Walking in the Dark: informal Cross-border trade ... - International Alert

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38 International Alert also creates tensions on the border with Burundi. Since the weakening of the Burundian franc, many traders prefer to use the Rwandan franc, thus leading to tensions and frustration. Finally, it is important to emphasise that these tensions exist in society in general: they are the product of the region’s violent history, which has left a trace in collective memories and in the prejudices, stereotypes and rumours used by one group against another. 139 In short, one must be careful to neither overestimate tensions between the different nationalities nor underestimate them. Those who intervene politically should take account of this (especially in a region with a history of sporadic conflict). Traders are aware that small cross-border trade must take place on a complementary basis and that cooperation is essential. 140 Political intervention must therefore support such cooperation and use cross-border trade as a “common thread” to improve cross-border relations between the different populations. 141 139 International Alert (2007). Op. Cit. 140 UN Women (2012). Op. Cit., p.47. 141 Pole Institute (2011). Les populations du Nord-Kivu (RD Congo) face au défi du voisinage: Les pesanteurs [The populations of North Kivu (DR Congo) facing the challenge of neighborhood: the burdens]. Goma, DRC.
Walking in the Dark: Informal Cross-border Trade in the Great Lakes Region 39 7. Informality: the “devil’s deal” Paradoxically, the interviews conducted with traders revealed a preference for informal taxes in DRC over formal taxes in Burundi. The latter are perceived as being a source of ‘hassle’, while the former are seen as more reasonable because they are ‘negotiable’. 142 In other words, the legitimacy of taxes is in no way linked to their legality: on the contrary, traders prefer informal and often illegal taxes, perceiving them to be less expensive than formal and legal taxes. 143 As a result, traders often prefer to involve themselves in informal situations in which they can either try to avoid paying any taxes or pay informal taxes. In her analysis of informality, Judith Tendler discovered that this state of affairs was based on tacit agreements between politicians and traders (especially in terms of the informal economy), whereby politicians promised not to collect taxes from traders or to protect them against the regulations in force. 144 She refers to this phenomenon as the “devil’s deal” because, in this context, informality is made more attractive than a formalised system, an arrangement that is difficult for both parties to leave behind. Although informal arrangements benefit traders in the short term, they provide no sustainable development at the local level: the resulting job creation is not sustainable and neither is the informal arrangement. The same argument applies to the situation experienced by small traders at the locations concerned by this report: they may not depend on agreements reached with politicians, but their actions are, to a large extent, informal. This manifests itself in two different ways: traders prefer to pay informal taxes or reach an agreement with individual public officials; or they try to avoid paying taxes by using smuggling routes (and therefore participate in the informal economy). While this provides advantages in the short term, the negative effects significantly outweigh the positive effects in both the medium and long term. First of all, many of these taxes are not supposed to be paid and are therefore a violation of national laws or inter-state agreements ratified within the framework of CEPGL or EAC. 145 Secondly, the large number of taxes and high degree of informality lead to significant levels of confusion at border points. This is not only due to the fact that operators are unfamiliar with the taxation rates in force, but also because there is a general lack of clear regulations at all the borders concerned. In concrete terms, it is difficult to know how (or whether) national regulations and regional trade agreements are being respected. One agent from the Uganda Revenue Authority (based in Kampala) commented that ‘our laws are there [...] but their application depends on the person working at the border post’. 146 In other words, national institutions are not always aware of practices on the ground and do not consider this to be a priority. 147 Furthermore, fiscal rates and practices can vary considerably within a single country. As illustrated above, the two Congolese border posts covered by our study displayed significantly divergent rates of informal taxation: Bukavu applied low levels of informal taxation (USD0.17), whereas in Uvira their value was much higher (USD1.75). All of the border posts have informal arrangements with regard to the value of taxes and the quantities of merchandise which can cross without being taxed. 142 Traders focus group, Gatumba, 8th October 2011. 143 I. Abraham and W. van Schendel (2005). ‘Introduction: the making of illicitness’, in I. Abraham and W. van Schendel (eds) (2005). Illicit Flows and Criminal Things. Bloomington/Indianapolis: Indiana University Press. 144 J. Tendler (2002). ‘Small firms, the informal sector, and the Devil’s Deal’, IDS Bulletin, 33(3). 145 For example, small quantities are not supposed to be taxed in DRC, except in the case of small batches being transported for a “large trader”. Interview with DGDA Director in North Kivu, September 2011. 146 Interview with URA official, Kampala, 2nd February 2012. 147 For a detailed analysis of this phenomenon in Uganda, see K. Titeca and T. De Herdt (2010). Op. Cit.
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