Benin report - Institut Africain de la Gouvernance

CHAPTER FIVE: CORPORATE GOVERNANCE__________________________________________________________________________Accused of corruption, tax evasion and money laundering, this sector is asafety valve for social unrest and one of the pillars of family solidarity,especially as no formal support is given to citizens in general andbusinesspeople in particular.562. The informal sector has two categories of players and practices, which may cutacross each other without merging. Indeed, one category consists ofenterprises that might decide not to declare their activities and that, since theypay neither registration fees nor corporate tax, can pay for a business licenceand local taxes. The other category consists of illegal operations (trade orotherwise) that can neither be billed nor declared, and that are often the outputof enterprises that are prosperous, highly respected and belong to theunderground economy (rather than the purely informal economy).Table 5.1: The main categories of enterprises and their roles in the economyInformal economyUnderground economyOriginsDeal with the weaknesses of thestate and stagnation of the moderneconomy (unemployment,precariousness of employment inthe formal sector, etc.)The fear of being exposed to theformal structures of the state andthe administration (notably fiscalpressure and social regulation,and the slow pace and complexityof administrative procedures)Incapacity or inability to formaliseone‟s business (absence ofadministrative structures,illiteracy 36 , low level of educationor lack of certificates, lack ofidentity cards, scarcity of capital,and inadequate technicalknowledge)Lack of information on aid from thestate and advantages offormalisationTaking advantage of theweaknesses of the state(delinquency or even to adegree organised criminality)The differentials of the customsregime, speculation andshortagesPossibility of operating in theinformal sectorThe vagueness of certainregulations and proceduresBanning of certain activities andbusinesses and difficulties ofenforcing controlsPossibilities of corruption36 Illiteracy affects nearly 70% of the population.195