Tales From Madagascar

​ Madagascar’s current corporate tax system is a two-tier regime: small businesses under a turnover threshold use the synthetic tax, while companies above the threshold are generally taxed under the real regime at 20% of profit. The proposed 2026 reforms keep that basic structure but tighten rules, adjust thresholds, and add new tax treatments for several corporate situations.  Current system: - Turnover below MGA 400 million: synthetic tax regime applies; PwC summarizes it as 5% of 70% of turnover, with a minimum tax depending on activity.  - Turnover above MGA 400 million: corporate income tax is 20% of profit under the real regime.  - Minimum tax floors still apply under the real regime, with different floor amounts by activity.  Proposed / 2026 reform highlights: - Companies with turnover between MGA 200 million and MGA 400 million could choose the real income-tax regime without being automatically subject to VAT, if their financial statements are certified by a ...

​ Current Personal Tax System in Madagascar 1. Tax Brackets:    - 0% for income up to MGA 350,000 per month    - 5% on income from MGA 350,001 to MGA 600,000    - 10% on income from MGA 600,001 to MGA 1,200,000    - 15% on income from MGA 1,200,001 to MGA 2,000,000    - 20% on income from MGA 2,000,001 to MGA 4,000,000    - 25% on income above MGA 4,000,000 (recently proposed but not uniformly implemented yet) 2. Tax Collection:    - Approximately 10.4% of GDP is collected through taxes, indicating a narrow tax base and reliance on indirect taxes. 3. Challenges:    - High levels of tax evasion, especially in the informal sector.    - Limited administrative capacity to enforce and collect taxes effectively.    - The system is perceived as complex and difficult to navigate for many taxpayers. Proposed Improved Tax System 1. Broaden the Tax Base:    - Reduce exemptions and streamli...

​ Property tax in Madagascar consists of the land tax (IFT) and the property tax on built properties (IFPB). The IFT represents 1% of the market value of the bare land. The property tax (IFPB) varies between 5% and 10% of the cadastral rental value of the building, with a specific calculation for owner-occupied residences, where the taxable base is estimated at the rental value level. The property tax collection rate remains very low. In some cases, only 0.01% of taxpayers actually pay it, demonstrating that this tool is underutilised as a lever for local finances. To enhance property tax revenue in Madagascar, several reforms could be considered: 1. Regular Assessments: Implementing regular property assessments to ensure that property values reflect current market conditions. This can help identify properties that are under-taxed. 2. Expanding the Tax Base: Including more properties in the tax system, such as informal and unregistered properties, could increase the number of taxable p...

​ To reduce the budget deficit in Madagascar, several tax reforms could be implemented: 1. Broadening the Tax Base: Expanding the tax base by identifying and incorporating more individuals and businesses into the tax system can increase revenue. This involves ensuring that all economic activities are captured and taxed appropriately, particularly in the informal sector. 2. Progressive Taxation: Implementing a more progressive tax structure where higher income earners pay a larger percentage of their income in taxes can enhance equity and generate additional revenue. This could include increasing tax rates on income above a certain threshold. 3. Enhancing Tax Compliance: Strengthening tax administration and enforcement mechanisms will improve compliance. This can involve investing in technology to streamline tax collection processes, conducting regular audits, and providing taxpayer education to ensure understanding of tax obligations. 4. Reducing Tax Exemptions and Incentives: Reviewin...

  I have done 12 blogs on the economy. Budget deficit, remittances, loans by IMF, Chinese Debt, other debt , taxation and corruption.   It seems from my analysis that  a) tax reforms are needed so that the budget deficit could be eliminated Tax reforms are essential for stabilising Madagascar's economy and addressing the budget deficit. By broadening the tax base and enhancing compliance, the government can generate more revenue without overburdening citizens. Implementing progressive taxation would ensure that wealthier individuals and corporations contribute their fair share, allowing for increased public investment in critical sectors like education and healthcare. Additionally, simplifying the tax code can reduce administrative burdens and encourage business growth, further boosting revenue. b)  Need to reduce debt exposure and reliance on debt Reducing Madagascar's exposure to debt and reliance on external financing is crucial for fostering long-term economic st...

As of the latest available data, Madagascar's estimated external debt relative to GDP is approximately 50% to 60%. This figure indicates that the country's total external debt is about half to more than half of its annual economic output (GDP). Key Points 1. Debt Composition: The external debt primarily consists of concessional loans from multilateral institutions (like the IMF and World Bank) and bilateral loans, including significant amounts from China. 2. Economic Growth: Madagascar's GDP growth has been influenced by various factors, including agricultural performance, infrastructure development, and external economic conditions. Economic growth rates have fluctuated, affecting the debt-to-GDP ratio. 3. Debt Sustainability: A debt-to-GDP ratio in the range of 50% to 60% is generally considered manageable for developing countries, especially when the debt is primarily concessional. However, ongoing economic challenges and reliance on external financing can pose risks to ...