Master EFD

Module : Anglais des affaires

An analysis of new finance law

2020 How far does it serve the
interests of socio economic
development in morocco ?

Presented by: Under the supervision of :

Jahid Anass Mr El melhaoui

Ouahabi Ilias
Introduction:
Morocco has capitalized on its proximity to Europe and relatively low labor
costs to work towards building a diverse, open, market-oriented economy. Key
sectors of the economy include agriculture, tourism, aerospace, automotive,
phosphates, textiles, apparel, and subcomponents. Morocco has increased
investment in its port, transportation, and industrial infrastructure to position
itself as a center and broker for business throughout Africa. Industrial
development strategies and infrastructure improvements - most visibly
illustrated by a new port and free trade zone near Tangier - are improving
Morocco's competitiveness.

In the 1980s, Morocco was a heavily indebted country before pursuing

austerity measures and pro-market reforms, overseen by the IMF. Since taking
the throne in 1999, King MOHAMMED VI has presided over a stable economy
marked by steady growth, low inflation, and gradually falling unemployment,
although poor harvests and economic difficulties in Europe contributed to an
economic slowdown. To boost exports, Morocco entered into a bilateral Free
Trade Agreement with the US in 2006 and an Advanced Status agreement with
the EU in 2008. In late 2014, Morocco eliminated subsidies for gasoline, diesel,
and fuel oil, dramatically reducing outlays that weighed on the country’s
budget and current account. Subsidies on butane gas and certain food products
remain in place. Morocco also seeks to expand its renewable energy capacity
with a goal of making renewable more than 50% of installed electricity
generation capacity by 2030.

Despite Morocco's economic progress, the country suffers from high

unemployment, poverty, and illiteracy, particularly in rural areas. Key economic
challenges for Morocco include reforming the education system and the
judiciary.

In 2007 the financial sector of Morocco maintained an economic environment

conducive to further growth of banking activity following a very good year for
the sector in 2006. Morocco’s banks have been largely unaffected by the credit
crisis due to their limited connection to global financial markets. The number of
people with a bank account increased from 25% in 2007 to 29% in 2008, while
deposits rose by 11.1% to a record Dh572.3bn (€51.5bn), 20% of which belong
to Moroccan nationals living abroad. Private banks are increasingly moving
towards universal banking, buying companies in all segments of the financial
industry. While GDP advanced 5.6% in 2008, outstanding loans jumped 23% to
a record Dh519.3bn (€46.74bn) as more people bought and furnished property.
As the rest of the world saw lending dry up, Moroccan banks issued more
loans, showing 2.6% growth in the first five months of 2009.The economic
growth prospects for the year 2020 have been established taking into account
recent developments in the international economic situation, structural
changes which mark out the national economy in the same way as the main
guidelines set out in the Government's declaration. On this basis, the growth
rate of the Moroccan economy should settle in real terms at 3.7% in 2020 after
2.9% in 2019. Excluding agriculture, the GDP would post an increase of 3.7% in
2020 after 3.3% in 2019.
Morocco’s Finance Law N° 70-19 relating to financial year 2020 (FL 2020) is
now effective and introduced several amendments to Moroccan tax law. The
provisions of FL 2020 should be read in conjunction with the recommendations
of the National Conference relating to Tax (Assises Nationales de la Fiscalité)
which took place in May 2019 and with the conclusions of the European
Commission which placed Morocco on the “grey list” of the Common European
Union (EU) list of third-country jurisdictions for tax purposes.
Here are the main tax measures to take into account for fiscal years beginning
on or after January 1, 2020:

1) Corporation tax:
- Abolition for new exporting companies of the 5 year exemption in terms of
company tax, concerning the turnover made on export. However, industrial
companies continue to benefit for their overall turnover from total exemption
during the first 5 financial exercises following the date of the start of their
operations.
- The incorporated sports companies will benefit from the five-year
exemption , from the first exercise of exploitation .
- Farms with a turnover of more than 5,000,000 dirhams, companies carrying
out offshoring activities as well as sports companies will permanently benefit
from the marginal rate set at 20% for the portion of net profit including the
amount is more than 1,000,000 dirhams.
 - The amount of the participation giving right to the tax reduction for the
benefit of the companies which take participations in the capital of the young
innovative companies in new technologies ( startup) is from now on capped
at 500,000 dirhams , per start-up instead of 200,000 dirhams;
-The SI scale is modified as follows:

Amount of net profit in DH New rates

Less than or equal to 300,000 10%

from 300 001-1 000 000 20% (instead of 17%)

Greater than 1,000,000 31%

The scale rate of 31% is however reduced to 28% for companies exercising an
industrial activity , excluding those whose net profit is equal to or greater
than 100,000,000 dirhams,
- Takaful insurance and reinsurance companies as well
as Takaful insurance funds and Takaful reinsurance funds will be subject to the
specific rate of 37% .
- Extension of the regime of fiscal neutrality to transfer operations
of intangible and financial fixed assets carried out within the framework of the
restructuring of groups of companies and enterprises.

