To improve an overly unfavorable tax system, the Government has initiated a general revision ofthe tax code. Burundi has traditionally had a particularly complex tax regime and one of the highest taxburdens in the world (UNCTAD 2010) 32 , but taxes have been significantly reduced in recent years.According to the standardized case used by Doing Business (2012), 24 different payments are requiredper year, taking on average 274 hours. The total statutory tax rate over profits is 46 percent (compared to41 percent on average in the other EAC countries, but 57 percent in Sub-Saharan Africa). This isdetrimental to private sector development and investment, and is likely to encourage tax evasion andinformality and reduce the tax base 33 . Furthermore, the tax regime is characterized by a vast and complexset of exemptions, mainly concerning imports, which are largely perceived as inefficient and still have tobe harmonized with EAC practices (World Bank 2011b). Major tax policy developments in recent yearshave included:- the establishment in 2009 of the semi-autonomous Revenue Authority OBR, responsible for thecollection of public revenue, including custom duties 34 . Until 2009 Burundi was the only EAC countrywithout such an institution. The main objectives of the OBR are to broaden the tax base, improverelations with taxpayers and simplify procedures. Although recently established, the OBR is creditedwith a significant increase in revenue collection. Preliminary data in September 2011 suggests thatrevenue collection is about 30 percent higher than in the same period in 2010 as the result ofimprovements in revenue administration and the collection of non-tax revenue.- the introduction in 2009 of a value added tax (VAT) that replaces the previous transactions tax. Thedual objective was to raise the efficiency of tax collection and compensate the revenue loss due to theadoption of the EAC Common External Tariff. The standard rate has been set at 18 percent and importsare subject to the tax, while exports are zero-rated. The VAT is deemed to have contributed to thereduction of the tax burden 35 , as well as the simplification of the tax regime and its alignment withpartner countries’ practices in the EAC (AfDB 2010). The government has recently worked on a firstrevision of the VAT law with support from the IMF.In late 2011, the OBR finalized draft laws on direct taxes and tax procedures that are compatible withEAC regulations. Furthermore improving the Burundian tax system is a core objective of the IFC’sBurundi Investment Climate Reform Program implemented since 2011. Program activities include thesimplification of tax procedures, the creation of a simplified tax regime for SMEs and the harmonizationof tax incentives for investment with EAC regulations.Despite progress with legislative reforms, one of the main causes for Burundi’s poor tradeperformances continues to be the country’s unfavorable business environment. This is partly causedby structural factors such as the country’s geographical isolation, weak infrastructure and poor humancapital, but also includes a major regulatory dimension. For example, the cost and time to import to andexport from Burundi as measured by Doing Business remain higher than in most East African and Sub-Saharan African countries (see Figures 1.11 a to d).32 In Doing Business 2012, Burundi is ranked 125 th out of 183 economies regarding the business-friendliness of itstax regime, an improvement of 17 places from the previous year. This is lower than Rwanda (19 rd ), Uganda (93 rd )and Tanzania (129 th ), but higher than Kenya (166 th ).33 The tax base in Burundi is exceptionally narrow, with 200 large taxpayers contributing to 80 percent of internallycollected revenue, the rest being paid by 1,500 small and medium taxpayers (AfDB 2010).34 The Office Burundais des Recettes, which formally began operations in July 2010, was established with thesupport of the Belgian, British and German cooperation agencies, the IMF, World Bank, Rwandan RevenueAuthority and TradeMark East Africa.35 After the introduction of the VAT, the tax burden as a percentage of profits, as measured by Doing Business,decreased from 279 in 2009 to 153 percent in 2010, and to 46 percent in 2011.32 / 153
4,000Figure 1.11a: cost to export (USD percontainer)5,000Figure 1.11b: cost to import (USD percontainer)3,0004,0002,0001,0003,0002,0001,00002005 2007 2009 2011BurundiKenyaRwandaTanzaniaUgandaSub-Saharan AfricaSource: WDI02005 2007 2009 2011BurundiKenyaRwandaTanzaniaUgandaSub-Saharan AfricaSource: WDIFigure 1.11c: time to export (days)Figure 1.11d: time to import (days)6010080406020402002005 2007 2009 2011BurundiKenyaRwandaTanzaniaUgandaSub-Saharan AfricaSource: WDI02005 2007 2009 2011BurundiKenyaRwandaTanzaniaUgandaSub-Saharan AfricaSource: WDIA significant improvement in Burundi’s “ease of doing business” index has been achieved, but theranking of its business environment remains poor. Doing Business 2012 ranks Burundi 169 th out of183 economies on its overall “ease of doing business” index 36 , which is far below neighboring countriessuch as Rwanda (45 th ), Kenya (109 th ), Uganda (123th) and Tanzania (127 th ). This is nonetheless asignificant improvement from the country’s previous ranking (177 th ) and places Burundi in the Top 10group of countries which have improved the most their regulatory environment in 2010/2011 (DoingBusiness 2011). After more than a decade without significant reforms in a context of protracted civilwar, the Burundian regulatory environment has somewhat improved between 2005 and 2010 with fivepositive reforms registered in the following areas: construction permits, investor protection, tax payment,and insolvency procedures.36 This index captures the overall business-friendliness of a country’s laws and regulation as they apply to domesticSMEs. It is the average of 9 thematic indicators (see www.doingbusiness.org for more information).33 / 153
- Page 1 and 2: Republic of Burundi / Enhanced Inte
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standards, which kindly share the m
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According to a testimony gathered i
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public sectors would have more clou
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CHAPTER 5 - Strengthening Trade Fac
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ii. designing a program of action o
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3. Size of ShipmentsThe small avera
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makes it possible for the coffee to
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logistics services on the other. Ty
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Table 5.3: Characteristics of Clear
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The Central Corridor is potentially
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Air connectivity, while limited in
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Kigoma and Bujumbura lake ports. Th
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In its Strategic Plan 2011-2015, th
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increase reliability would therefor
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8. RecommendationsThe foregoing sho
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Cooperation at the regional level a
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(BIF billion) (%)1. Primary sector
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A striking feature of Burundi’s s
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Business servicesNumber of accounta
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At the same time there exist severa
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Under the capacity building compone
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MadagascarCameroonSenegalKenyaMalaw
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Explaining the Segmentation of Mark
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. Adequate regulations that ensure
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The pace of integration is largely
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take time to overcome, are likely t
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and to domestic travel spending, as
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the attractiveness of the sector fo
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4. The challenges facing tourism in
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supply, hospitals), and in large-sc
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durable improvements in terms of st
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- the introduction of a single EAC
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Box 7.4: Examples of regional conse
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cultural and social sustainability
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ICG. 2012. Burundi: A Deepening Cor
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World Bank. 2010c. Reform and Regio
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