Morocco cuts taxes on profits of companies and banks

2007-12-06

Morocco passes bills reducing profit taxes for corporations and banking institutions following a week of tensions and heated arguments in parliament.

By Mawassi Lahcen for Magharebia in Casablanca – 06/12/07

[Hassan Benmehdi] Under pressure from USFP Secretary-General, Mohamed El Yazghi, the party retracted its opposition at the last minute and the tax bills passed.

The lower chamber of the Moroccan Parliament agreed to a 2008 budget measure cutting profit taxes on corporations from 35% to 30% and on banking institutions from 39.6% to 37%. Following a week of tensions and heated arguments due to the opposition of the Socialist Union Party, the bills were ratified at a late hour on Friday (November 30th).

The Socialist Union Party, represented by the ministries of trade, industry, and information technology, surprised the Financial Affairs Committee in the Parliament last week when it strongly opposed the government's tax plan.

The party's objections prompted a severe crisis within the government majority. Prime Minister Abbas El Fassi called for a meeting in the middle of the week for leaders of parties which form the government to examine the situation. El Fassi expressed his resentment over the position of the Socialist Union Party and called upon its leaders to abide by the government's position.

Under pressure from the party's Secretary-General, Mohamed El Yazghi, representatives of the Socialist Union Party retracted their opposition at the last minute and the tax bills passed.

No sooner did the crisis start to calm down within the government than it moved to the Socialist Union Party itself. The ensuing internal conflict prompted Secretary-General Mohamed El Yazghi and his first deputy Abdelouahed Radi, to announce their resignation from the leadership of the party earlier this week.

General Confederation of Moroccan Companies (CGEM) President Moulay Hafid El Alami, meanwhile, expressed his satisfaction over the new tax measures. In a statement to Magharebia, he said, "In general, we consider the reduction of taxes on profits to be an important strategic progress that we have been demanding for 12 years now."

Dialogue continues with legislators, however, about a further reduction of taxes on corporate profits "to the level of 25% by the end of the current government tenure," he said. The competitiveness of Morocco in attracting investments is a key issue, El Alami noted.

CGEM and the current government will soon sign an agreement aimed at helping small and medium-sized enterprises, he said. Along with a special corporate profit tax of 20%, measures include help with incorporation, access to bank finance, and market penetration.

"We attach high hopes to this agreement," El Alami said, "to give a strong boost to the wheel of economic development in Morocco."