Morocco to Raise Solidarity Tax on Firms to Help Poor

Morocco to Raise Solidarity Tax on Firms to Help Poor

Budget amendment extends reach of tax in 2012; Funds to help develop poor areas to stem discontent; two rates, depending on level of profit.

April 10, 2012 9:45 by kippreport

Morocco’s government has agreed to amendments from parliament to widen the imposition of a new tax on firms to help it develop poor areas and help quash grumbling discontent over social inequalities, officials said on Monday.

Plans for the so-called solidarity fund tax were announced in the midst of mass protests last year in Morocco that were inspired by the Arab Spring revolts.

Proceeds from the new tax will help raise 2 billion dirhams ($235 million) for a social solidarity fund to develop poor areas in a country that has one of the widest wealth inequalities in the region and where protesters still take to the streets over poverty, joblessness and corruption.

The fund is also expected to pave the way for a reform of food and energy subsidies – which even the government, says benefit mostly those who need them the least.

The 2012 budget now provides for the imposition in 2012 of a tax equal to 1.5 percent of the net profit for firms that make between 50 million and 100 million dirhams in net annual gains, Finance Ministry and parliament officials said.

Firms with annual net profits above 100 million dirhams will be subject to a 2.5 percent tax on their net profit in 2012, they added.

The government also agreed to raise tax on beer and spirits in 2012 by 12.5 and 43 percent respectively, the first increase since 2010, the officials said.

In its draft budget for 2012, the government had initially fixed the contribution at 1.5 percent of net profit for firms that make over 200 million dirhams in annual gains.

“The government has agreed to the majority’s proposed amendments for the ratio and scope of the new solidarity tax but it rejected the (majority’s) demand that this tax applies beyond 2012,” a parliament official said.

The fund should enable authorities to develop poor areas, many of which have seen protests about poverty, unemployment and poor infrastructure and access to basic amenities.

Official data shows that 24 percent of Morocco’s near-34 million population lives in poverty.

Morocco’s budget deficit in 2011 rose to its highest level since the 1990s, or 7 percent of gross domestic product (GDP), with those subsidies costing nearly as much as the budget shortfall.

Morocco’s parliament is expected to vote and endorse the amended budget before the end of this week.

($1 = 8.5141 Moroccan dirhams)

(Editing by Alison Williams)