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Gender and taxation in Morocco Gender and taxation in Morocco - CEDAW REPORT - January 2009 1
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  • Gender and taxation in Morocco

    Gender and taxation in Morocco

    - CEDAW REPORT -

    January 2009

    1

  • Gender and taxation in Morocco

    2

    Table of content Table list ..............................................................................................................................................3

    Graph list .............................................................................................................................................3

    A. Introduction ...................................................................................................................................4

    B- Description of employment structure and income profile ............................................................4 1. Active population aged 15 years and older ........................................................................................... 4 2. Unemployment rate................................................................................................................................. 5 3. Employment by sectors........................................................................................................................... 6 4. Income profile.......................................................................................................................................... 7

    Women payroll share ................................................................................................................................................ 8 Average public sector salary..................................................................................................................................... 8 Gender wage gap in the public sector....................................................................................................................... 8 Average private sector salary ................................................................................................................................... 9 Gender wage gap in the private sector ..................................................................................................................... 9 Public and private sector comparison....................................................................................................................... 9

    C. Summary of Personal Income Tax System ..................................................................................9 1- Global versus scheduler.......................................................................................................................... 9 2- Definition of types of income................................................................................................................ 10 3- Exemptions ........................................................................................................................................... 11

    a- Exemptions that lower the tax base..................................................................................................................... 11 b- Exempted persons from income tax .................................................................................................................... 11

    4. Rate structure applied to taxable income ........................................................................................... 12 5. Tax preferences ..................................................................................................................................... 13

    a- Deductions on global taxable income ................................................................................................................. 13 b- Deduction for professional expenses .................................................................................................................. 14 c- Reductions........................................................................................................................................................... 14

    D. Hypothetical scenarios of PIT impacts on household types .......................................................15 i. Vertical equity ........................................................................................................................................ 15 ii- Horizontal equity .................................................................................................................................. 15

    PIT incidence over years for different earners ........................................................................................................ 15 PIT incidence on different household's earners....................................................................................................... 16

    E- Summary and conclusions...........................................................................................................20 a. Explicit gender biases ........................................................................................................................... 20 b. Implicit gender biases ........................................................................................................................... 20

    E. Recommendations for policy........................................................................................................20

  • Gender and taxation in Morocco

    3

    Table list Table 1 : Women payroll share by sector ..........................................................................................8 Table 2 : Average monthly salary by deciles in the public sector (1999-2007) ................................8 Table 3 : Average wage gap in the public sector by deciles ..............................................................8 Table 4 : Average wage gap in the private sector by deciles.............................................................9 Table 5 : PIT normal rates applied in 2009 on salary revenues are as follows:...............................12 Table 6 : PIT specific rates: .............................................................................................................12 Table 7 : Evolution of exemption threshold.....................................................................................13 Table 8: Distribution of employed people across tax brackets by sex (2007) .................................15 Table 9 : Median salary in the public sector taxpayer with 3 dependents (2007)............................16 Table 10 : Half median salary in the public sector taxpayer with 3 dependents (2007)..................16 Table 11 : Two times the median salary in the public sector taxpayer with 3 dependents (2007) ..16 Table 12 : taxpayers at ½ the median income..................................................................................17 Table 13 : taxpayers at the median income......................................................................................17 Table 14 : taxpayers at two times the median income .....................................................................18 Table 15 : Comparison of the effective average tax rate of an individual .......................................18 Table 16 : effective average tax rate of a household........................................................................19

    Graph list Graph 1 : occupied labor force by sex and age in 2007.....................................................................5 Graph 2 : activity rate by sex and area of residence in 2007 .............................................................5 Graph 3 : unemployment rate by sex .................................................................................................6 Graph 4 : Unemployment rate by sex and by area in 2007................................................................6 Graph 5 : occupied labour force by sector and by sex .......................................................................7 Graph 6: Field of application of PIT................................................................................................10 Graph 7 : How PIT is calculated......................................................................................................15 Graph 8 : effective average tax rate of an individual.......................................................................19 Graph 9 : effective average tax rate of a household.........................................................................19

