Finance Bill 2024: Surprises relating to VAT!
Exemption of basic products, broadening of the scope of VAT, reduction in the number of rates and generalization of the right to refund: these are the main principles on which the gradual reform of VAT should be based, starting next year and ending in 2026. The 2024 Finance Bill proposes three rates: 0%, 10% and 20%.
This great reform should open with the exemption of consumer goods. This is the case for all pharmaceutical products, raw materials and products used in their composition, as well as the non-returnable packaging of these products and the materials used in their manufacture. The same holds true for school supplies and the products and materials used in their manufacture, currently subject to a 7% rate, which should in principle result in lower prices. In the case of medicines, the exemption is already applied for products related to chronic diseases such as cancer. If the measure proposed by the Government is approved by Parliament, it will save Moroccans more than 1 billion dirhams (USD 100 million). The loss of revenue will also be offset by increases planned for other products. The exemption will also apply to butter made from animal milk, currently subject to a 14% VAT, canned sardines, milk powder and household soap, which are currently subject to a 7% tax. So much for the good news on VAT, because if the Government’s proposals are approved, certain products such as refined sugar, electricity, water, and sanitation will see their tariffs increase over the next three years. The tax on sugar would rise from 7% to 8% from January 01, 2024, 9% in 2025 and 10% in 2026.
In any case, the Government speaks of «a gradual adjustment of tax rates to cushion shocks while ensuring the neutrality of this tax for businesses». Currently set at 7% on water and sanitation services, VAT will rise to 8% from January 01, 2024, 9% in January 2025 and 10% on January 1st, 2026. A VAT rate of 7% is applied to the rental of electricity meters. This rate is set to rise to 11% from January 1st, 2024, 15% in 2025 and 20% from January 01, 2026. For electricity, the tax will be 16% from next year, compared with 14% at present. The Government is proposing a rate of 18% in 2025, rising to 20% in 2026.
To cushion the impact of these increases on low-income individuals, the social brackets are to be reorganized. The VAT adjustment will also affect electricity from renewable sources. This would become less expensive: a VAT of 12% would be applied from January 2024, compared with the current 14%. The VAT rate should increase to 12% from January 1st, 2024 and 10% from 2025.
Khadija MASMOUDI
