of society, including those on low incomes, are taken into account in tax policies. Measures such as tax exemptions for basic products and progressive tax rates can help mitigate the negative impacts on the poorest, promoting social justice. (Human Development Report).
International cooperation and tax harmonisation are essential for Cape Verde, given its island economy and dependence on foreign trade. Harmonising tax rules with international standards can facilitate trade and attract foreign investment. Participation in international tax information exchange agreements is also crucial for combating cross-border tax evasion. Cooperation with international organisations and partner countries can provide technical and financial support for the implementation of tax reforms. (Organisation for Economic Co-operation and Development).
This report addresses aspects not covered in previous reports, such as technological modernisation and digitalisation, which are key to the efficiency of the tax system. Expanding the tax base and combating tax evasion are explored with a focus on specific strategies for Cape Verde, while fiscal sustainability and inclusion are discussed in terms of social justice. International co-operation is highlighted as a strategic perspective for the country's economic development.
The report on Tax Law in Cape Verde emphasises the importance of fundamental principles such as legality, ability to pay, equality, transparency and non-confiscation, which form the basis of a fair and efficient tax system. These principles are essential to ensure that tax collection is carried out in an equitable manner and that resources are used to promote the country's social well-being and economic development. The tax administration, led by the National Directorate of State Revenue (DNRE), plays a crucial role in implementing these guidelines, ensuring fair collection and effective enforcement of tax obligations. (Constitution of the Republic of Cape Verde)
Current tax legislation in Cape Verde is made up of a variety of direct and indirect taxes, such as Personal Income Tax (IRPS) and Value Added Tax (VAT), which are structured to promote tax equity and stimulate economic growth. However, the country faces significant challenges, such as the need to expand the tax base and combat tax evasion, especially due to high economic informality. Technological modernisation and digitalisation of the tax system are crucial steps towards increasing tax efficiency and transparency, allowing for better oversight and control. (Cape Verde Ministry of Finance)
Future prospects for the Cape Verdean tax system include the implementation of more sustainable and inclusive tax policies that can balance the need for revenue with the economic impact on taxpayers, especially the most vulnerable. International cooperation and tax harmonisation are seen as essential strategies to facilitate trade and attract foreign investment, promoting the country's economic development. Continuing tax reform efforts, with a focus on simplifying procedures and adapting to international best practices, is fundamental to ensuring a fairer and more efficient tax system. (Organisation for Economic Co-operation and Development)
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