  • Gender and taxation in Morocco

    4

    A. Introduction Morocco was committed to eliminating all forms of discrimination against women by ratification of CEDAW and engagement to achieve the Millennium Development Goals (MDGs). Among these objectives MDG3 targets women empowerment including "empowerment of women" with associated targets 6, 11, 12, 13 and 14. These targets relate to reducing social exclusion, the elimination of gender disparities in primary and secondary education, the elimination of disparities in access to employment and resources and equal pay, access to the legislative, executive and judicial areas and in all decision-making bodies and the elimination of legal discriminatory provisions.

    At the 1995 United Nations World Conference on Women in Beijing, governments made a commitment to incorporate a gender perspective into budgetary processes in order to support gender equality. Since then, work by women’s NGOs, other civil society organisations, academics and multilateral organisations has shown that the analysis of government expenditures can be an important tool for addressing gender inequities.

    Efforts to integrate a gender perspective into public budgeting have been going on in Morocco since 2002. But the budget revenue side has not been addressed yet from a gender perspective.

    Taxation and expenditure need to be analysed together for a full understanding of the income and gender impacts of government fiscal policy. The level of taxes to be levied is decided in conjunction with the level of needed expenditures. The ultimate ratio of tax burden/social benefit for individual women and men depends on the gender distribution of both taxes paid and services received, as well as the gender distribution of the long-term gains from social and economic development. The goal of gender revenue analysis is to identify and monitor the flow of sufficient financial resources so that gender equity is achieved in revenue generation and women and men, and girls and boys, benefit equitably from programmes and services.

    This report reviews the gender dimensions of taxation in Morocco, especially, the Personal Income Tax (PIT). The report will investigate the question of gender bias in the taxation system and identifies the implications for tax policy and reforms, which often include a shifting of the tax burden toward individuals and away from corporations.

    The structure of the paper is as follows. Section B describes the employment structure and the income profile of the Moroccan population. Section C provides a summary of Personal Income Tax in terms of types of income, exemptions, rates structure and tax preferences. Section D outlines several hypothetical scenarios of PIT impacts on different household types. Finally, section E presents the summary and main conclusions.

    B- Description of employment structure and income profile

    1. Active population aged 15 years and older

    The active population aged 15 years and older represents 11.1 million in 2007, Women labour force participation compared to men remains low 27.1%.

  • Gender and taxation in Morocco Graph 1 : occupied labour force by sex and age in 2007

    20,5

    46,6

    23,3

    15-24years

    25-44years

    45-59

    MaleFemale

    In 2007, in urban areas, activity rate reached 71.5% for men against 19.6% for women. In rural areas, this rate represents 84.6% in 2007 for men and 37.7% for women.

    Graph 2 : activity rate by sex and area of residence in 2007

    71,5

    19,6

    82,6

    37,7

    76,1

    27,1(%)

    Urban Rural Both

    Activity rate by sex and area of residence in 2007

    Male Female Source: HCP

    2. Unemployment rate Contrary to the situation prevailing in the 1990s, where the female unemployment rate was generally higher than for men, the difference between these two rates tend to diminish since the early 2000. Indeed, the annual unemployment rate, both men and women, stood at the same level. It rose from 9.7% in 2006 to 9.8% in 2007 which probably means that men and women are currently facing the same difficulties in the labour market. This difficulty is most pronounced in urban areas (15.5% in 2007 ).

    5

  • Gender and taxation in Morocco Graph 3 : unemployment rate by sex

    Unemployement rate by sex (2000 to 2007)

    8

    9

    10

    11

    12

    13

    14

    15

    2000 2001 2002 2003 2004 2005 2006 2007

    (en

    %)

    Male Female All

    Source: Drawing from national surveys on employment, HCP

    In rural areas, women unemployment rate is lower than men, but their occupations remain low-paid. Indeed, 80.6% of women in rural areas belong to the category of caregiver, seasonal, domestic workers and apprentices versus 37.5% for men.

