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Morocco Eyes Real Estate Wealth Tax to Bolster Universal Social Protection
Morocco is considering the implementation of a tax on real estate wealth as a means to finance its ambitious universal social protection program, according to a recent report by the Arab Reform Initiative. The study, titled "Property Taxes: Missed Opportunities for Funding Universal Social Protection in Lebanon, Morocco, and Jordan?", explores the fiscal challenges and potential solutions for sustainably funding the expansion of social security in the North African nation.
The proposed social protection reform aims to provide comprehensive coverage to millions of Moroccans. This includes extending Compulsory Health Insurance (AMO) to 22 million beneficiaries, expanding family allowances to 7 million school-age children, and incorporating 5 million self-employed and informal workers into pension schemes by 2025.
This reform comes at a critical time, as Morocco grapples with increasing inequality and poverty. The World Bank reports that the percentage of the population considered "vulnerable to poverty" or "poor" rose from 17.1% in 2019 to 19.87% in 2020. The total cost of this non-contributory solidarity funding is estimated at 50 billion Moroccan dirhams (approximately $5 billion) annually.
While Morocco's tax revenues have seen an increase from 19.4% of GDP in 2015 to 21.1% in 2022, the current financing structure heavily relies on state budgets (54%) and earmarked taxes (24%). This raises concerns about long-term sustainability and fairness in the tax system.
The report suggests that a more equitable approach would involve higher taxation on capital, specifically through the introduction of a real estate wealth tax inspired by France's "impôt sur la fortune immobilière" (tax on real estate wealth). The author, Abdelhak Kamal, estimates that a progressive tax targeting the top 5% of properties by value, with rates ranging from 0.5% to 1.5%, could generate approximately 8.37 billion Moroccan dirhams per year.
This proposed tax would focus on high-value properties worth over 10 million Moroccan dirhams, affecting an estimated 36,000 out of 8 million properties in Morocco. The revenue generated could represent 26% of the 2021 budget for the solidarity portion of the reform and 14-17% of the total annual funding needs.
Proponents argue that such a tax would promote a more balanced tax base, reduce reliance on labor income, and incentivize productive investments. However, the report acknowledges the need for further studies to refine revenue estimates and develop a robust legal and administrative framework.
As Morocco continues to navigate the challenges of financing its universal social protection program, the proposed real estate wealth tax emerges as a potential tool for promoting fiscal sustainability and social justice. The ongoing debate surrounding this initiative highlights the complex balance between funding ambitious social reforms and ensuring a fair distribution of the tax burden.