Rabat – Morocco’s government recently announced that it is heading towards increasing corporate tax on banks and insurance companies starting 2023.
In a move likely related to Morocco’s soaring deficit, the government announced that as part of the 2023 state budget, the country would collect a 40% tax on corporate profits exceeding MAD 100 million ($9 million) for banks and insurance companies until 2026.
Morocco’s Economy and Finance Minister, Nadia Fettah Alaoui, announced the measure while presenting the highlights of Morocco’s 2023 state budget.
The news comes on the backdrop of the surging budget deficit. After showing timid signs of recovery in 2021, Morocco’s external deficit is reaching its highest level in more than five years.
At the end of July 2022, the country’s trade deficit climbed to a staggering MAD 63.9 billion ($6 billion), according to data from Morocco’s Exchange Office, the country’s foreign trade watchdog.
Rising energy prices have especially worsened the trend as Morocco imports close to 90% of its energy needs.
Last year’s severe drought also put significant pressure on the country’s foreign trade balance as the government had to step in to increase wheat subsidies as prices reached record-high levels, amid the worst supply crisis the world has seen since World War II.
In a recent publication, the World Bank warned that Morocco’s increased subsidiaries coinciding with rising commodity prices are negatively affecting the country’s external and foreign exchange balances.
The country’s numerous attempts at mitigating the effects of rising energy prices are weighing down on its foreign exchange reserves and pushing up its budget deficit, the World Bank notes.
In the wake of the COVID-19 crisis and the subsequent Ukraine war, Morocco implemented a number of policies to cushion the ongoing increase in food and energy prices on the national purchasing power. The policies include scrapping taxes on imported wheat, as well as providing direct financial aid to transportation workers among others.
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