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Morocco, the most unequal country in North Africa

Hailed for its growth rate, its openness to tourism and foreign investors, Morocco is nonetheless the country of North Africa where the inequalities between citizens are the strongest. A report entitled “An egalitarian Morocco, a fair taxation”, published Monday, April 29 by the NGO Oxfam, advocates for a fairer taxation and at the same time draws a precise and relentless picture of wealth disparities within the kingdom.

The document recalls that over the last twenty years, Moroccan growth has been dynamic (4.4% per year on average between 2000 and 2017), allowing a considerable reduction in the poverty rate, from 15.3% in 2001 to 8.9% in 2007 and 4.8% in 2014. These data, the NGO reminds us, are, however, based on a purely monetary approach to poverty. They exclude other factors such as access to health or education. Above all, this rate ignores families that are just above the poverty line and are likely to fall at the slightest blow, what the NGO calls the “vulnerability rate”. However, this would affect one in eight Moroccans nationwide, and nearly one in five in rural areas.

Inequalities have remained almost the same. The Gini coefficient, an international measurement of inequality, was 39.9 in 1985 and 39.5 in 2014. A statistical stability that is again to put into perspective, warns Oxfam, because of many methodological limitations: spending abroad are not counted, nor are savings. In addition, monetary inequalities do not take into account wealth inequalities. All these observations suggest that the differences are even greater than the official statistics say.

A failing education system

At the heart of the unequal machine is the educational system. “An inclusive and egalitarian system would alleviate social disparities and partially erase differences related to the environment of origin,” the report says. However, although Morocco devotes 21.5% of its budget to this sector (much more than the average of the Middle East and North Africa, with 13.9%), its education system is largely failing. The average duration of schooling is 4.4 years, two years less than the average of the Arab countries. And school results vary considerably depending on the environment of the students. In this context, the massive privatization of education, encouraged by the authorities, accentuates the inegalitarian logic. It is estimated that 14% of Moroccan students are enrolled in private schools, and up to 80% in large cities such as Casablanca and Rabat.

These inequalities linked to education extend into the labor market, with four strong characteristics: high youth unemployment (42.8% of 15-24 year olds in 2017); the problem of “NEET”, these young people who are neither students nor employees nor trainees (29.3% of 15-24 year olds, 2 million); the exclusion of women from the labor market; and the preponderance of informal and precarious work (80% of jobs are informal). The pay gap is also striking: “While the SMIG is 2,570 dirhams monthly [about 237 euros], it would take 154 years for a person at this level of salary to earn the equivalent of the increase in wealth on a year of one of Morocco’s billionaires,” writes Oxfam.

Like education, the health system is synonymous with strong inequalities. Morocco spends little money on it, forcing its citizens to pay for themselves (when they can) their health expenses. While in the Middle East and North Africa region, 36% of health expenditure is borne directly by households, in Morocco this proportion rises to 51%. The sector has not escaped the logic of privatization. Result: the country is 123rd out of 188 countries in the world rankings of the Human Development Index (HDI), behind Tunisia (97th) and Algeria (83rd).

Strong territorial imbalances

The kingdom also faces strong territorial imbalances. Example with access to water: while almost all urban dwellers are connected to a drinking water network, this proportion drops to 64% in rural areas, and even to 40% in the Tangier-Tetouan region -Al Hoceima (north). The latter city was the scene of a major social movement in 2017.

Finally, the inequalities between men and women remain glaring. According to the global report “Global Gender Gap”, which takes into account the participation of women in the economy, political life, their access to education and health, etc., Morocco ranks 137th out of 144 countries. Despite the efforts made in the field of school enrollment, 41.9% of Moroccan women were still illiterate in 2014 (compared to 22.1% of men), a figure that rises to 60.4% in rural areas. In 2009, 62.8% of Moroccan women reported experiencing some form of violence.

But instead of helping to erase these inequalities, the tax system accentuates them, according to Oxfam. Tax revenues represented 26.4% of Morocco’s GDP in 2016. This figure is much higher than in many other African countries, but it does not make taxation an instrument for reducing inequalities. In particular: VAT (30% of tax revenue), an unequal tax because applicable to all without distinction of income; the small number of taxpayers (the informal sector being predominant), which puts most of the effort on private and public employees; or the structuring of tax brackets (the tax rate increases very quickly in the low and middle income brackets, but reaches a ceiling quickly).

In addition, there is a quasi-inexistent wealth tax. As for the companies, a large part of them escape the tax by declaring themselves a deficit. As a result, 82% of corporate tax revenues come from only 2% of companies. In addition, foreign multinationals, including French carmakers Renault or PSA, enjoy significant tax benefits.

On the gray list of tax havens

Oxfam recalls that the country is on the gray list (not black) of the European Union of tax havens: “under surveillance” states that have until 2020 to reform their tax legislation. Finally, the NGO concludes, “governance issues also deprive Morocco of significant tax revenues.” According to the International Monetary Fund (IMF), corruption costs the country 2% of GDP, or 20.7 billion dirhams in 2017 (about 1.8 billion euros at the time).
Read also Corruption in Morocco remains “endemic” despite “slight improvement”.

Faced with these different challenges, the NGO makes a number of recommendations that are supposed to make taxation “an instrument for reducing inequalities”: better progressivity of the tax, broadening the tax base, setting up wealth tax or the end of inefficient exemptions. Oxfam recalls the speech made by King Mohammed VI to Parliament in October 2018, inviting to rethink the model of national development, but also the holding of the foundations of taxation, scheduled for May 3 and 4. These are opportunities for the authorities to show their political will to reduce inequalities.

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