Exports and Imports
Cape Verde's economy is heavily dependent on imports due to limited natural resources and agricultural production. Key imports include foodstuffs, industrial products, transportation equipment, and fuels. The main exports are fish and shellfish, clothing, footwear, and beverages. Cape Verde also exports services, particularly tourism, which is a significant contributor to the economy.
Infrastructure
Cape Verde has made substantial investments in infrastructure to support its economic development. Key developments include:
Roads: The archipelago has 3,050 kilometers (1,830 miles) of roads, with 1,010 kilometers (606 miles) paved. These roads connect major towns and cities across the islands.
Bridges: Various bridges facilitate transport between the islands' more remote and rural areas.
Ports: The major ports are Mindelo (Porto Grande) and Praia, which have recently been renovated. Smaller port facilities exist on other islands, with plans for future expansion.
Airports: Cape Verde has international airports on Sal and Santiago (Praia International Airport). Other inhabited islands also have airports, except for Brava, where an airport was built but later shut down due to safety concerns.
Balance of Trade
Cape Verde runs a trade deficit, meaning it imports more than it exports. This deficit is somewhat balanced by remittances from Cape Verdean emigrants and income from tourism. The country aims to diversify its exports to reduce this trade imbalance
Fiscal Policy
Cape Verde's fiscal policy focuses on maintaining economic stability and promoting growth. The government prioritizes spending on infrastructure, education, and health to support long-term development. Taxation is structured to support these expenditures while maintaining fiscal discipline. Efforts are made to keep public debt at sustainable levels, although external assistance is often required.
Monetary Policy
The central bank of Cape Verde, Banco de Cabo Verde, manages the country's monetary policy. The Cape Verdean escudo is pegged to the euro, which helps stabilize the economy and control inflation. The central bank's actions focus on maintaining this peg, managing foreign reserves, and ensuring financial system stability.
Trade Agreements
Cape Verde is not a member of major trade blocs like NAFTA but engages in various trade agreements to promote economic ties. The country benefits from preferential trade agreements with the European Union and is a member of the Economic Community of West African States (ECOWAS), which facilitates regional trade and economic cooperation.
Environmental Regulations
Cape Verde has implemented several environmental regulations to protect its fragile ecosystems. Policies focus on sustainable development, conservation of marine and terrestrial biodiversity, and management of natural resources. The government promotes renewable energy projects and aims to increase the share of renewable energy in the national energy mix, reducing dependence on imported fuels and lowering carbon emissions.
Tax System in Cape Verde
Capital gains tax: Capital gains derived from the sale of investments, such as real estate or securities, are taxed at a flat rate of 10%. This includes both domestic and foreign investors. There are specific rules and exemptions for different types of assets and holding periods, designed to encourage long-term investments and economic stability.
Corporate Tax Rate
Corporate tax rate: The standard corporate tax rate is 25%. However, Cape Verde offers various incentives to attract foreign investment and support local businesses. For example:
Special economic zones: Businesses operating in designated economic zones may benefit from reduced tax rates and other incentives.
Sector-specific incentives: Lower rates or tax holidays may apply to key sectors such as tourism, renewable energy, technology, and export-oriented industries.
Investment incentives: Companies investing significant capital in development projects may receive tax reductions or exemptions for several years.
Sales Tax
Sales tax (VAT): The Value Added Tax (VAT) in Cape Verde is set at a standard rate of 15%. Reduced rates of 6% or 10% may apply to essential goods and services, such as basic food items, medical supplies, and educational materials. VAT is collected at various stages of production and distribution but is ultimately borne by the end consumer. This system aims to increase government revenue while minimizing economic distortion.
Property Tax
Property tax: Property tax rates in Cape Verde range from 0.1% to 1% based on the property’s value and location. Urban properties typically incur higher rates than rural properties. This tax is assessed annually and is a significant source of revenue for local municipalities. The government has also introduced measures to ensure proper valuation and collection, improving compliance and efficiency.
Payroll Tax
Payroll tax: Contributions to social security are a key component of the payroll tax system. Employees contribute 8% of their gross salary, while employers contribute 15%, making a total contribution of 23%. These funds support various social security benefits, including pensions, disability, maternity leave, and unemployment benefits. The system is designed to provide a social safety net for workers while ensuring that employers contribute to their employees' well-being.
Tax Deductions and Credits
Tax deductions and credits: Cape Verde’s tax system includes several provisions to reduce tax liability and encourage investment. These include:
Investment deductions: Businesses can deduct certain capital expenditures, particularly those related to infrastructure development and technological improvements.
Research and development (R&D) credits: Companies investing in R&D may receive tax credits to offset a portion of their expenses.
Environmental incentives: Investments in renewable energy and environmentally friendly projects can qualify for tax reductions or exemptions.
Tax Compliance
Tax compliance: Cape Verde has made significant strides in improving tax compliance through modernization efforts. The introduction of electronic filing systems, digital tax payment platforms, and streamlined procedures has made it easier for taxpayers to comply with tax laws. Enhanced training for tax officials and stricter enforcement measures have also contributed to increased compliance rates. The government regularly reviews and updates tax policies to close loopholes and ensure a fair and efficient tax system.
Tax Burden
Tax burden: The overall tax burden in Cape Verde, which represents the total amount of taxes paid by individuals and businesses as a percentage of GDP, is moderate compared to other countries. The government strives to balance the need for revenue with the importance of maintaining a competitive tax environment. Efforts are ongoing to reduce the informal economy and broaden the tax base, ensuring that tax policies support sustainable economic growth and development.
04 Jul 2024
24 Jul 2024
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