Local taxation: The big clean-up to come

The Government is about to embark on a structural reform of local taxation. Spearheaded by the Ministry of the Interior, the project aims to overhaul territorial taxes, in an effort to simplify them and make them more coherent and efficient. Gone are the days of stacked taxes, replaced by an architecture built around two main pillars: economic activity and property.

At present, no fewer than 17 taxes apply, often redundantly or unfairly. The reform aims to change all that. A single tax on economic activity would replace, among others, the current professional tax, regularly criticized for its negative impact on investment, as it is based on companies’ fixed assets. At the same time, a property tax incorporating several existing levies, including the tax on municipal services, would clean up the system and make it easier to understand.

The backbone of this reform is not new: it follows on from the Tax Conference (“Assises de la Fiscalité”) held in 2019 and the guidelines set out in Framework Law 69.19.  This law recommends, among other things, a review of tax assessment and collection rules, and the reinforcement of local authorities’ financial autonomy.

More efficient collection

Interior Minister Abdelouafi Laftit confirmed to the House of Representatives that a local tax code, modelled on the General Tax Code, would be drawn up. The future text aims to bring together, in a single document, all the rules governing taxes, fees and duties due to local authorities. The aim is to clarify a landscape that over time has become illegible, if not inefficient.

It should be mentioned that beyond the legal framework, the ambition is also practical. The aim is to tailor taxation more closely to local conditions, lighten the burden on taxpayers, and give local authorities the means to carry out their missions. Certain tax bases, such as business tax and property tax, will have to be revised. The idea is to replace current rental values with fairer bases that reflect local realities, without putting additional pressure on taxpayers. Another essential aspect is governance. The reform provides for the establishment of a regional tax administration, capable of ensuring more efficient tax collection and strengthening local capacities. This is a major challenge in a Morocco engaged in a process of advanced regionalization, where local authorities are called upon to play a growing role in economic, social, and territorial development.

Publication of the bill is expected in the coming months. In the meantime, consultations are continuing to refine the contours of this overhaul. If it lives up to its promises, the reform could mark a decisive turning point: that of a rethought, fairer, more legible local tax system capable of supporting the ambitions of the regions and municipalities.

Khadija MASMOUDI