Abdelmejid Faiz, Tax Partner, EY Maroc: Viewpoint

Viewpoint: Abdelmejid Faiz

The year 2019 was marked by the organisation of the country’s third national tax conference. The objective of this forum was to launch a genuine reform of the Moroccan tax system, the implementation of which could be spread over a maximum period of five to 10 years. It should be recalled that the last major tax reform in Morocco dates back to the mid-1980s and early-1990s, and led to the establishment of the country’s first modern, globally coherent tax system based on corporate income tax, value-added tax (VAT) and individual income tax. This ambition to reform the tax system stems from several realities and observations. These include the high concentration of the sources of public tax revenue in a small number of enterprises which drive the creation of national wealth; persistent inequality; and public services not meeting the legitimate needs and expectations of citizens.

Furthermore, there is the perceived instability of the tax system as a result of multiple provisions introduced by successive finance bills, making the system lose its readability and coherence. This has been accentuated by the introduction of some provisions resulting from pressure to defend sectoral interests, along with widespread behaviour marked by non-compliance and the non-acceptance of tax. In fact, while the system is essentially one based on self assessment, a significant number of taxpayers continue to evade their obligations of declaring and paying taxes. Despite significant efforts to improve the dematerialisation process, the relationship between tax administration and taxpayers is still often conflictual. There is also the issue of the complexity of the tax system and the low efficiency of some taxes and levies. Furthermore, the national tax system is juxtaposed with a local tax regime that presents even more problems due to its complexity, lack of coherence and inefficient administration.

Thus, the aims of the announced reforms more or less revolve around four themes that were aligned with the framework of the third national tax conference, namely: tax governance; equity and fairness; tax competitiveness; and legal certainty. The first area of reform aims to strengthen taxpayer confidence in public institutions and improve tax governance. The second aims to introduce a tax system adapted to socioeconomic reality by abolishing derogations that have not achieved their expected objectives. The third component addresses the fight against fraud and the informal sector to ensure fair and healthy competition between economic operators. The last reform aims to improve administration and litigation procedures, as well as services for users. In accordance with the recommendations made at the forum, the reform should be initiated by drafting a framework law that establishes the bases, principles and objectives of the tax reform.

Following the latest official announcements by the minister of finance, this project is being finalised and the necessary procedures for its approval and adoption should begin in early 2020. Nevertheless, there is currently no certainty regarding the adoption of such a law. It should be highlighted, however, that the legislators behind the 2020 Finance Bill have shown a willingness to implement the guidelines set out by the tax forum. Some of the measures included in the bill are the gradual reduction of the minimum tax contribution rate and the reduction of the marginal corporate tax rate to 28% for industrial firms, with a stated objective of eventually reducing it to 20%. In addition, the bill includes the abolition of the five-year corporate tax exemption for exporters, while reserving it for certain sectors identified as primary sectors or job-creating sources. It also includes the abandonment of the reduced rate of 8.75% previously applicable to former export processing zones – and now to industrial acceleration zones – and companies with Casablanca Finance City status; abolition of VAT exemptions for some agricultural equipment; and the modification of the taxable thresholds applied to very small businesses, particularly those subject to the flat-rate scheme.