IR: Who Pays Income Tax in Morocco?
25 April 2011
Read by 3614 persons
73% of income tax comes from salaries and only 11% from the liberal professions. Only 47% of employees actually pay income tax. 1.6 million are exempt. The average monthly tax amount is 1000 DH for an employee and 972 DH for a professional!
Who pays income tax (IR) in Morocco? We roughly knew that this burden was mainly borne by employees. We were far from suspecting that even among the latter, a large majority escapes it. According to statistics obtained from the General Directorate of Taxes (DGI), 1.8 million taxpayers were exempt from IR in 2010, compared to nearly 1.64 million in 2009, an increase of 9.7%. And this, as we will have understood, results from the IR reforms, the last of which, in 2010, raised the exemption threshold to 30,000 DH per year. And in this 1.8 million exempt people (of which 1.6 million are employees and the rest are independent), we do not take into account pensioners, whose population is also exempt from IR to the tune of...97%, according to the Minister of Employment, Jamal Rhmani.
Estimating the number of declared employees, therefore subject to tax, at a little more than 3 million people, including 2.2 million in the private sector, those who, by law, are exempt represent 53% today. Consequently, income tax is paid by only 47% of declared employees (1.6 million people).
When we know that the active employed population is 10.4 million people, we measure the shortfall for the public treasury. With this precision, but which is significant, that the entire employed active population is not salaried. Out of the 10.4 million employed people, 76.7% perform paid work, i.e., nearly 8 million. And out of these 8 million, only 57.7% are employees, i.e., a little more than 4.6 million people. So, as we can see, there is a lot of "loss" in terms of income tax. And by loss, we mean not the exemptions - which benefit employees, therefore families - but all the income distributed in the informal sector.
25 billion DH collected in IR in 2010
In 2010, the state collected 25 billion DH in income tax, down 3.5% compared to 2009. Of this 25 billion, 18.25 billion comes from IR on salaries. They were paid by the 1.6 million people who still pay this tax. A little arithmetic allows us to deduce that each of these taxpayers paid an average of 11,400 DH of IR in 2010, or an average of about 1,000 DH per month. But this is only an average; in other words, the contributions of employees, taken individually, are different since they are based on the declared income of each. There are those who pay less than 200 DH per month, and there are many, and others who can exceed 10,000 DH or 20,000 (the income bracket subject to the marginal rate having no limit) and these are not legion.
Added to this is the fact that we do not pay everything we should. Many people ignore the fact that the tax rates that we often wave in the face of our interlocutor are precisely...facial rates; and this is not a play on words. For example, an employee whose net taxable income is 50,000 DH per year (or 4,166.66 DH per month) is subject to a facial rate of 10%, applicable to the income bracket ranging from 30,001 to 50,000 DH. In reality, he only pays 4%. Thanks to the deduction system, and in particular the allowance for professional expenses, no employee, in fact, pays the facial rate applied to the income bracket to which he belongs. Everyone pays a so-called real or effective rate (see table)
From this angle, income tax is not such a heavy burden to bear. That being said, improvements can always be made for low incomes, or now perceived as such. But nothing prevents, at the same time, by way of compensation, setting up an additional bracket that would tax very high incomes at a slightly higher level (40%, 45%...) exceeding a certain threshold. Let us not lose sight of the fact that taxes are the main resource of the State, and it is not equitable that someone who earns 15,000 or even 25,000 DH per month pays the same IR rate (38% as a facial rate) as someone who has an income exceeding 50,000 DH net per month. Today, salaries of 80,000 DH, 100,000 and much more exist, and it would be fair for those who receive them to pay a little more so that the weakest pay a little less. The only problem is that 53% of employees do not already pay tax, and for that there is nothing to do in terms of tax. These people rather need to see their salary improve...
