The significant demographic growth that our country is experiencing is accompanied by an increase in the needs of citizens, making it necessary to strengthen the role that the Territorial Collectivities must play in providing services to citizens and strengthening the bodies of the modern Local Government.
Thus, the issue of financing projects and the services to be rendered to citizens have become one of the main pillars of the success of the decentralization system.
While the Moroccan Constitution and the Organic Laws relating to Territorial Collectivities have distributed competencies and roles among the various actors in the field of local development, whether by redistributing competencies vertically between the Local Government and its various territorial units or horizontally among the levels of Territorial Collectivities, the question of financial resources poses many problems with regard to the management of territorial affairs.
If the attributions have been distributed equitably among the different Territorial Collectivities and within the same category of Collectivity, without distinction between them, and that the roles have been defined equally for each of these categories of Territorial Collectivities, in a precise manner and in accordance with the Organic Laws, the fact remains that the laws governing local finances, particularly those relating to own resources, still perpetuate fiscal disparities and do not ensure balance in this area, or even take into account the socio-economic potential of Territorial Collectivities within the same category.
Thus, it is difficult for all Territorial Collectivities to cover their needs in terms of expenses by relying solely on their own resources, especially in view of:
- The concentration of wealth production in certain Regions and Territorial Collectivities, to the detriment of others;
- Significant differences in income and tax revenues;
- The great geographical diversity that forces some collectivities to bear higher costs in order to provide public services, as is the case in mountainous areas, where the opening up of the inhabitants requires generally high costs, as well as in desert or semi-desert areas that are widely dispersed in terms of population distribution;
- The cost of certain public services such as solid waste management, urban travel management / urban transport, infrastructure;
By reviewing the new attributions conferred on the Councils of Prefectures and Provinces and their relation to financial resources, the following observations can be noted:
- Inadequacy of local tax revenues to the pace of economic growth;
- Inadequacy of the rules instituting certain taxes to the objectives of economic development;
- Multiplicity of taxes and royalties;
- Multiplicity of tax expenditures;
- Low profitability of local taxes and their adequacy to the development of citizens’ needs;
- Absence of a clear structuring of the local tax administration;
- In the absence of sufficient resources to support the burdens associated with the new attributions, the elected assemblies may be held accountable for management results, which may cause the delay in the implementation of the development process;
- Recording a decline in the financial resources collected, both in terms of transferred resources and own resources (from MAD 7749 million in 2015 to MAD 5439 million in 2018. This corresponds to a decrease of 30%);
- The share of Prefectures and Provinces of the total granted to the Territorial Collectivities in terms of VAT does not exceed 27%;
- Own resources do not represent more than 6%. These resources are insufficient and difficult to recover. Local Government allocations cover 94% of the budget of the Councils of Prefectures and Provinces.
But despite the importance of the initiatives and efforts made by the Ministry, as well as those made by the Territorial Collectivities to improve financial resources, these resources are still struggling to reach the required level.
And so that the Prefectures and Provinces may be autonomous and be able to assume the responsibilities entrusted to them, the following suggestions were made:
General and Global Suggestions:
- Allow the Territorial Collectivities to have stable and evolutionary resources with the ability of widening the tax base, smoothing out difficulties and encouraging investment;
- Reduce the number of royalties and strengthen their link with Local Government taxes, in order to overcome the difficulties and obstacles to the implementation of Law 47.06 on Local Taxation and Law 39.07 on the establishment of transitional provisions concerning certain taxes, duties and fees to be paid to Territorial Collectivities;
- Implement an efficient and cost-effective fiscal policy at the economic level;
- Adopt significant taxes likely to provide Territorial Collectivities with sustainable and regular own resources while broadening the tax base;
- Simplify the rules for setting up taxes (scope, base, liquidation and collection rules) and simplify procedures (taxpayer obligations, penalties and disputes);
- Reforming the tax system should in no way increase the tax burden;
Enhancement and diversification of local taxation and improvement of parafiscal resources
Suggestions for the Councils of Prefectures and Provinces
To set the percentages for the distribution of the shares of the Prefectures and Provinces in the Local Government taxes within the framework of the Organic Law No. 112. 14, as is the case for article 188 of the Law regulating the Regions, which set the share granted to the Regions by the Local Government at 5% of corporate tax, 5% of income tax and 20% of taxes on insurance contracts, in addition to other financial allocations intended to reach 10 billion dirhams in 2021, in order to ensure the stability and control of these resources.
Allowing Prefectures and Provinces to benefit from 1% of corporate tax revenues and 1% of income tax revenues, in order to increase their resources.
Increase the share of the Prefectures and Provinces in the value added tax, and establish clear criteria and ratios for the distribution of this share and organize it by decree, as is the case for the distribution of the Region’s share in the taxes of the Local Government.
Reinstate the taxes imposed on private educational institutions and apply progressive ratios (according to the number of students enrolled) and according to cycles (the level of education: elementary, preparatory, secondary, vocational training, higher education, private university) and allocate 5% of their turnover to Prefectures and Provinces, for the following reasons:
- Increase in the number of private schools;
- Implementation of the principle of solidarity stipulated in the Constitution;
- Coverage of public expenses related to school transportation in rural areas, which is provided by the Prefectures and Provinces.
Allocate 95% of the proceeds of the special tax on vehicles to the Prefectures and Provinces and 5% to the Local Government budget to cover public expenses related to the completion and maintenance of rural roads.
Domiciliation of taxes to the Communal Councils (base and collection), and transfer of percentages of these taxes to the Councils of Prefectures and Provinces.
Create an environmental tax by applying the Polluter = Payer principle.
Create a tax on airports, train stations, ports and bus stations.
Allocate a share of regional royalties, such as those from tourism, quarries, wholesale markets, slaughterhouses, etc., to the Councils of Prefectures and Provinces.
This is the Association’s contribution to the enrichment of the debate on the theme of local taxes and their role in the implementation of territorial development policies. The Association remains at the disposal of all government partners to contribute to the construction of a new local tax system.