Économie et Finance

2019 Finance Bill failing to provide sufficient impetus to investment

le 17 décembre 2018


The 2019 Finance Bill has three priorities – support social policy, reduce inequality and provide impetus to investment and support for the corporate sector. The measures proposed as far as the first two priorities are concerned are satisfactory in terms of the amounts that they have been allocated.

Social provisioning has increased with the proceeds from privatisation divided equally between the Hassan II Fund for Economic and Social Development and the General State Budget.

A social solidarity contribution is to be introduced at a rate of 2.5% on the profits made by companies which are liable for corporate tax and which will generate profits of more than MAD 40 million for two consecutive financial years, commencing 1 January 2019.

The 2019 Finance Bill contains a slew of other new measures in relation to the first two priorities, far too numerous to be listed here. This is something which we heartily encourage, given the many inequalities that exist in our country.

But to be able to sustain development and meet the needs of society, we have to recognise that an economy’s health is measured by its rate of growth, its unemployment rate, government debt and household debt levels etc.

In this respect, the 2019 Finance Bill sets out a third priority, which is to provide impetus to investment and support for the corporate sector.

In practical terms, this has meant amending the existing corporate tax scale and adapting it to the specific needs of SMEs i.e. capping the rate at which profits are progressively taxed at 17.5% for those companies generating profits of between MAD 300,001 and MAD 1,000,000 and which currently pay tax at the standard rate.

Providing impetus to investment and support for the corporate sector, so as to bolster support for SMEs and small businesses, also consists of reducing payment delays and accelerating VAT refunds for those businesses which deduct more VAT than they collect.

This may be otherwise described as clearing cumulative VAT credit and accelerating refunds.

The 2019 Finance Bill also promises improved access to financing by simplifying guarantee mechanisms and raising the financing ceiling through microcredit. It also provides for the introduction of a new guarantee mechanism for small businesses.

These are important measures that need to be implemented rapidly. Unfortunately, however, they are unlikely to provide enough impetus to investment and support for the corporate sector, which is one of the three priorities of the 2019 Finance Act.

Furthermore, while government investment of MAD 190 billion in 2019 will continue to drive private sector growth, it will not be enough to boost investment on a sustainable basis.

Admittedly, a new investment charter is being drafted by the department of Moulay Hafid Elalamy, Minister of Industry and Commerce. But it is perfectly legitimate to question why the charter was not drawn up sufficiently in advance so as to incorporate the measures outlined in the 2019 Finance Bill.

How can investment be revived without tax incentives? Conversely, how can tax incentives be granted it they are not even included the Finance Bill?

And the fact that investment needs to be promoted in all types of project, not just major projects of more than MAD 200 million, which qualify for 5-year exemption, if they are governed by an agreement with the State.

What is needed, in fact, is investment in companies, to enable them to grow, enhance their export competitiveness and generate wealth and jobs.

More specifically, we’re talking about current capital expenditure that SMEs are unable to make without the help of government, which must drive the process aimed at improving the economy’s entrepreneurial fabric. That is why the new investment charter is just as important as the slew of measures benefiting SMEs, proposed by the 2019 Finance Bill.

Investment enables companies to be resilient and should takes precedence over all else. The new measures for promoting investment provide a more effective panacea when it comes to revitalisation, the third of the 2019 Finance Act’s priorities.

Unfortunately, however, it takes time for them to become widely known, despite the business climate deteriorating and confidence ebbing away…

Afifa Dassouli