IR on real estate profits remains very low
But the efforts of the public authorities, if they are to be deployed, should be directed not only towards employees, but also, and perhaps above all, towards other taxpayers subject to income tax: the liberal professions, certain industrial, commercial and real estate activities, etc., grouped under the heading "professional income". It is certainly at this level that the "losses" in terms of IR are the most significant. Consider that out of the 25 billion DH of IR collected by the State in 2010, 73% was paid by employees, i.e., 18.25 billion DH. IR from professional income (private doctors, lawyers, architects, notaries, accountants, pharmacists, etc.) amounted to 2.8 billion DH in 2010, i.e., 11.2% of the overall IR revenue, and even a decrease of 3.3 points compared to 2009 (see graph). This professional category has some 400,000 declarants. Taking into account those among them who benefit from the exemption (about 40%), professional IR is therefore paid by 240,000 taxpayers, i.e., an average annual amount of 11,667 DH each or nearly 972 DH per month! This is obviously very low and almost scandalous considering the money handled by the liberal professions. Moreover, the General Directorate of Taxes (DGI) continues to call on the latter to properly fulfill their tax obligations.
The same can be said for those subject to IR on real estate profits. These paid 3.7 billion IR in 2010, i.e., 14.9% of the total IR revenue. This share is certainly up two points compared to 2009, but it is well known that real estate is the activity where profits are the highest.
The reductions in the IR rate have not been offset by a significant increase in the number of declared employees
Finally, the tax on income from movable capital, that on profits from shares and bonds: the share of revenue from this category fell from 1.1% to 0.9% in 2010, i.e., 225 million DH, except that at this level, the problem seems rather to be that of the decline in activity, because this tax, like that of employees, is taken at source, therefore theoretically unlikely to be reduced; a fairly common practice in terms of declaration tax - even if the tax services are tightening the net more and more to prevent big fish from getting through!
In total, income tax remains very largely covered by employees, those who are both declared (not everyone is) and do not benefit from the exemption.
The idea that reducing the tax level would encourage the informal sector to declare itself is certainly attractive in theory. In practice, the successive reductions decided in 2007, 2009 and 2010, which cost the budget nearly 14 billion DH, have not been offset by a significant increase in the number of declared employees. And even among declared employees, those who are declared throughout the year represent less than half (48%) of all declared employees. In other words, 52% of employees declared to the CNSS (the problem does not arise in the public sector) are declared for less than 12 months, and 39% for less than 9 months. This shows the fragility that characterizes certain activities, such as textiles or tourism where the phenomenon of seasonality is still prevalent. But does this explain everything? Probably not!
Published April 25, 2011
Posted online April 25, 2011
Lavieeco.com
Who pays income tax (IR) in Morocco? We roughly knew that this burden was mainly borne by employees. We were far from suspecting that even among the latter, a large majority escapes it. According to statistics obtained from the General Directorate of Taxes (DGI), 1.8 million taxpayers were exempt from IR in 2010, compared to nearly 1.64 million in 2009, an increase of 9.7%. And this, as we will have understood, results from the IR reforms, the last of which, in 2010, raised the exemption threshold to 30,000 DH per year. And in this 1.8 million exempt people (of which 1.6 million are employees and the rest are independent), we do not take into account pensioners, whose population is also exempt from IR to the tune of...97%, according to the Minister of Employment, Jamal Rhmani.
Estimating the number of declared employees, therefore subject to tax, at a little more than 3 million people, including 2.2 million in the private sector, those who, by law, are exempt represent 53% today. Consequently, income tax is paid by only 47% of declared employees (1.6 million people).
When we know that the active employed population is 10.4 million people, we measure the shortfall for the public treasury. With this precision, but which is significant, that the entire employed active population is not salaried. Out of the 10.4 million employed people, 76.7% perform paid work, i.e., nearly 8 million. And out of these 8 million, only 57.7% are employees, i.e., a little more than 4.6 million people. So, as we can see, there is a lot of "loss" in terms of income tax. And by loss, we mean not the exemptions - which benefit employees, therefore families - but all the income distributed in the informal sector.
25 billion DH collected in IR in 2010
In 2010, the state collected 25 billion DH in income tax, down 3.5% compared to 2009. Of this 25 billion, 18.25 billion comes from IR on salaries. They were paid by the 1.6 million people who still pay this tax. A little arithmetic allows us to deduce that each of these taxpayers paid an average of 11,400 DH of IR in 2010, or an average of about 1,000 DH per month. But this is only an average; in other words, the contributions of employees, taken individually, are different since they are based on the declared income of each. There are those who pay less than 200 DH per month, and there are many, and others who can exceed 10,000 DH or 20,000 (the income bracket subject to the marginal rate having no limit) and these are not legion.
