European Commission ‘Greatly Appreciates’ Morocco's Tax Reform Efforts

Rabat – The European Commission (EC), the executive branch of the EU, expressed its appreciation for Morocco’s efforts to reform its tax system on Tuesday, February 18.

“The EC greatly appreciates the efforts undertaken by Morocco to eliminate any contradiction between international standards and the Moroccan tax system,” said EU Commissioner for the Economy Paolo Gentiloni.

Morocco’s cooperation with the EU “remains very close,” Gentolini added.

“We welcome the reforms introduced by Morocco in the 2020 appropriation bill, which amend three preferential tax regimes that had been considered harmful by the European Union,” he continued.

“Morocco has not yet left the ‘gray list’ and the reason is simply that the EC is awaiting the finalization of the Organisation for Economic Co-operation and Development (OECD) assessment of the Casablanca Finance City tax system,” the Italian official explained.

The gray list refers to countries that have committed to compliance with the EC’s criteria for transparency, fair tax competition, and base erosion and profit shifting (BEPS) implementation.

In 2018, the EU added Morocco to its tax haven gray list of countries given time to reform their fiscal policies. In March 2019, the union did not move Morocco to its “blacklist” of tax havens, but gave it until the end of 2019 to enact reforms, citing the progress Morocco achieved in 2018.

In March 2019, Morocco’s Minister of Economy and Finance Mohamed Benchaaboun discussed Morocco’s efforts to promote good tax governance with the previous EU Commissioner for the Economy, Pierre Moscovici.

Benchaaboun remarked after the meeting in Brussels, Belgium that the EU Council had taken note of “a positive evolution in Morocco’s commitment to respect the rules of good governance as they are generally practiced for all developed countries.”

Although Morocco still remains on the gray list in 2020, “this is not indicative of a lack of commitment or ambition in this direction,” the current commissioner said yesterday.

“When the EU and the OECD assess the same measures in parallel, the EC always waits for the conclusion of the OECD procedure before formalizing its decision,” Gentiloni continued in his remarks on Morocco’s gray list status.

“If the OECD concludes its procedure as planned, it is very likely that the EU will permanently remove Morocco from the gray list in its next update in October,” the commissioner affirmed.

Morocco is much more than a neighboring country to the EU, he added: “It is a friendly country and a key partner in many areas.”

Gentiloni expressed his optimism that the EC will soon be able to close Morocco’s gray list chapter for good so the EU can focus on strengthening its partnership with the North African country.

He stressed that “the idea is to work for a gradual economic integration between Morocco and the EU, as well as for inclusive, equitable and sustainable development.”

Morocco’s 2020 Finance Bill

In November 2019, the Finance and Economic Development Committee in Morocco’s House of Representatives passed a first draft of the 2020 Finance Bill.

Legislators want the bill to prioritize education reforms and socio-economic projects to curb social disparities while boosting the country’s economy.

The bill allocates MAD 91 billion ($9.4 billion) to the health and education sectors. The figure amounts to around MAD 2,500 per person in Morocco for the year.

Lawmakers have also budgeted MAD 14.6 billion for the subsidy fund. The fund subsidizes flour, sugar, and butane gas, according to media outlet Le 360. A further MAD 26 billion would go to support the purchasing power of Moroccans.

At the same time, legislators are keen to encourage investment in Morocco. The 2020 Finance Bill proposes a decrease in the corporate tax rate from 31% to 28%.

In a presentation to the Finance and Economic Development Committee on Thursday, November 7, Benchaaboun said the new bill will continue to reform the subsidy fund and implement decentralization.