    Graph 4 : Unemployment rate by sex and by area in 2007

    0

    5

    10

    15

    20

    25

    (%)

    Urbain Rural Ensemble

    Taux de chômage par sexe et milieu de résidence en 2007

    Hommes Femmes

    Source: Drawing from national surveys on employment, HCP

    3. Employment by sectors The highest woman participation is encountered in agriculture, forestry and fisheries, industry and handicrafts. 92% of women work in the agriculture sector in rural areas, versus only 6.1% in urban areas.

    Employment in manufacturing and services shows a significant participation of the occupied urban women. In the textile and food-industry, the presence of women is also important, despite the unfavourable working conditions. Men are frequently employed in trade, construction, public works, mining and industry.

    In the informal sector 86.7% of workers are men. Women represent 69.9% in informal sector work at home versus 30.1% men (crafts, embroidery, sewing, weaving carpets...).

    6

  • Gender and taxation in Morocco This analysis of employment indicators highlights existing inequalities between men and women. This situation is explained by the existence of bottlenecks and social norms impeding the promotion and development of female employment.

    Graph 5 : occupied labour force by sector and by sex

    Occupied labour force by sector and by sexe - 2006 -

    38%

    34%

    33%

    18%

    8%

    8%

    7%

    2%

    1%

    1%

    62%

    62%

    66%

    67%

    69%

    82%

    82%

    92%

    92%

    93%

    98%

    99%

    99%

    38%

    18%

    31%

    Social Services to the co llectivity

    Agriculture, forest and fishing

    Personnels & domestiquesServices

    Industry

    Banques, insurance, real estateand services to companies

    Catering and hotel business

    General Administration

    Wholesale and retail trade

    Electricity, gaz, water

    Transports, communications

    M ining

    Construction and public works

    Repair works

    F M

    Source: HCP

    In the informal sector 86.7% of informal sector workers are men. Women represent 69.9% in informal sector work at home versus 30.1% men (crafts, embroidery, and sewing, weaving carpets, small confections,...).

    4. Income profile As household income data is not available, the analysis of income profile is based on data related to wages in public and private sector.

    In 2007, women represent 31.16% of private sector employees and 36.1% of public civil servants.

    7

  • Gender and taxation in Morocco Women payroll share Women civil servants received 32% of total payroll in 2007 versus 28% in 1999. Whereas, women employed in the private sector got only 27% of the total payroll in 2007 versus 24% in 19991.

    Table 1 : Women payroll share by sector

    Source : CNSS and Annuaire statistique, Author calculations

    Average public sector salary Women civil servants received 32% of total payroll in 2007 versus 28% in 1999. Whereas, women employed in the private sector got only 27% of the total payroll in 2007 versus 24% in 1999.

    Table 2 : Average monthly salary by deciles in the public sector (1999-2007)

    Source : Annuaire statistique, Author calculations

    Gender wage gap in the public sector The analysis of the gender wage gap in the public sector by deciles from 1999 to 2007 calls the following comments:

    The women monthly average wage is 18.7% less than males. The gender wage gap varies between 17.6% and 20.2% during the same period;

    Table 3 : Average wage gap in the public sector by deciles

    Average wage Gap MF-Public 1999 2000 2001 2002 2003 2004 2005 2006 2007

    1 18,2% 17,0% 16,5% 17,5% 19,1% 16,8% 13,2% 10,2% 14,9%2 14,2% 12,4% 11,1% 10,4% 9,5% 9,3% 5,9% 0,5% 0,5%3 10,0% 7,7% 5,5% 5,4% 6,0% 4,7% 3,4% 2,8% 3,2%4 8,8% 8,7% 8,3% 9,5% 10,6% 7,1% 7,7% 9,7% 13,4%5 12,4% 12,0% 12,3% 11,8% 12,9% 13,2% 12,7% 16,1% 14,4%6 14,5% 13,6% 12,8% 17,2% 20,0% 25,7% 18,2% 20,2% 27,4%7 18,4% 20,3% 20,5% 15,1% 10,7% 9,4% 8,5% 11,9% 2,1%8 17,9% 14,6% 13,7% 11,5% 14,1% 9,4% 15,4% 30,3% 48,8%9 26,1% 31,3% 32,8% 39,4% 38,8% 34,3% 34,1% 31,9% 21,4%10 29,2% 23,6% 22,5% 20,6% 20,8% 19,3% 20,2% 14,1% 11,2%

