IMF Commends Moroccan Fiscal Policy

by Ulrika Lomas, Tax-News.com, Brussels

27 November 2009

The International Monetary Fund has released a report on the findings of its Article IV consultations with Morocco, which has shown that the country has been relatively unscathed by the economic crisis.

According to the IMF, the country’s current account deficit is expected to fall from 5% in 2008 to 4.5% in 2009 following strong fiscal performance in recent years.

Thanks to strong tax revenue flows, last year's budget surplus was 0.4% of GDP. However, the budget deficit in 2009 is expected to be about 2.5% of GDP.

The IMF anticipates that revenues will fall significantly as a percentage of GDP, owing to the slowdown in non-agricultural activity and lower tax rates On the expenditure side, the government has announced a series of measures aimed at stimulating the economy. These expenditure increases have been partially compensated for by reduced subsidies.

The tax burden will be reduced following implementation of the second phase of the income tax reform, including an increase in the tax threshold, tax brackets, and a reduction of rates.

A decrease in corporate tax revenue is also expected, owing to the slowdown in private sector activity in 2009 and 2010.

The IMF report commends Morocco on “considerable progress in the area of fiscal reform".

"The mission encourages the authorities to continue these efforts, particularly by further simplifying the tax regime, including reform of the VAT and customs tariffs, by reducing the number of rates and exemptions and extending the scope of reimbursements for VAT credits," the report states.

"The overhaul of VAT rates could also lead to a reduction in the normal rate, with a neutral impact on revenue. These changes will help expand the tax base through increased taxation of the informal sector. In addition, compliance with tax regulations and control procedures will be less complex, permitting a more equitable distribution of the tax burden,” the report adds.

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