Added to this is the fact that we do not pay everything we should. Many people ignore the fact that the tax rates that we often wave in the face of our interlocutor are precisely...facial rates; and this is not a play on words. For example, an employee whose net taxable income is 50,000 DH per year (or 4,166.66 DH per month) is subject to a facial rate of 10%, applicable to the income bracket ranging from 30,001 to 50,000 DH. In reality, he only pays 4%. Thanks to the deduction system, and in particular the allowance for professional expenses, no employee, in fact, pays the facial rate applied to the income bracket to which he belongs. Everyone pays a so-called real or effective rate (see table)
From this angle, income tax is not such a heavy burden to bear. That being said, improvements can always be made for low incomes, or now perceived as such. But nothing prevents, at the same time, by way of compensation, setting up an additional bracket that would tax very high incomes at a slightly higher level (40%, 45%...) exceeding a certain threshold. Let us not lose sight of the fact that taxes are the main resource of the State, and it is not equitable that someone who earns 15,000 or even 25,000 DH per month pays the same IR rate (38% as a facial rate) as someone who has an income exceeding 50,000 DH net per month. Today, salaries of 80,000 DH, 100,000 and much more exist, and it would be fair for those who receive them to pay a little more so that the weakest pay a little less. The only problem is that 53% of employees do not already pay tax, and for that there is nothing to do in terms of tax. These people rather need to see their salary improve...
IR on real estate profits remains very low
But the efforts of the public authorities, if they are to be deployed, should be directed not only towards employees, but also, and perhaps above all, towards other taxpayers subject to income tax: the liberal professions, certain industrial, commercial and real estate activities, etc., grouped under the heading "professional income". It is certainly at this level that the "losses" in terms of IR are the most significant. Consider that out of the 25 billion DH of IR collected by the State in 2010, 73% was paid by employees, i.e., 18.25 billion DH. IR from professional income (private doctors, lawyers, architects, notaries, accountants, pharmacists, etc.) amounted to 2.8 billion DH in 2010, i.e., 11.2% of the overall IR revenue, and even a decrease of 3.3 points compared to 2009 (see graph). This professional category has some 400,000 declarants. Taking into account those among them who benefit from the exemption (about 40%), professional IR is therefore paid by 240,000 taxpayers, i.e., an average annual amount of 11,667 DH each or nearly 972 DH per month! This is obviously very low and almost scandalous considering the money handled by the liberal professions. Moreover, the General Directorate of Taxes (DGI) continues to call on the latter to properly fulfill their tax obligations.
The same can be said for those subject to IR on real estate profits. These paid 3.7 billion IR in 2010, i.e., 14.9% of the total IR revenue. This share is certainly up two points compared to 2009, but it is well known that real estate is the activity where profits are the highest.
The reductions in the IR rate have not been offset by a significant increase in the number of declared employees
Finally, the tax on income from movable capital, that on profits from shares and bonds: the share of revenue from this category fell from 1.1% to 0.9% in 2010, i.e., 225 million DH, except that at this level, the problem seems rather to be that of the decline in activity, because this tax, like that of employees, is taken at source, therefore theoretically unlikely to be reduced; a fairly common practice in terms of declaration tax - even if the tax services are tightening the net more and more to prevent big fish from getting through!
In total, income tax remains very largely covered by employees, those who are both declared (not everyone is) and do not benefit from the exemption.
The idea that reducing the tax level would encourage the informal sector to declare itself is certainly attractive in theory. In practice, the successive reductions decided in 2007, 2009 and 2010, which cost the budget nearly 14 billion DH, have not been offset by a significant increase in the number of declared employees. And even among declared employees, those who are declared throughout the year represent less than half (48%) of all declared employees. In other words, 52% of employees declared to the CNSS (the problem does not arise in the public sector) are declared for less than 12 months, and 39% for less than 9 months. This shows the fragility that characterizes certain activities, such as textiles or tourism where the phenomenon of seasonality is still prevalent. But does this explain everything? Probably not!
Published April 25, 2011
Posted online April 25, 2011
Lavieeco.com