    Average salary 20,2% 19,0% 18,6% 19,3% 19,6% 17,9% 17,6% 18,4% 18,1% Source : Annuaire statistique, Author calculations

    1 Data on the public payroll and public sector employment is provided by the Statistical Yearbook of Morocco. The statistics published by the National Social Security Fund (CNSS) are used to estimate the number of employees and payroll in the private sector.

    8

  • Gender and taxation in Morocco Average private sector salary The average salary in the public sector from 1999 to 2007, increased annually by 3%. During this period the average monthly salary grew from 2845 DH in 1999 to 3617 DH in 2007 which represents an increase of 27.1%.

    Gender wage gap in the private sector The analysis of the gender wage gap in the private sector by deciles from 1999 to 2007 calls the following comments:

    The women monthly average wage is 25.8% less than males. The gender wage gap varies between 19% and 32.1% during the same period;

    Table 4 : Average wage gap in the private sector by deciles

    Average wage Gap MF-Private 1999 2000 2001 2002 2003 2004 2005 2006 2007

    1 27,6% 26,7% 27,3% 30,7% 6,2% 4,8% 0,2% -2,7% 0,4%2 25,0% 23,4% 21,8% 21,2% 9,3% 7,6% 4,2% 3,3% 1,2%3 21,6% 23,5% 28,3% 29,4% 19,0% 16,8% 13,9% 15,0% 13,6%4 21,7% 20,8% 17,2% 15,0% 11,3% 10,0% 4,8% 2,7% -2,7%5 11,0% 6,3% 4,6% 9,6% -7,5% -4,9% 0,5% 4,8% 8,0%6 10,5% 13,2% 17,2% 17,0% 8,4% 9,1% 2,3% -1,3% -6,5%7 22,0% 22,8% 18,9% 20,1% 11,3% 7,0% 5,6% 8,8% 10,9%8 30,0% 26,3% 30,1% 31,9% 24,0% 21,5% 19,6% 19,4% 17,3%9 36,2% 34,5% 33,2% 47,1% 30,2% 28,5% 25,6% 22,8% 19,6%10 39,2% 39,4% 38,2% 36,3% 37,8% 34,5% 32,9% 31,3% 30,0%

    Average salary 30,7% 30,2% 29,7% 32,1% 25,7% 23,4% 21,2% 20,3% 19,0% Source : CNSS, Author calculations

    Public and private sector comparison From a gender perspective it can be concluded that:

    Female civil servants are better paid than females employees in the private sector. They receive an average monthly salary of about 6588 DH, representing two times the average salary received in the private sector (3144 DH).

    The average gender wage gap in the public sector has slightly decreased by 2 points between 1999 and 2007 (from 20.2% to 18.1%).

    The average gender wage gap in the private sector has greatly decreased by 8 points, between 1999 and 2007 (from 30.7% to 19% ).

    C. Summary of Personal Income Tax System

    1- Global versus scheduler PIT was introduced in 1990 in replacement of other scheduler taxes. PIT in his new edition aims mainly to reduce distortions and inequities in the distribution of tax burden between individuals and corporations by submitting all their global income (professional income, wages, agricultural and capital, land and profit) to a single tax with a single scale.

    PIT is based on individual filing which refers to a system in which each person liable to income tax files an individual return. But, usually returns are filed by employers and PIT is cut from the source.

    The employees whose tax is deducted from the source contribute up to 89% of PIT revenue. The share of non salary revenues remains low and reflects the efforts to be undertaken to improve the revenues generated from PIT.

    9

  • Gender and taxation in Morocco In the case of declaration of salaries and wages2, private employers resident or established in Morocco as well as other administrations and legal persons of public law are required to submit each year to the tax inspector, a statement showing, for each of the beneficiaries of wages paid during the previous year.

