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Evaluating Value Added Tax in Morocco

Cruce, Fredrika LU (2011) NEK691 20111
Department of Economics
Abstract
Following trade liberalisation and the resulting loss in government revenues from trade tariffs, governments need to find other sources of revenue to compensate for this loss. Many developing countries have set their hopes on value added tax (VAT). This was also the case for Morocco when it introduced VAT in 1986. Over the years it has become evident that the Moroccan VAT is not sufficiently simple, neutral and equitable as the number of exemptions and differentiated rates have multiplied and the informal sector is substantial. Therefore a VAT-reform was initiated in 2005 with the aim of progressively implementing a modern VAT, in line with the best international practices, by limiting the number of exemptions and moving towards a two-rate... (More)
Following trade liberalisation and the resulting loss in government revenues from trade tariffs, governments need to find other sources of revenue to compensate for this loss. Many developing countries have set their hopes on value added tax (VAT). This was also the case for Morocco when it introduced VAT in 1986. Over the years it has become evident that the Moroccan VAT is not sufficiently simple, neutral and equitable as the number of exemptions and differentiated rates have multiplied and the informal sector is substantial. Therefore a VAT-reform was initiated in 2005 with the aim of progressively implementing a modern VAT, in line with the best international practices, by limiting the number of exemptions and moving towards a two-rate system. The aim of this study is to evaluate the Moroccan VAT-system, especially following the changes that have been implemented so far in the current reform. Issues of particular interest are the effects on government revenue and on equity indicators. The results of this study show that the government revenue from VAT as a proportion to GDP has increased. There has been a slight decrease in trade tariff revenues in absolute terms, which is by far outweighed by the increase in VAT-revenue. As regards equity indicators, there is a probable decrease in vertical equity following the abolition of some exemptions and reduced rates on basic products that generally benefit the poorer groups relatively more, while there are some indications that horizontal equity has been improved. (Less)
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author
Cruce, Fredrika LU
supervisor
organization
course
NEK691 20111
year
type
M2 - Bachelor Degree
subject
keywords
Morocco, informal sector, VAT, fiscal reform, value added tax
language
English
id
1790271
date added to LUP
2011-02-25 15:05:56
date last changed
2011-02-25 15:05:56
@misc{1790271,
  abstract     = {Following trade liberalisation and the resulting loss in government revenues from trade tariffs, governments need to find other sources of revenue to compensate for this loss. Many developing countries have set their hopes on value added tax (VAT). This was also the case for Morocco when it introduced VAT in 1986. Over the years it has become evident that the Moroccan VAT is not sufficiently simple, neutral and equitable as the number of exemptions and differentiated rates have multiplied and the informal sector is substantial. Therefore a VAT-reform was initiated in 2005 with the aim of progressively implementing a modern VAT, in line with the best international practices, by limiting the number of exemptions and moving towards a two-rate system. The aim of this study is to evaluate the Moroccan VAT-system, especially following the changes that have been implemented so far in the current reform. Issues of particular interest are the effects on government revenue and on equity indicators. The results of this study show that the government revenue from VAT as a proportion to GDP has increased. There has been a slight decrease in trade tariff revenues in absolute terms, which is by far outweighed by the increase in VAT-revenue. As regards equity indicators, there is a probable decrease in vertical equity following the abolition of some exemptions and reduced rates on basic products that generally benefit the poorer groups relatively more, while there are some indications that horizontal equity has been improved.},
  author       = {Cruce, Fredrika},
  keyword      = {Morocco,informal sector,VAT,fiscal reform,value added tax},
  language     = {eng},
  note         = {Student Paper},
  title        = {Evaluating Value Added Tax in Morocco},
  year         = {2011},
}