VAT reform: Employers cling to tax neutrality

“Moroccan businesses are currently experiencing many difficulties, including great pressure on their cash flow, but they are not giving up. We need to give them the means to overcome these difficulties and grow”. This statement by Chakib Alj, President of the Moroccan Employers’ Confederation (CGEM), sums up much of what is at stake in the next Finance Law. The main expectations will focus on the impact in terms of business growth and job creation. Submitted to the Ministry of Finance in July, the employers’ recommendations for the 2024 Finance Act focus primarily on reforming local taxation and VAT. At this level, the challenge is to reduce the number of rates, whose multiplicity, as well as the various exemptions granted, are sources of distortion. In any case, the CGEM is proposing a redefinition of the scope of application and exemptions from VAT, as well as the generalization of the right to deduction and reimbursement. Without giving details of the rates it would like to see established, the Employers’ Confederation remains in favor of two rates, while maintaining the 0% rate. « VAT must be neutral for the members of the business community, and the setting of rates is a matter for the Government. The trade-off will certainly be based on the impact on the budget and purchasing power. The multiplicity of rates and the non-reimbursement, in certain cases, of VAT credits create a stumbling block. We need to get out of this situation. By 2026, we may have to reach a maximum rate of 16% and an intermediate rate of 7 or 8% «, argues Abdelmajid Faiz, Vice-Chairman of the Taxation and Customs Commission. The Third National Tax Conference in May 2019 recommended a rate of 0% for essential products, 10% for mass consumption products, and 20% as the standard rate and a higher rate for luxury goods. VAT reform is not limited to simple rate adjustments; it encompasses a more global vision of Moroccan taxation. Broadening the scope of application is just as important as simplifying rates. This is intended to give taxpayers greater clarity and reduce the obstacles posed by disparities between the different rates applied.

Another issue close to employers’ hearts is local taxation. Deemed opaque and complex, there is a strong desire to simplify it. The CGEM would like to see the 27 taxes grouped into two main taxes: a property tax and an economic activity tax. The employers’ association is also pressing for an overhaul of the business tax, which is based on the historical value of equipment rather than its net book value. The base of this tax is deemed to be disconnected from real activity, and would even generate inequality.

Khadija MASMOUDI