    The following taxpayers do not have to produce the statement of total income, unless they feel surcharged or claims for deductions3:

    - Taxpayers who have only farm income from a single holding fall; - Taxpayers who have only wage income paid by a single employer resident or established

    in Morocco and required to operate the withholding tax.

    PIT code distinguishes 3 categories of persons liable for income tax 4:

    - Physical persons who have their usual fiscal residence in Morocco on their global Moroccan or foreign revenues and profits;

    - Physical persons who doesn't have their usual fiscal residence in Morocco on their global Moroccan revenues and profits;

    - Persons who have or don’t have their usual fiscal residence in Morocco and who make profits or perceive revenues on which tax levy is recognized to Morocco in accordance with international conventions against double taxation on PIT.

    The Graph below shows the structure of the taxable base and the liable persons and the different categories of taxable revenues.

    Graph 6: Field of application of PIT

    Who is in the net

    Taxable base

    Liable persons

    Non resident persons

    Resident persons

    Resident or non resident

    persons

    Professional revenues

    Agricultural revenues

    Salary revenues

    Land profits and revenues

    Capital gains and profits

    Wages SalariesIndemnities

    and emoluments

    Pensions Life annuities

    Global Moroccan or

    foreign revenues and

    profits

    Global Moroccan

    revenues and profits

    Tax Revenue levy (non

    double taxation

    convention)

    2- Definition of types of income Personal Income tax in Morocco is composed of five different types of revenues which are subject to different tax rules: professional income; agricultural income5; salary income; land profits and income; capital gains and profits. In this study, we will focus only on the income tax applied on salary revenues because data on the other types of revenues is not available.

    2 Art 79, General Tax Code 3 Art 86, General Tax Code 4 Article 22, General Tax Code. 5 Agricultural income is exempted from PIT until December 31st, 2013.

    10

  • Gender and taxation in Morocco

    11

    Are considered as earned income for tax purposes income derived from salaries; allowances and emoluments; special allowances, reimbursement of standard fees and other emoluments granted to the leaders of societies; pensions; advantages in money or in kind awarded in excess of income above.

    The global income includes all types of income. The overall taxable income is composed by the taxable income of one or several categories above, excluding income and profits subject to tax at a rate discharge.

    The net income of each of those categories is determined separately following specific rules to each of them as provided by the provisions of the tax code.

    According to article 2-II of the general tax code are liable to corporate tax as an option, corporations and simple limited corporations created in Morocco and including only individuals (physical persons). The option must be stated on a declaration.

    Salary revenues are strongly dominating PIT revenue for about 71.6% in 2007. The weak contribution of other sources of income is worsened by tax preferences. PIT revenue progression comes primarily from an imposition of employees. Other types of income such as professional income benefit from exemptions and deductions, which are felt more and more inequitable.

    3- Exemptions 6

    a- Exemptions that lower the tax base PIT exemptions that lower the tax base are as follow:

    1°- Function indemnities;

    2°- family allowances;

    3°- pension increases for family load;

    4°- invalidity pensions allocated to army members and their legal claimant;

    5°- temporary life annuities allocated to work accident victims;

    6°- daily illness indemnities, accident, maternity, and death allocations;

    7°- lay-off and voluntary work quit indemnities.

    8°- alimony;

    9°- complementary pensions;

    10°- life insurance contracts not less than 10 years;

    11°- employer social security contribution part;

    12°- employer insurance subsidy for illness, maternity, invalidity and death;

    13°- catering allocations by employers in the limit of 10 dirham a day and 20% of gross taxable salary of the employee.

    15°- salaries allocated by the Islamic Development Bank to its employees;

    16°- monthly trainee indemnity up to 6.000 dirham to persons recruited by private sector;

    17°- student tuitions.

    b- Exempted persons from income tax Exempted persons from income tax are:

    6 Article 57

  • Gender and taxation in Morocco - Ambassadors and diplomatic agents, consuls and foreign consular agents on their foreign

    income at condition to get the same treatment by other countries.

