Gambiaj.com – (Banjul, The Gambia) – The Tax Justice Network 2024 Corporate Tax Haven Index (CTHI) has placed The Gambia 70th of 70 countries globally, spotlighting the country’s unsettling tax policies. The Gambia’s jurisdiction’s laws and regulations are evaluated against more than 70 questions to arrive at a Haven Score.

These questions are organized into 18 indicators, which are grouped into five groups. While these policies benefit multinational corporations seeking lower tax burdens, they perpetuate economic disparities and leave ordinary Gambians grappling with inadequate public services and infrastructure.

With a Haven Score of 45 and a Global Scale Weight of 0.1%, The Gambia attracts foreign investors by offering extensive tax incentives, including exemptions and holidays. However, critics argue that this comes at a significant cost to the domestic economy, fostering inequality and limiting the country’s developmental potential.

How Tax Haven Structures Favor Foreign Investors

When a country makes special tax arrangements for multinational corporations, they pay far less than the statutory corporate income tax rate on profits. Effective January 2018, the Gambia’s standard CIT rate is 27% (IBFD GM 2023d). The 2024 CTHI report reveals that The Gambia’s tax framework is tailored to attract foreign direct investment at the expense of creating an equitable economic landscape.

For example, The Gambia allows loss carry forward with a time limit of more than 5 years, but there is no annual ceiling. Losses may be carried forward for 6 consecutive fiscal years and set off against the same source income.

The Gambia applies the lowest available capital gains tax rate arising from the disposal of domestic securities applicable for large “for profit” companies that are tax residents in the country.

The government’s tax policy of giving corporate income tax breaks to multinational corporations operating in specific economic sectors is a special treatment that can be abused to shift profit and underpay tax.

Although these measures are intended to encourage investment and job creation, they deprive the government of vital revenue that could be used to fund public services and infrastructure development.

Multinational companies can shift their profits to The Gambia to avoid higher tax obligations in other jurisdictions, thanks to loopholes in the regulatory framework.

Meanwhile, large corporations reap the rewards; local businesses struggle to compete under a system that disproportionately favors external investors.

These policies create a dual economy, where foreign corporations thrive while local enterprises lack the resources and support to grow.

Implications for Everyday Gambians

The economic disparity resulting from such policies has profound effects on the daily lives of Gambians:

By prioritizing foreign investors, The Gambia forfeits significant potential revenue. This loss directly impacts the funding available for essential public services such as education, healthcare, and infrastructure development.

While foreign corporations benefit from tax breaks, their investments often focus on profit extraction rather than generating substantial employment opportunities for locals.

With limited tax revenue, the government relies heavily on indirect taxes and fees, increasing the financial burden on ordinary Gambians.

One Banjul-born businessman lamented, “We see big companies operating here, but what do we gain? Our electricity and water supply remain poor, and access to basic services is still a challenge.”

Broader Developmental Concerns

The Gambia’s reliance on such tax policies also undermines its long-term economic sustainability. Despite offering attractive tax incentives such as holidays and exemptions, The Gambia’s share of multinational corporate activity remains negligible.

In 2024, The Gambia accounted for less than 0.1% of the global financial activity conducted by multinational corporations, according to the 2024 Corporate Tax Haven Index, underscoring its limited role in the international economic landscape.

This raises questions about the effectiveness of the government’s tax policies in achieving significant foreign direct investment (FDI) inflows and stimulating broader economic development.

The Gambia’s CTHI Share highlights the scale of corporate tax base erosion, reflecting a broader issue where the country sacrifices fiscal sovereignty for short-term gains.

This model has drawn criticism from civil society and international organizations, with calls for reforms that prioritize inclusive development. “Foreign investment is important, but not at the expense of the people,” said a representative from the Gambia Tax Justice Forum.

To address the disparity, experts advocate for comprehensive tax reforms to balance foreign investor needs with domestic economic priorities, transparent regulation to close profit-shifting loopholes, and investing in local enterprises to support competitiveness and growth in Gambian businesses.

As The Gambia navigates the challenges of its tax haven status, its policymakers must consider the broader implications of such policies on the nation’s development and its citizens’ well-being. The CTHI ranking is not just a reflection of global corporate practices but a call to action for a more inclusive and equitable economic future.

For many Gambians, the question remains: will the government prioritize the needs of its people over the allure of foreign investments?