Benin report - Institut Africain de la Gouvernance

CHAPTER FIVE: CORPORATE GOVERNANCE__________________________________________________________________________repression of the underground economy, taking care not to confuse the one sector withthe other.Dependence on the formal sector: the informal sector develops thanks to the difficultiesfacing the formal economy, but needs it in order to survive.Incapacity of the state to assist the players to develop and plan their own actions in theframework of a coherent economic policy.570. The system of direct taxation of informal activities relies on occupation andbusiness tax. The latter is generally in the form of a lump-sum payment. Inaddition to this tax, which is managed by the government services, there arealso local taxes that significantly increase tax pressure on informal activities.The lump-sum procedure, which is normally a contradictory one, is most oftentransformed into a unilateral procedure of automatic assessment in which thetaxpayer is cheated. The tax is claimed either at the end of the year during thefestive period (which is not representative of normal activities, and thereforedoes not adequately represent the lump sum to be paid) or on the basis ofpotential revenue estimated from the value of the enterprise‟s capital or ofphysical items like the size of the premises.571. Support for the informal sector. Given the scope and importance of theinformal sector in Benin, the APR Panel considers that a more realistic andpragmatic attitude will help to avoid the following three extremes:ignoring the informal sector and focusing solely on the tip of the iceberg;believing that the growth of the formal sector will necessarily be achievedthrough the fight against the informal sector; orconsidering the informal sector to constitute the „natural‟ expression (orreaction) of the real economy and making it the solution, or even thepanacea, to the problems of underdevelopment.572. The informal sector is the creator of wealth, and rather than “breaking thethermometer thinking it will cure the fever”, the causes of this sector‟smagnitude should be investigate so as to develop tools and a policy to organiseit with a view to:avoid its exploitation by players in the underground economy;assist it to better play its role as wealth creator and a shield againstpoverty;assist it to succeed the transition to the formal economy; andpromote partnership between the informal and formal sectors, and avoidunfair competition.199