Taxation, redistribution and equity: what role for fiscal expenditures in Morocco?

Abstract

The state mobilizes a range of instruments to correct the biases and distortions of the market game. Fiscal redistribution remains one of the key instruments of economic policy, and is achieved through tax progressivity, to ensure equity and reduce income inequalities. However, the duality of the tax system means that the measures of the derogatory tax regime known as "tax expenditures" can run counter to the objective of redistribution. For the literature review, we mobilized a critical theoretical analysis. The methodology used consists firstly in analyzing the progressiveness of the Moroccan tax system based on the equity criterion, and secondly in assessing the impact of the introduction of tax expenditures on the progressiveness of the tax and consequently on equity. The data used come from official tax data and data from other studies.

  The results of this work show that the Moroccan tax system is relatively progressive, by type of tax we note the neutral effect of the corporation tax, the relatively progressive character of the VAT and customs duties, and consequently we note that the income tax has a regressive character, which lets us note an inverse effect on the tax equity. Moreover, the introduction of tax expenditures has a negative impact on equity, as it increases with the level of income, which alters the progressiveness of the tax and its ability to reduce income inequalities. Consequently, for a better redistribution, it is advisable to rationalize tax expenditures, and to combine the tax instruments with other instruments, namely state transfers and public services.

Keywords: Tax system, fiscal expenditures, redistribution, progressivity, equity.

JEL Classification: H23, O23.

Paper type: Theoretical Research.