According to the report entitled “Property taxes: missed opportunities to finance universal social protection in Lebanon, Morocco and Jordan? » published this week by the Arab Reform Initiative, Morocco is working on the establishment of a real estate wealth tax (IFI) in order to finance universal social protection. Written by Abdelhak Kamal, this report examines the budgetary challenges and potential solutions for sustainably financing the expansion of social security in Morocco.
The generalization of universal health coverage in Morocco requires the integration of 22 million new beneficiaries into the compulsory health insurance system, the extension of family allowances for the benefit of 7 million children of school age and the extension in the number of retirement pension recipients to 5 million additional beneficiaries. According to the World Bank, this reform comes in a context characterized by the exacerbation of inequalities and poverty, the number of people “vulnerable to poverty” and/or “poor” increasing from 17.1% in 2019 to 19, 87% of the population in 2020.
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The total cost of this non-contributory solidarity financing amounts to 50 billion dirhams ($5 billion) per year. If Morocco’s tax revenues increased from 19.4% of GDP in 2015 to 21.1% in 2022, the current financing structure is largely based on state budgets (54%) and allocated taxes (24% ), which raises questions about long-term sustainability and fairness, the report points out, suggesting a fairer approach that would involve higher taxation of capital, for example by introducing a real estate wealth tax inspired by French real estate wealth tax.
He believes that “the current tax structure can favor capital income. The tax base is relatively narrow, with middle-class citizens often contributing the most.” According to Kamal, a progressive IFI targeting the most expensive 5% of properties by value, with rates ranging from 0.5% to 1.5%, could generate around 8.37 billion dirhams per year. Better, this would represent 26% of the 2021 budget for the solidarity component of the reform and 14 to 17% of the total annual financing needs. The tax is expected to affect high-value real estate, worth more than 10 million dirhams, affecting around 36,000 of Morocco’s 8 million properties.
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“The establishment of a real estate wealth tax in Morocco, similar to that in force in France, represents a more optimal compromise than the aforementioned proposals. It could be considered to diversify the sources of tax revenue and improve tax equity,” says Kamal, recognizing however the need to carry out additional studies to refine revenue estimates and develop a solid legal and administrative framework. “To ensure the success of this initiative, it is essential to conduct an in-depth study to refine revenue estimates, develop a solid legal and administrative framework and raise public awareness of the benefits of this tax,” he adds.
