Tax competition is generally presented as a race to the bottom. States reduce certain taxes, increase exemptions, or offer preferential regimes to attract investors. In West Africa, however, the reality sometimes takes a different form. The problem is not always a tax that is too low to attract capital, but rather a tax base so narrow that governments end up taxing the same actors more heavily.

In several countries in the region, the tax base remains limited. A large part of the economy operates in the informal sector, partially escaping formal declarations or remaining difficult for the administration to monitor. According to the World Bank and the African Development Bank, the informal economy often represents between 40% and 60% of GDP depending on the country, and more than 80% of employment in several West African economies.

Faced with this reality, public revenue relies heavily on a small number of visible taxpayers. Large companies, formal sector employees, telecom operators, banks, importers, and a few industrial groups bear a significant share of the tax burden. Structured SMEs often find themselves in the same situation, precisely because they are identifiable.

In Senegal, the tax burden has increased in recent years, moving closer to the WAEMU community target of 20% of GDP. According to official data, it stands at around 19% to 20%. This increase reflects efforts to mobilize revenue, but it still relies heavily on indirect taxation, particularly VAT, customs duties, and levies on those already operating in the formal economy.

The paradox is this: the more formalized a business becomes, the more visible, and therefore taxable, it becomes. Conversely, an informal activity can continue to operate with a much lower tax contribution. This situation can discourage some entrepreneurs from growing, fully declaring their business, or investing in upgrading their production processes.

Tax authorities then find themselves in a circular dynamic. Unable to sufficiently broaden their tax base, they seek greater revenue from taxpayers already registered. This can take the form of more frequent audits, increased pressure on certain sectors, or excessive reliance on large corporations and customs revenue.

This configuration differs from traditional tax competition. It's not simply about attracting investors with low rates, but about managing a system where the narrow tax base sometimes leads to higher taxes on those who remain within the tax base's reach. Some economists informally refer to this as a form of reverse tax competition.

The risk is both economic and budgetary. Overly concentrated taxation can slow productive investment, weaken the most structured businesses, and maintain a persistent divide between the formal economy and subsistence activities. The challenge, therefore, is not simply to increase revenue, but to better distribute the tax burden. Without a genuine broadening of the tax base, the pressure often continues to shift to those who already pay, instead of gradually integrating those who remain outside the system.