    - Resident persons for benefits from using or the right of using copyright on literature, artistic or scientific productions.

    - Farmers are exempted until December 2013 for benefits from their farms and all other agriculture activities.

    - Training indemnity allowed to graduated persons (up to a fixed amount) recruited by the private sector.

    - Revenues from rents of new constructions. - Donations of asset between ascendants, descendants, spouses and sisters and brothers. - Interests perceived by physical persons who hold an account in "Caisse d’épargne

    nationale".

    - Companies primarily with regard to: o Exemption from property developers who perform as part of an agreement with the

    State, programs of construction under conditions.

    o The hotels benefit for the portion of the tax base corresponding to their turnover in foreign currencies, the total exemption of PIT for 5 years from the 1st hosting operation conducted in currencies and a reduction of 50% of that tax beyond this period.

    o The exporting companies benefit for the amount of their turnover on the export of the total exemption of PIT during the 5 years from the 1st export operation and a reduction of 50% after.

    4. Rate structure applied to taxable income The table below shows the distribution of employed people across tax brackets by sex. It is calculated from data on public and private sector employees in 2007. We notice from this table that women are more likely to be found in the bottom lower brackets of salaries that do not pay PIT: 34.8% in the private sector and 1.6% in the public sector

    On the other hand we notice that the situation of women in the upper revenue slices is also better in the public sector (50.4%) than in the private sector (11.5%). The percentage of men in the upper brackets is higher than for women in both public and private sectors.

    Table 5 : PIT normal rates applied in 2009 on salary revenues are as follows:

    Table 6 : PIT specific rates7: Specific rates Beneficiaries

    10% Copyright royalties, remunerations for technical and scientific studies…art 15) 15% Net profits from transfer of securities or other assets

    17% Occasional remunerations granted by public or private organisations to teachers not belonging to the permanent personnel

    7 Art. 73, Tax code

    12

  • Gender and taxation in Morocco 18% director's fee, salaries paid by offshore banks and offshore holdings to their employees

    20% Transfer of securities and other assets profits, OPCVM, gross profit from foreign capital

    30% Occasional indemnities and remunerations granted by employers to persons not belonging to the permanent personnel, fees and remunerations of doctors and artists

    Table 7 : Evolution of exemption threshold

    This Graph shows that PIT marginal rate dropped significantly during the observed period from 60% to 40% which means that the tax burden has been alleviated on high bracket revenues.

    5. Tax preferences8 Tax preferences existing in Morocco show great complexity and concern all types of taxes (Corporate Tax, PIT, VAT, registration fees and stamp, licence and urban tax), and they are still increasing with new specific derogatory measures granted.

    Vis-a-vis this situation, the authorities decided in 2005 with the support of the European Union to make a first evaluation of the tax expenditure in order to measure their budgetary consequences. On behalf of this decision many reports showing the cost of theses tax preferences were published and annexed to the financial law.

    Tax preferences apply either on the taxable base or on tax rates. PIT distinguishes between 2 types of deductions: deductions on global taxable income and deduction for professional expenses.

    a- Deductions on global taxable income Deductions on global taxable income9 are as follows:

    - Donations in cash or in kind given to some specific organizations and NGO10; - In the limit of 10 % of global taxable income, interest related to loans given to tax

    payers by specialized institutions or by banks or similar authorized organizations, by public or private sector and associations, for the acquisition or the construction of houses to live in. To benefit from this deduction salary revenues must be cut from the source and the amounts of reimbursement of loans (principal and interest) must also be cut monthly from the source by the employers to lenders;

    - For houses owned jointly, the deduction of the amount of interest is granted to every joint owner in the limit of 10%, quoted above, and according to the share of each one of them in the main house.

    - In the limit of 6 % of the global taxable revenue, a deduction is granted for individual or collective insurance premiums contracts and social security contributions for duration at least equal to 10 years and whose benefits are given to persons when they reach the age of 55 years.

