Agricultural Companies Pay Little Corporate Income Tax in Côte d'Ivoire (World Bank)

In recent years, Côte d'Ivoire has strengthened its efforts to mobilize tax revenue, reaching a tax-to-GDP ratio of 14%. However, some highly valued sectors like agriculture still show significant tax gaps, according to the World Bank.

Agriculture is listed alongside mining, trade, construction, and telecommunications as sectors that are either under-taxed or have fiscal niches to be identified and exploited. The latest World Bank report highlights a marked imbalance in tax mobilization.

Based on microeconomic analyses by the economic policy analysis unit of CIRES (CAPEC), the study shows agricultural companies in Côte d'Ivoire make only a 2% effort in corporate income tax relative to their potential, implying a 98% tax gap. This means most wealth created in this sector escapes corporate income tax. By comparison, industry and services reach 63% and 80% of their fiscal potential, respectively. For agricultural export products, only a 1% tax effort is observed for fisheries and forestry products, confirming export agriculture as an under-taxed niche.

This tax gap may be due to a mix of factors: preferential regimes and exemptions often granted for political or social reasons, administrative complexity, and the weight of the informal sector. Recent tax reforms and economic transformation have reduced the informal sector by nearly 10 percentage points of GDP since the 2000s, down to about 38% in 2020. However, the informal sector still employs over 80% of the workforce and does not fully contribute to tax revenue, limiting the tax base and corporate tax productivity.

Port Taxation: A Major Revenue Source

Agriculture in Côte d'Ivoire does not escape taxation entirely. With a 23% GDP share and two-thirds of export revenue, the sector faces complex tax regimes generating revenue through port taxes (export duties) and parafiscal levies.

Cocoa, the leading export product, produced 1.76 million tonnes in 2023/2024, with 974,000 tonnes exported. In 2023 alone, this sector brought in over $3.6 billion in export revenue. Customs collected $692 million as single export duties, representing 19.2% of export revenue. Côte d'Ivoire taxes cocoa exports more heavily than other producers, with a rate reaching 22% including parafiscal charges. This tax burden, fully passed to producers, results in about 40% of farmers’ turnover and likely over 50% of profits being taxed, making cocoa farming the most heavily taxed activity.

Additional revenues come from other export sectors: $59.2 million in export duties were collected on cashew nuts and $37.2 million on rubber in 2023. Port taxation and parafiscal levies are thus the main revenue sources in agriculture, more than corporate income tax. VAT efforts are strong: 62% for agriculture, 45% for food crops and livestock, and 72% for export products, although a 41% fraud rate is noted.

Large multinationals like Cargill and Nestlé operate in Côte d'Ivoire, but no specific company is blamed for the low corporate income tax yield in export agriculture.

This situation raises questions about the state’s fiscal choices. Between high port tax revenues and weak direct tax, Côte d'Ivoire seems to favor taxing trade flows more than net profits. The question is whether this imbalance is accidental or intentional. With a tax-to-GDP ratio capped at 14%, six points below the regional norm, these fiscal choices deserve serious discussion.

(Agence Ecofin)