Introduction

Women entrepreneurs contribute significantly to Cameroon, despite facing persistent challenges in accessing finance due to cultural barriers and stereotypes, and limited property rights in rural areas. In 2022, about 350,000 small and medium-sized enterprises (SMEs) were created in Cameroon, with 37% led by women and 42% holding managerial positions, according to statistics from the Ministry of Small and Medium-sized Enterprises (SMEs), Social Economy, and Handicrafts (Minpmeesa). All SMEs – including women pay up to 33% corporations’ tax, and deductions are notoriously difficult. Even so, the government plans to introduce new taxes from 2025. The government is introducing local taxes that will hit women entrepreneurs, especially. The impact of taxation on female entrepreneurs in Cameroon is a critical issue that affects their ability to thrive in a challenging economic landscape.

Female-led businesses face unique obstacles, particularly concerning revenues, profitability, and survival rates (Efogo & Timba, 2015). Understanding these dynamics is essential for policymakers aiming to foster gender-inclusive economic growth. This policy brief provides an overview of the current taxes, followed by a brief explanation of the new taxes and how women-led SMEs will be impacted.

i. An Overview of Taxation in Cameroon

The taxation framework for small and medium-sized enterprises (SMEs) in Cameroon is characterized by various laws and regulations that impose different tax obligations depending on the size and nature of the business. Resident corporations are taxed on their worldwide income, while non-resident corporations are taxed only on income sourced from Cameroon. The corporate income tax (CIT) rate is set at 33% for companies with a turnover exceeding XAF 3 billion, while those with lower turnover may benefit from a reduced rate of 27.5%.

SMEs are categorized into different taxation systems based on their turnover: a flat rate for those earning below XAF 10 million, a simplified taxation system for turnovers between XAF 10 million and XAF 50 million, and an actual earnings taxation system for those above XAF 50 million. Additionally, a minimum tax of 2.2% or 5.5% applies based on turnover, which can be offset against Corporate Income Tax (CIT).

ii. What is the Proposed New Tax?

In 2025, Cameroon’s government is set to introduce a new local development tax designed to improve public services and infrastructure. The Bill No. 2064/PJL/AN will reform Cameroon’s local tax framework and return some autonomy to local governments when it comes to taxation.  It has two main aspects;

• Digital Tax Collection: introducing digital tools to streamline tax collection, reduce leakage, and improve accountability.
• Revenue Distribution: Ensures that a substantial portion of taxes is used to finance local development projects, fostering socio-economic growth at the grassroots level.

This will return some autonomy to local governments, but will impose additional compliance costs on SMEs, especially female-led entrepreneurs who are more productive than their male counterparts. Research from Meli & Meli (2021) finds that women-led firms perform better than companies led by men, by an average of 2.2% in terms of turnover growth, and an average of 0.8% in terms of growth in the number of employees, in favour of female-owned businesses. Additional taxes will eat into the revenues of women-led SMEs, slowing both investments and economic growth. The next section discusses the implications of the new taxes for women-led SMEs in Cameroon.

iii. Implications of New Taxes for Female-led SMEs

a). New Local Taxes May Discourage Business Registration

Many SMEs already face challenges in formalizing their operations due to bureaucratic hurdles and a lack of effective communication from tax authorities, even as 84% of SMEs have declared taxes since their inception. This is because the government has implemented support programs aimed at easing the tax burden on SMEs, but issues such as corruption and inefficient administrative processes continue to hinder business growth. These new taxes will, at best, slow the rate of formalization of female-led SMEs or discourage more women from making the transition away from the informal sector to the formal sector.

b). High Taxes Reduce Available Capital for Investment

Taxation significantly influences the revenue generation and investment capabilities of female entrepreneurs in Cameroon. A study by the Institute of National Statistics (INS) revealed that 34.2% of entrepreneurs identified taxation as a major barrier to starting and running their businesses. Furthermore, high corporate tax rates, which can reach up to 35%, disproportionately affect small and medium enterprises (SMEs), where many female entrepreneurs operate. This high tax burden limits available capital for reinvestment, thus stunting revenue growth. Furthermore, the International Labor Organization (ILO) noted that over 90% of the workforce in Cameroon operates in the informal sector, partly due to the oppressive tax environment, and women make up 50% of entrepreneurs in the informal sector in Cameroon. As such, the new taxes will force female entrepreneurs to remain informal, limiting their revenue potential and access to formal financial services.

A company’s profits are an important source of future investment, with policymakers encouraging reinvestments of up to 20% of profits for large companies in the FX regulation. The new tax will discourage entrepreneurship and the competitiveness of local businesses; high corporate taxes reduce future income flows that are supposed to contribute to the country’s economic development. This justifies the predominance of the informal sector.

c). High Taxes Can Increase the Number of Women in the Informal Sector

Profitability for female-led enterprises is closely tied to the tax framework in Cameroon. Research indicates that complex tax regulations and high compliance costs deter women from formalizing their businesses. For instance, while women constitute 51% of the population, they lead only 23% of manufacturing SMEs, reflecting significant barriers in accessing profitable business opportunities.

The lack of favorable tax regimes exacerbates these challenges; only 10% of companies bear the corporate income tax burden, which suggests that many female entrepreneurs either do not report profits or remain outside the formal economy altogether. Consequently, the profitability of female-led businesses remains low, limiting their capacity to grow and innovate.

d). High Taxes Rates Reduce Survival Rates of Women-Led Businesses

The survival rates of female-led businesses are critically impacted by taxation policies. A report from the Partnership for Economic Policy highlighted that easing financial constraints on female entrepreneurs could increase productivity by up to 40% and job creation by 50%. However, high taxation acts as a deterrent, leading to higher failure rates among these businesses. Furthermore, the World Bank’s Women, Business and the Law report noted that Cameroon scores only 60 out of 100 regarding women’s entrepreneurship laws, indicating significant gaps that hinder women’s business survival. The combination of high taxes and inadequate support mechanisms creates an environment where female entrepreneurs struggle to sustain their operations.

Recommendations for Policy Reform

To improve the situation for female entrepreneurs in Cameroon, policymakers must consider several reforms aimed at creating a more conducive business environment:

1. Tax Incentives: Implementing targeted tax incentives for female-led businesses could enhance their competitiveness. Reducing corporate income tax rates or providing exemptions for startups can encourage women to formalize their enterprises and invest in growth.
2. Simplifying Tax Compliance: Streamlining tax regulations would reduce the administrative burden on female entrepreneurs. Simplified filing processes and clearer guidelines can help women navigate the tax system more effectively.
3. Access to Financial Resources: Enhancing access to financial services is critical. With only 20.7% of adults having a formal bank account, improving financial literacy and access can empower women entrepreneurs to leverage available resources better.
4. Support Programs: Establishing government-backed programs specifically designed for women can help address barriers related to financing and market access. Initiatives like mentorship programs or networking opportunities can provide valuable support.

Conclusion

The taxation landscape in Cameroon poses significant challenges for female entrepreneurs regarding revenues, profitability, and survival rates. By addressing these issues through a stable SME tax rate of 25-30%, targeted reforms, and supportive policies, the government can enhance economic inclusion for women, ultimately contributing to broader economic growth in the country. Empowering female entrepreneurs not only benefits them but also strengthens the overall economy by fostering innovation and job creation. Ultimately, while factors such as taxation rates determine the outcomes for female entrepreneurs, investment in education and skills will support female-led businesses over the long run.