    8 This list is far from exhaustive. Whatever their goals and forms, tax incentives should meet in their drafting and design some criteria to ensure their effectiveness and success. Besides the traditional criteria (transparency, clarity and ease of use; durability to ensure visibility to beneficiaries; and low cost of use for both the government and the beneficiary), it is suggested to add gender dimension of beneficiaries while monitoring and post-evaluating of performance and results. 9 Article 28 of General tax code 10 Quoted in article 10-I-B-2°of General Tax Code

    13

  • Gender and taxation in Morocco

    14

    - If the taxpayer has only salary revenues, he can deduct the whole amount of all his social security contributions from his net taxable salary.

    - Retirees benefit from 40% flat rate deduction on the global amount of their taxable pension or life annuities.

    b- Deduction for professional expenses Tax code allows the benefit from deduction for professional expenses as follows in the limit de 28000 Dirham a year11:

    - 20%, normal rate ; - 40% for retirement revenues, - 25% for casino employees ; - 35% for night working employees (newspapers, miners, artists, musicians, choreographs etc); - 45% for journalists, photographs, life insurance agents, travelers, pilots, air employees, etc); - Deduction of 20% for land revenues; - Deduction of 40% on gross land revenues on rented buildings.

    c- Reductions Reductions are as follows:

    - Reductions for family loads: taxpayers benefit from a reduction of PIT for family loads equal to 360 dirham per year for each dependant family member, limited to 6 persons12 equivalent to 2160 DH.

    - Reduction of 80% of PIT on foreign pension transferred to Morocco in DH. - Taxpayers, who have their fiscal residence in Tangier and have their principal activity there,

    benefit from a permanent tax reduction of 50% for this activity.

    - Taxpayers who have their fiscal residence in provinces quoted by the law benefit from PIT reduction of 50% during 5 years on their activities based inside the territory of the quoted provinces.

    "The tax code consider as dependant of the taxpayer (men):

    - His wife ; - His own children and children under his legal responsibility according to the following

    conditions:

    • They must not have an income above the threshold of exemption;

    • Not aged above 21 or 25 if pursuing studies. This age condition is not required if children are permanently suffering from disabilities…

    - The women benefit from tax reduction for family load if she proves that her husband and children are legally dependent on her"13.

    11 Article 68 of General tax code 12 Article 74, General Tax code 13 Article 74, General Tax Code.

  • Gender and taxation in Morocco

    D. Hypothetical scenarios of PIT impacts on household types

    i. Vertical equity The table below shows the distribution of employed people across tax brackets by sex. It is calculated from data on public and private sector employees in 2007. We notice from this table that women are more likely to be found in the bottom lower brackets of salaries that do not pay PIT: 34.8% in the private sector and 1.6% in the public sector

    On the other hand we notice that the situation of women in the upper revenue slices is also better in the public sector (50.4%) than in the private sector (11.5%). The percentage of men in the upper brackets is higher than for women in both public and private sectors.

    Table 8: Distribution of employed people across tax brackets by sex (2007)

    Source: statistical yearbook book, CNSS, authors calculations.

    ii- Horizontal equity

    PIT incidence over years for different earners The tables below show that the burden in 2007 on taxpayers at the median income, half median and twice the median, has been decreasing over year corresponding to the successive PIT reforms, and even in the future (next two years) all classes will benefit from this reduction of the burden except for employees whose salary is at the threshold of exemption. In the followings examples the gross monthly salary stay the same over all the years, without any inflation adjustment.

    Calculations are based on salaries related to public sector wages for both males and females in 2007 and PIT provisions according to the different tax reforms from 1999 to 2009 related to the rate of deduction for professional expenses, reduction for family load, revenue brackets and the threshold of exemption.

    Graph 7 : How PIT is calculated

    Taxable income = (Gross salary - Deduction for Professional Expenses - social security contribution) Deduction for Professional Expenses = (Deduction rate x Gross salary) max 2333,33 DH. PIT= (Taxable income x PIT rate - Fixed deduction) - Reduction for family load Net salary = (Gross salary - PIT- Social security contributions) + child allowances.