2) Income tax:
- The examination of the entire tax situation provided for in article 29 of the
CGI, can only be carried out when the amount of expenditure exceeds
240,000 dirhams per year , instead of 120,000 dirhams.
- Taxpayers benefit from a reduction of 25% of the tax base corresponding to
the turnover achieved by mobile payment , concerning the simplified net
profit or flat-rate profit schemes.

- Disability pensions paid to civilians as well as soldiers or their successors in

title are exempt without distinction from income tax .

- The gross monthly internship allowance , capped at 6,000 dirhams, paid to

the intern holding a baccalaureate recruited by private sector companies for a
period of twenty-four months, will be exempt .

- Immovable property belonging to associations recognized as having public

utility and registered in the name of natural persons is exempt from tax.

- Income and profits from movable capital realized within the framework of a
stock savings plan or a company savings plan for the benefit of employees,
including the amount of payments made by the taxpayer in said plans, does not
exceed 2,000,000 dirhams (instead of 600,000 dirhams).

- Premiums or contributions relating to individual or collective pension

insurance contracts will only be deducted up to a limit of 50% of the net
taxable salary received regularly during the activity of the taxpayer with only
salary income.

3) Value added tax

- The following are exempt from value added tax without the right to deduct:

* Sales and services provided by manufacturers and service providers, natural

persons, whose annual turnover is less than or equal to five hundred
thousand (500,000) dirhams , with the exception of persons exercising liberal
professions.

* All the activities and operations carried out by sports companies for a period
of 5 years from January 1, 2020 until December 31, 2024.

- The following are exempt from value added tax with the right to deduct :

* Sales of cochlear implants ;

* Vaccines, drugs for the treatment of fertility and the treatment of multiple
sclerosis.

- Some agricultural equipment may have mixed use, including :

* Greenhouses and the elements used in their manufacture.

* Stationary internal combustion engines, vertical axis pumps and motor

pumps known as submersible pumps or submersible pumps.

- Are subject to tax at reduced rates of 10% :

* The services provided by the cafes ;

* Operations for the sale of entrance tickets to museums, cinema and

theater ;

* Financing operations carried out under the “ Salam” and “ Istisna'a ”

contracts ;

* Imported engines, intended for fishing boats.

- The products resulting from securitization operations will be

taxable according to the rules of common law instead of taxation by way of
withholding tax, collected by the initiating institution on behalf of the
Treasury.

Registration and stamp duties

- The following are exempt from registration fees :

* Acts relating to the acquisition of buildings by the beneficiaries of rehousing

within the framework of the program " Cities without slums " or " Buildings
threatening ruin " ;

* Acts relating to the acquisition of bare land or comprising buildings intended

to be demolished and reserved for the construction of hotel establishments ;

* The acts and writings by which sports associations contribute, part or all of
their assets and liabilities to sports companies.
* Acts relating to the acquisition of buildings by political parties necessary for
the exercise of their activity.

The above exemption is applied for a period of two years, starting on January 1,
2020.

Measures favoring the reduction of activities carried out in the

informal sector

Taxpayers exercising an activity liable to income tax, and who identify

themselves for the first time with the tax authorities by registering for the role
of professional tax, from January 1, 2020, are not taxable only on the basis of
income earned and transactions carried out from that date.

Internal consumption taxes

- Progressive taxation of non-alcoholic drinks according to their sugar content

- Clarification of the definition of energy drinks

- Integration of the quotas of the specific value added tax into those of the
internal consumption tax

- Establishment of an offense relating to the non-compliance of the tax mark

affixed on the containers or their packaging with the properties of the product
released for consumption.

- Introduction of an internal consumption tax on refill liquids for electronic

cigarettes.

Customs Code Changes and Indirect Taxes

- Removal of references to repealed article 20 bis, in articles 20

- Consecration of the transparency of special regimes

- Abolition of certain special tariff regimes

- Consecration of the dematerialization of customs procedures

- Clarification of the scope of certain customs offenses

- Rationalization of the repressive regime

- Change of the name of the free zones

Priority objectives of the 2020 Budget Bill

The priorities of the 2020 Budget Bill are closely indexed to the Royal High
Guidelines and are in line with the commitments made by the Government
during its fourth legislative year. The objectives adopted in the context of PLF
2020 give absolute priority to the social dimension through the use of more
effective public policies in terms of reducing social and spatial disparities and
the establishment of efficient social protection mechanisms.

