Hugues Rajaonson: 'Excessive Tax Pressure Encourages Fraud'

Malagasy businesses continue to complain about the heavy fiscal pressure they face. For economist Hugues Rajaonson, the State is right to seek increased tax revenues through various means. However, he believes this objective is better achieved through broadening the tax base rather than increasing tax rates.

According to Rajaonson, excessive pressure risks encouraging fraud, discouraging formalization, and deterring business investment, particularly among SMEs. "If we want to increase tax revenues in Madagascar, let's broaden the tax base, not increase pressure on those already paying," says Professor Hugues Rajaonson.

This approach suggests the answer lies not in tightening the screws on already-registered companies, but in expanding the number of taxpayers. "Excessive pressure produces the opposite effect of what is sought because it fuels fraud, discourages investment, and pushes entrepreneurs toward the informal sector."

For the economist, this direction represents a major challenge for sustainably increasing public resources without further weakening the productive fabric.

Increased tax pressure does not automatically translate into proportional revenue increases. "Beyond a certain level, the burden on businesses and taxpayers can become an incentive for fraud or tax evasion." Moreover, an excessively heavy tax system can create favorable conditions for corruption practices.

"The objective of increasing public revenues can thus paradoxically lead to reducing the taxable base if economic actors seek to escape fiscal pressure."

From this perspective, the economist advocates for a strategy focused on progressive formalization of the economy. An overly heavy tax burden can discourage entrepreneurs from entering the formal sector. The challenge would be to gradually expand the number of taxpayers rather than continually demanding more from companies already in the system.

"This requires creating a more favorable environment for investment and growth of micro-enterprises, SMEs, and medium-sized enterprises," Hugues Rajaonson argues.