Without a tax reform, Morocco suffers a big shortfall. And this is an expert opinion, Bank Al Maghrib which advocates an assessment of the strengths and weaknesses of the system.
Since the 1980s, Morocco has undertaken various reforms to modernize its tax system and tax administration. In 2019, the kingdom mobilized nearly 238.2 billion dirhams in tax revenue, or 20.7% of GDP. These constitute its main source of funding and cover around 74.5% of the general state budget.
In comparison to developing countries, the average share of tax revenue is between 10% and 20% of GDP, which is much lower compared to developed countries where it represents between 25% and 50% of GDP.
How then to explain these differences in ratios between developing countries and advanced countries?
These differences reflect the large tax revenue gap that is due, among other things, to an inefficient tax system, a narrow tax base due to the prevalence of tax avoidance and avoidance, and the poor performance of the government. tax administration in revenue collection and compliance with tax obligations.
A lot of money lost
Based on a panel of seventy-six developing countries, including Morocco, the comparative analysis of Bank Al Maghrib made it possible to measure the budgetary space available to Morocco to compensate for its fiscal shortfall. The analytical study covers the period from 1980 to 2017, and is based on the latest generation of stochastic frontier models proposed by Kumbhakar et al. (2014).
The results show that the level of tax revenues in Morocco is relatively low, compared to the fiscal capacity available to the country. Over the period 2013-2017, Morocco’s fiscal capacity is estimated on average at 27.2% of GDP, while tax revenue represented 21.2% of GDP giving rise to a shortfall of around 6, 7 points of GDP. Thus, the Kingdom operates only about 76% of its fiscal capacity. In developing countries, the average shortfall is 6.1 percentage points of GDP.
During the last phase of the study, which runs until 2019, tax revenues in Morocco experienced a very marked decline of around 5.2 points of GDP, reaching 20.7% of GDP.
This regression is mainly due to three factors: the slowdown in economic activity at the national and international level following the subprime crisis in 2008. A phenomenon which has generated downward movements for all categories of taxes. The second factor is the reduction in the CIT and IR rates from 2009, which resulted in a drop in the revenue generated by these two taxes to reach 7.6% and 3.7% of the total, respectively. GDP in 2019. The third factor is the deepening of trade liberalization which has caused a considerable reduction in customs taxes, namely from 1.9% to 0.8% of GDP.
Large tax gap
During the last five years of the 2013-2017 estimation period, tax gaps in low-income countries range from 3 to 5.8 percentage points of GDP with an average of 4.1.
In Morocco, the tax gap is 6.7 points of GDP on average. Compared to lower middle-income countries where tax differentials vary between 3.6 and 7.8 percentage points of GDP. As a result, the tax loss at the national level is slightly above the average for these countries, which is 6.1.
Countries like Cambodia, Ukraine, Vietnam and Tunisia have a tax loss comparable to that of Morocco.
In upper-middle-income countries, tax gaps are wider, ranging from 6.2 to 10.8 percentage points of GDP with an average gap of 8.3.
In view of these indicators, Morocco has plenty of room for maneuver to collect additional tax revenues and exceed the current level of 20.7% of GDP.
Sectoral inequalities vis-à-vis the tax system
The results of the analysis clearly confirm that the structure of the economy is very decisive for fiscal capacity. It turns out that the share of agriculture in GDP is associated with a statistically significant decrease in fiscal capacity, while the value added of industry exhibits a significantly positive correlation. The service sector is positively associated with fiscal capacity, but this relationship is not statistically significant.
Finally, trade openness is positively associated with fiscal capacity, as trade taxes are easier to collect, especially in developing countries.