Other priority objectives were also highlighted, in particular the stimulation of

investment and support for the company in order to boost the pace of growth
and strengthen in terms of job creation. No less important, additional impetus
will be given to certain major reform projects intended to consolidate the
effectiveness of public action.

1 .Continued support for social policies

Aware of the importance of social policies as a cornerstone of public policies,

the PLF 2020 will count among its priorities the pursuit of support for social
policies, through the consolidation of the reform of the education system and
Training. Thus, an immediate implementation of the framework education law
will be carried out, the pursuit of the progressive generalization of pre-school
education, the strengthening of social support for schooling and the
strengthening of the role of education as a vector. access of young people to
the labor market.

Priority will also be given to the operationalization of the roadmap for

vocational training presented to His Majesty the King on April 4, 2019, in
particular with regard to the creation of cities of trades and skills and the
modernization of teaching methods.

In addition, special attention will be given to improving and generalizing health

services and guaranteeing citizens' access to quality health services. through
the continued implementation of the 2025 Health Plan, which aims to broaden
and improve the hospital offer and the development of prevention and cure
programs at the urban and rural levels.
The efforts of the public authorities will also focus on support for the middle
classes and strengthening of support for the benefit of vulnerable groups, in
particular in terms of access to decent housing, by accelerating construction
programs. of housing and those relating to the renovation of buildings
threatening ruin and cities without slums.

2. Reduction of social and spatial disparities, and the establishment of social

protection mechanisms

In accordance with the Royal High Guidelines, the PLF 2020 pays particular
attention to the reduction of social and spatial disparities. In this context,
efforts will continue for the implementation of the Royal program to reduce
spatial and social disparities for the benefit of the rural world.

In the same vein, additional efforts will be made to support the third phase of
the National Human Development Initiative (INDH), through the promotion of a
new generation of income-generating and employment-generating activities.

Priority will also be given to the implementation of the commitments of the

social dialogue agreement given its positive and immediate impact on the
purchasing power of citizens who will benefit from the continued subsidization
of some basic products within the framework of the compensation fund.

At the same time, particular interest will be given to the expansion of health
coverage through the correction of malfunctions in the RAMED system and the
activation of AMO for the self-employed, in addition to the extension of AMO
for students .

In addition, as part of the PLF 2020, the targeting mechanisms for citizens in
precarious situations will be improved, through the launch of the pilot
experiment of the unified social register (RSU), without obscuring the pursuit of
support for widowed, divorced women, precarious and blind mothers and
people with disabilities.

No less important, vigorous action will be taken to modernize the management

of the services offered to Moroccans around the world and raise their quality,
in accordance with the operational implementation of the national immigration
and asylum strategy.
3. Impulse of a new dynamic for investment and support for the company in
order to increase the pace of growth and job creation

The Government will strive, through the PLF 2020, to consolidate the
foundations of strong and sustainable economic growth, through the
mobilization of investment and support for business.

In this regard, efforts will be made to support public investment, through the
development of a coherent new generation of sectoral strategies and the
launch of new productive investment programs with a strong impact on
employment. Emphasis will also be placed on support for domestic and foreign
private investment through the improvement of the business climate (raising
the level of efficiency of public administrations and establishments,
accelerating the adoption of the new charter investment, continue the reform
of regional centers,.).

Efforts will be focused, in particular, on supporting SMEs and MSMEs, in

particular, through the pursuit of measures aimed at cleaning up the VAT credit
accumulated in recent years, the reduction of payment periods and the
improvement of conditions 'access to finance.

At the same time as these efforts, the Government will continue its policy of
supporting exporting companies to enable them to strengthen their
competitive capacity, by making them benefit from the various strategic
partnership and free trade agreements.

In order to support the dynamics of investment, the public authorities will work
in favor of integrating the informal sector into the formal circuit, while
strengthening tax and customs control, with a view to combating fraud more
effectively. and tax evasion, smuggling, dumping and counterfeiting. Such
actions are important to guarantee consumer protection, transparency and fair
competition.

4. Continuation of major reforms

The pursuit of major reform projects is set up as priorities in the PLF 2020, in
accordance with the Royal High Guidelines which called for collective
mobilization of all the players in order to allow our country to make a
significant qualitative leap in terms of its trajectory overall development.
This is essentially the continuation of the reform of the judicial system, through
the consolidation of the independence of the judiciary, the further
simplification and standardization of rules and procedures, the improvement of
conditions of reception and acceleration of the pace of execution of judgments.

The transparency system will also be strengthened, through the application of

the provisions of the national anti-corruption strategy and the
operationalization of the law relating to the right of access to information.

The continued implementation of advanced regionalization and the

implementation of the contractual system with the regions are among the
priorities of PLF 2020. This requires support from local authorities in order to
guarantee good governance in the promotion of their autonomous resources,
in particular human and financial, as well as in the management and execution
of local affairs.

