The NGO says Morocco’s economic recovery during the COVID-19 crisis relies on a tax system that reduces inequalities and makes it possible to finance public sectors.
Rabat – A new report by Oxfam has established that Morocco needs a “progressive” and more inclusive tax system to tackle deepening social inequalities and accelerate the country’s post-COVID-19 recovery.
The report, titled“Fair Tax Monitor: Analysis of the Moroccan tax system,” advocates for a fair tax system in Morocco to help reduce inequalities and to further develop the country’s economy. It deals with the role of taxation in reducing social, economic, and gender inequalities particularly in the context of the COVID-19 crisis.
“The Moroccan economy has never created as much wealth as in the last twenty years,” said the report. At the same time, poverty continues to weigh heavily in official statistics. According to the report, the tax system is struggling to keep pace with the evolution of wealth creation.
It reveals that tax revenue accounted for nearly 85% of state budget revenues between 2000 and 2018. However, these taxes weigh “heavily and unfairly on a tiny category of society,” adds the report. This is also the case with an income tax which places a greater tax burden on employees.
Official statistics show that about 75 percent of employees contribute to the total income tax in Morocco, with only 25% coming from professional, land, agricultural, and capital income. When it comes to Moroccan companies, 82% of corporate tax revenues come from only 2% of companies.
The result is that Morocco’s economic recovery especially during the current health crisis “will not be possible without a tax system that reduces inequalities and makes it possible to finance fair public policies,” according to the report.
Oxfam recommends a series of reforms to the tax system in order to accelerate Morocco’s economic recovery. The recommendations include the introduction of new tax brackets for income tax, as well as the raising of the minimum tax threshold.
As part of the reforms, people with lower income would pay a lower percentage of income tax than those with higher income. The introduction of a progressive tax will alleviate the tax burden on the lower and middle-income classes.
The report also recommends urgently establishing a wealth tax, meaning a tax on owned assets, and an environmental tax to reduce excessive CO2-emissions.
Oxfam designates the tax system as a lever for efficient and socially-oriented public spending. Meanwhile, the report’s main conclusion is that the COVID-19 crisis has highlighted the need to improve investments in the social sectors, particularly in health and education or social security.