Morocco tax expert urges broader fiscal base reform

14:51

By: Dakir Madiha

Morocco tax expert urges broader fiscal base reform

A leading Moroccan economist has called for a deep restructuring of the country’s tax system, arguing that current revenue patterns place disproportionate pressure on salaried workers while leaving large parts of economic activity under-taxed. The analysis focuses on personal income tax, corporate tax concentration, and persistent distortions in value added tax design.

The discussion highlights a structural imbalance in personal income taxation, where salaried employees and public sector workers provide the bulk of revenues. Because their earnings are taxed at source, they form a stable and easily captured base for the tax administration. By contrast, several income categories remain partially outside effective taxation, including informal activities, some professional services, agricultural earnings, and under-declared rental income. This uneven coverage contributes to perceptions of inequality in fiscal contribution and reinforces reliance on a narrow taxpayer base.

A similar concentration appears in corporate taxation, where a small fraction of large companies generates most revenue. This reflects a dual economic structure, with a formal segment composed of large, visible firms and a broad informal or semi-formal segment of small enterprises with limited compliance capacity. The system of simplified regimes and fixed tax schemes has contributed to this divide. The result is both a compliance gap and competitive tension, as large firms bear a heavier relative burden due to full exposure to tax enforcement.

Value added tax is presented as a more efficient instrument in principle but remains constrained by exemptions, multiple rates, and sector-specific rules. These distortions affect competition between similar goods, create cash flow problems linked to unrecovered input tax, and reduce investment efficiency in exempt sectors. Agriculture is frequently cited as an example where structural exemptions at production level generate inconsistencies in downstream taxation and processing activity.

The economist identifies electronic invoicing as a central reform tool to improve VAT performance. By digitising transactions and centralising reporting, tax authorities would gain real-time visibility over commercial flows, reducing fraud and under-reporting. This would increase VAT efficiency, currently estimated at around half of its theoretical potential, with projections suggesting significant improvement if compliance gaps are reduced. International examples are cited to show measurable fiscal gains following similar reforms.

Beyond technical measures, the analysis stresses the need for broader tax reform built on three pillars. The first is expanding the tax base rather than increasing rates. The second is simplifying VAT structures and reducing unjustified exemptions while protecting vulnerable households through targeted compensation. The third is restoring trust between taxpayers and the state through transparency, stronger enforcement of equity principles, and reduction of unjustified privileges. The overall objective is a more balanced, efficient, and sustainable fiscal system.