In addition, the PLF 2020 provides for the implementation of the national
charter of administrative decentralization, in particular, the part relating to
benchmark master plans. As a result, the various ministerial departments
should continue to present their referential master plans to the ministerial
committee on administrative deconcentration in order to approve them. These
plans should present a clear vision on the gradual execution of the
administrative deconcentration project during the three years mentioned in
the national deconcentration charter.

The pursuit of administrative reform is also one of the priority objectives of PLF
2020. Indeed, the organizational structures and managers of the administration
will be reformed, the modernization of the management of financial resources
and the moralization of the public service as well as the generalization of digital
administration and the facilitation of procedures, in order to substantially
improve the quality of the relationship between the administration and the
citizen.

The reform of the pension system is also one of the priorities of the PLF 2020
through the launch of the second phase of the overall reform of the national
pension systems, based on the results of the current study.

The PLF 2020 also aims to continue the application of the LOF and the
principles it advocates, in particular performance and re-issue of accounts,
especially since the financial year 2020 coincides with the implementation of
the three-year budgetary programming and preparation of the annual
performance report and the annual performance audit report.

A key importance will be given to the activation of the new approach to the
management of public investment projects, through the application of the legal
and regulatory texts governing it. This new approach aims to improve the
efficiency of investment projects and to enhance their role in terms of wealth
creation and employment, through the establishment of well-defined and
unified criteria for the selection of projects, monitoring their implementation
and assessing their economic and social impacts. To this end, a central digital
system will be set up within the Ministry of Economy and Finance in order to
ensure the follow-up of the projects of all the ministerial departments,
including those implemented by the public establishments under their
guardianship.

Tax reform would also be pursued through the adoption of the framework law,
constituting a repository of the next Finance Laws, based on the relevant
recommendations from the national meetings on taxation.

The measures of PLF 2020 will also focus on consolidating sustainable

development, by accelerating the pace of implementation, in order to improve
the lives of citizens and preserve natural resources.
 GENERAL CONCLUSION

The international economic outlook looming on the horizon remains tainted by

uncertainties. The downside risks are far from negligible and would at least
partially weaken the momentum of world GDP growth. In particular, economic
conditions would remain less buoyant in the advanced countries. On the other
hand, several emerging and developing economies would consolidate their
growth rates, although in less vigorous proportions than in the past. accentuate

In this uncertain climate, the aversion of investors to risk is called causing in its
wake a relative deceleration of trade and a less vigorous flow of capital
internationally. The disruptions in global value chains that could be induced in
the event of increased trade tensions between the United States and China, the
challenges Europe is facing in the light of Brexit as well as the risk of volatility in
commodity prices under the influence of rising geopolitical uncertainties are all
factors likely to fuel the fragility of the world economy.

The 2020 Finance Bill was drawn up taking into account the evolution of the
international context and the results of the Moroccan economy from a global
and sectoral point of view. This PLF 2020 was designed with the aim of
highlighting the progress made by Morocco in a multitude of fields and to
identify the major challenges that must be met to breathe new life into its
overall development process. .

An in-depth examination of the growth trajectory of the Moroccan economy

has made it possible to note its relative resilience to exogenous shocks and its
lower volatility. However, the low employment content of this growth, its high
concentration on the regional level and its lack of inclusiveness constitute an
obstacle to consolidating the bases of strong, self-sustaining and sustainable
growth.

Such a concern is, moreover, at the heart of the debate on the renewal of the
national development model. This renewal would obviously require a
substantial improvement in the quality of public policies in all areas of a
structural nature, both in terms of their design and in terms of their
implementation.

The multiple potentials of which Morocco abounds and its reforming vocation
put it in a better position to carry out successfully the site of the rehabilitation
of its development model. This major project requires, in accordance with the
Royal High Guidelines, the mobilization of all the living forces of the nation to
promote collective ownership of the reforms that would be envisaged for this
purpose and ricochet, in turn, the conditions necessary for their success.

Taking into account all of the above, the choices made in the context of this PLF
2020 are fully in line with the priorities of our country's development
agenda. Particular attention was paid to the social sectors, in order to
overcome social inequalities in all their dimensions, and to the increased
territorialization of public policies to forge the foundations for balanced
regional development. The same is true for strengthening the investment
climate and promoting small and medium-sized businesses in order to boost
the economy and encourage more job creation. Equal importance has been
attributed to the deepening of reforms relating to certain structuring areas,
namely institutional and territorial governance as well as the modernization of
public administration.

Bibliographic references

- Bulletin Officiel
- https://www.finances.gov.ma/fr/vous-orientez/Pages/lf-2020.aspx
- https://telquel.ma/2019/12/20/loi-de-finances-2020-ce-qui-va-changer-
pour-vous_1661608