Bringing Formal Business Laws to Cameroon’s Informal Sector: Lessons and Cautions from the Tax Law Example

A substantial majority of non-agricultural workers in a developing country such as Cameroon engage in legal businesses below the governmental radar, that is, in the informal sector. Because that segment of the Sub-Saharan economy is critical to subsistence within the region, and because the financial crisis has expanded the informal sector in the Global North, developing economies’ experience with the informal sector is of world-wide relevance. Formal business laws do exist in the formal sector; however, trying to move informal-sector workers to the formal sector where these laws already offer some protection can disrupt the entrepreneurs’ ability to sustain themselves, and to contribute to the national economy. A pilot study in five Cameroonian markets is thus of general interest when it reveals that entrepreneurs there do not benefit from formal business laws, which in turn limits their ability to borrow and their willingness to lend. The same study also suggests that tax literature has interesting, noncoercive strategies to improve tax compliance in ways that may be applicable to facilitating the introduction of formal business laws to the informal sector, instead of forcing informal-sector workers into the formal sector. The tax-morale literature recommends deploying strategies of reciprocity, in addition to providing public goods and services—strategies that encourage compliance—instead of using governmental power to extract tax payments. Similarly, tax-based strategies can apply to business  LL.M. in Taxation, New York University School of Law; J.D., Columbia University School of Law; A.B., Wellesley College. My thanks to the Tulane Law School workshop, and especially to my colleagues Professors Adam Feibelman, Marjorie Kornhauser, Shuyi Oei, and Amy Stein for their thoughtful and detailed suggestions. Further I need to thank very particularly Professor Emmanuel Yenshu Vubo, sociologist and Associate Dean at the University of Buea’s School of Social and Management Sciences for his advice and support, and to extend my thanks also to the following, without whose help the interviews would not have been possible: Prof. Martha Simo Tumnde, Ph.D., Dean and Professor, Faculty of Social and Management Sciences, University of Buea; Sone Patience, Ph.D., Lecturer, Department of Law, University of Buea; Roland Djieufack, DEA, Assistant Lecturer, Department of Law, University of Buea; and Ms. Juliet Yongbang. Washington University Open Scholarship 266 WASHINGTON UNIVERSITY GLOBAL STUDIES LAW REVIEW [VOL. 13:265 laws while informal-sector workers remain in the informal sector, even though the government’s posture vis-a-vis commercial actors is less direct than vis-a-vis taxpayers. The experience of Cameroon’s informal sector with formal tax law thus provides important insights on steps within the government’s control that would not only improve tax compliance, but would also bring formal business laws and their transaction-cost-reducing potential to the informal sector. The pro-business strategy is to apply tax-morale learning, which calls for government authorities to enter into a reciprocal relationship— respectful and communicative—with private parties and to focus on investing in basic infrastructure.