29 October 2012

Morocco: Moroccan Middle Class Faces New Tax Burden

Rabat — The draft 2013 Finance Act includes a new solidarity tax. The opposition views the proposal as an attack on the middle class.

Morocco's 2013 Finance Act is not yet law, but one provision is already sparking widespread criticism from opposition legislators.

Their main complaint about the draft law presented in parliament on Wednesday (October 24th) is a new solidarity tax on those with monthly earnings of 25,000 dirhams (2,250 euros) or more.

The tax hike on the highest earners aims to boost to the Social Cohesion Fund of 2012, which covers the new RAMED medical assistance programme for citizens with special needs and finances education initiatives.

A proportional rate of 3% will apply to those with annual incomes between 300,000 and 600,000 dirhams per year. Higher earners will be subject to a 5% rate.

But according to the leader of the Authenticity and Modernity Party (PAM) in the House of Councillors, Hakim Benchemmas, the move will hit the middle class the hardest. It will also fail to fulfil the government's commitments, he said.

Chaoui Belassel, the Constitutional Union party leader in the Chamber of Representatives, agrees, arguing that the measure aims to support the needy at the expense of the middle class.

Many workers also disapprove of the proposal and hope that the opposition will be able to amend it.

The government's increase to fuel prices has already had an effect on other items, critics of the new tax measure say. Ahmed Sellami, who works for a company, feels that the proposed solidarity tax will be yet another burden for many households.

"I earn 30,000 dirhams. I have to support my parents and my two unemployed brothers, as well as my small family. I pay school fees for my three children and I have to pay off my loans. That leaves me unable to save anything," he told Magharebia.

Driss Azami El Idrissi, the minister delegate responsible for the budget, has insisted that everyone must pull together in the current economic situation. Businesses, he explained, will also contribute to the Social Cohesion Fund.

Under the draft Finance Act, the Fund would be strengthened by taxing companies with net profits exceeding 20 million dirhams. Beginning January 1st, 2013, the rate would be up to 1% on net profits of 20 - 100 million dirhams and 1.5% for net profits in excess of 100 million dirhams.

In addition, the Fund would be boosted by an increase in the domestic consumption tax on cigarettes to 4.5% exclusive of VAT.

Opposition legislators say they plan to propose amendments to the draft measure.

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