INTERVIEW-IMF urges tax plans for EU deals with poor states
02 Nov 2007 18:10:06 GMT Source: Reuters
By Alistair Thomson DAKAR, Nov 2 (Reuters) - New trade deals being negotiated between EU countries and former colonies must be accompanied by detailed plans to replace lost revenues when poor countries cut tariffs on imports from Europe, an IMF official said on Friday. The European Union hopes to sign economic partnership agreements (EPAs) with nearly 80 ex-colonies before a World Trade Organisation (WTO) waiver on its preferential trade terms expires on Dec. 31. The deals will incorporate regional trade agreements, which under WTO rules must lead to the elimination of tariffs on at least 80 percent of imports from Europe -- a crucial source of income for many African, Caribbean and Pacific (ACP) countries. "What is important, whatever is agreed, is that it is accompanied by a well detailed plan for how to make up for revenue losses," Benedicte Vibe Christensen, deputy director of the International Monetary Fund's Africa Department, told Reuters in an interview in Senegal. "Traditionally African countries have relied on trade taxes because they are the easiest to collect, and therefore it requires long advanced planning to ensure that revenues are in place to make up for any potential reduced revenue," she said. Research carried out for the IMF's sister institution, the World Bank, has estimated Senegal could lose more than 10 percent of government revenues under the deal. Although none of the six regional groupings negotiating separate EPAs with Europe has settled on a final text, experts expect tariffs will be phased out over a period of 10-12 years, allowing the ACP countries to increase other tax revenues to compensate for the lost tariff income. "We have offered to give countries technical assistance should they suffer revenue losses ... We have not seen what is the final impact on the balance of payments or the fiscal picture, so it is too early to talk of financial assistance," Christensen said. The European Union has promised to help countries adjust to the new deals, which one study has estimated could cost more than 9 billion euros ($13 billion) given the need to overhaul tax collection, revamp trade and industries and retrain workers in sectors hit by new competition. But the EPA negotiations have dragged on longer than planned, and the EU's executive European Commission said last week it accepted that some of the six ACP regions negotiating the deals would miss the Dec. 31 deadline. The Commission urged countries to consider signing interim deals while full EPA deals are negotiated. Interim deals would avoid disruption to the countries' exports to Europe in the new year, when the expiry of the WTO waiver will mean Europe will no longer be allowed to grant tariff-free access to some products. But some experts have suggested piecemeal deals could undermine efforts towards regional economic integration. A senior adviser to the Economic Community of West African States (ECOWAS) said this week the region was pushing for a further WTO waiver to buy more time for negotiations.
