VAT hike: Lekjaâ downplays impact
The Minister for the Budget addressed again an issue that dominated discussions in the Finance Committee of the House of Representatives. The issue was the impact of VAT reform on families’ purchasing power and monthly bills. From the outset, Fouzi Lekjaâ made it clear that he didn’t want anything to do with citizens’ pur chasing power. But in saying that, he dealt with content in detail. Such is the case of the VAT hike on electricity and rental of meter, of 2% and 4% per annum over the next three years. This measure will only increase the weighted average monthly bill by 2 Dirhams in 2024, 4 Dirhams in 2025; and 6 Dirhams in 2026 compared to 2023. But all this needs to be nuanced. The first social bracket, which represents 66% of total consumer bills, will see only small increases, varying between 1 Dirham and 3 Dirhams (USD 0.1 to USD 0.3) between 2024 and 2026.
The second social bracket accounts for 17% of bills. Families in this category will pay 2.3 Dirhams more on their bill over the year. Thus, the 83% increase in bills due to the VAT rate will not exceed 3 Dirhams per month over the 2024-2026 period. As for the selective billing category, it concerns those who consume more than 500 kw/h per month, which exceeds the electrical energy consumption of 5 families in the first social bracket. Families in this category will see their monthly bill increase by 20 Dirhams per year; that is to say 20 Dirhams in 2024, 40 Dirhams in 2025; and 60 Dirhams in 2026.
As far as VAT on water via the public distribution grid is concerned, the minister spoke of the gradual increase in average VAT of 1% per year over the next three years. The impact on the bill and on Moroccan families will be very slight. It will increase by 50 centimes in 2024, 1.1 Dirhams in 2025; and 1.6 Dirhams in 2026 compared to 2023. For the first social bracket, which represents 59% of bills, the increase will be 16 cents. For the second social bracket, which represents 28%, the increase will be 60 cents. As a result, the social brackets will be largely unaffected by the VAT revision, since the increase will vary between 16 and 60 cents in the monthly bill. For the last two brackets, which consume between 20 and 35 cubic meters and more of water, the monthly bills will see annual increases of 4 and 10 Dirhams per annum.
Limited impact of the increase
Generally speaking, the impact of the increase in VAT on electricity, water, transport and sugar will be limited on the various social strata, since it will not exceed, on average, 13 MAD in 2024, 26 MAD in 2025 and 39 MAD in 2026. If we take into account the effect of the reduction in this tax on medicines, school supplies and butter derived from milk, which amounts to an average of 11 MAD per month, the impact on all families will not exceed an average of 2 MAD per month in 2024, 15 MAD in 2025 and 28 MAD in 2026. Taking into account the reduction in subsidies on basic products, the overall monthly impact will not exceed 44 MAD in 2024, 100 MAD in 2025 and 160 MAD in 2026. This is less than what employees have gained from the income tax reform, which varies between 50 and 180 MAD per month for more than 80% of employees, with a financial cost of around 2.4 billion MAD.
M.C.