    15

  • Gender and taxation in Morocco Table 9 : Median salary in the public sector taxpayer with 3 dependents (2007)

    Table 10 : Half median salary in the public sector taxpayer with 3 dependents (2007)

    Table 11 : Two times the median salary in the public sector taxpayer with 3 dependents (2007)

    PIT incidence on different household's earners This section will examine 3 hypothetical cases of PIT treatment of individuals inside different households with two children. These examples try to illustrate biases in PIT and the burden it generate on each household type because of the ways that deductions are structured. All these households with and without children are earning the same amount of total income at the three levels (half median; median; and 2 times the median).

    Case 1: This case presents different categories of taxpayers earning a salary at half the median income (one single breadwinner either male or female, male-breadwinner households and female-breadwinner households, dual breadwinner households).

    All households in this case are with dependants (Spouse + 2 children) except the first case “one single breadwinner” without legal dependants.

    All households are earning the same amount of total income: 2912 DH.

    16

  • Gender and taxation in Morocco Globally couples with dependants either one breadwinner or dual breadwinner households at half the median fall under the threshold of exemption and don’t pay any tax.

    In the other hand, single breadwinners, widowed, divorced, with or without adult dependants (mother, father, brothers or sisters), bear the heaviest effective average rate tax. This observation applies to all scenarios.

    Table 12 : taxpayers at ½ the median income

    Case 2: This case presents different categories of taxpayers earning a salary at the median income (one single breadwinner either male or female, male-breadwinner households and female-breadwinner households, dual breadwinner households).

    All households in this case are with dependants (Spouse + 2 children) except the first case “one single breadwinner” household which is without legal dependants.

    All households are earning the same amount of total income: 5825 DH.

    Globally, single breadwinner households at the median income pay more taxes. In the other hand reduction for family load lower the tax burden on male and female breadwinner households with dependants. On the other side, egalitarian dual breadwinner households pay less tax than other categories. Dual breadwinner households where female income is higher than husband’s, pay more tax than those where male earn higher income, because reduction of tax for family load benefit automatically to male breadwinner. This fact was not visible in the previous case where most households fall under the threshold of exemption and therefore pay zero tax.

    Table 13 : taxpayers at the median income

    17

  • Gender and taxation in Morocco Case 3: This case presents different categories of taxpayers earning a salary two times the median income (one single breadwinner either male or female, male-breadwinner households and female-breadwinner households, dual breadwinner households):

    All households in this case are with dependants (Spouse + 2 children) except the first case “one single breadwinner household” which is without legal dependants.

    All households are earning the same amount of total income: 11649DH.

    Globally, single breadwinner households at two times the median income pay more taxes. In the other hand reduction for family load slightly lower the tax burden on male and female breadwinner households with dependants. On the other side, egalitarian dual breadwinner households pay less tax than other categories. Dual breadwinner where female earns an income higher than male’s pay, more tax than those where male earn higher income because the tax reduction for family load benefit mechanically to male breadwinner. This fact is also visible in the previous case number 2.

    It is also noticed that child allowances14 (200 DH for each of the 3 first children and 30 DH for each of the 3 following) are granted in the same conditions as reductions for dependant persons. This situation worsens the net salary gap between male and female dual breadwinner households especially egalitarian type and this observation applies to all categories of income in the three cases.

    Table 14 : taxpayers at two times the median income

    Table 15 : Comparison of the effective average tax rate of an individual

    14 Décret n°2-58-1381 du 15 Joumada I 1378 (27 novembre 1958) fixant les conditions d’attribution des prestations familiales aux fonctionnaires, personnels militaires et agents de l’Etat, des municipalités et des établissement publics.

    18

  • Gender and taxation in Morocco Graph 8 : effective average tax rate of an individual

    Results of hypothetical scenariosEffective average tax rate of an individual

    0%

    5%

    10%

    15%

    20%

    25%

    1/2 Median income 2,1% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

    median income 13,2% 10,6% 10,6% 0,0% 2,1% 2,3% 0,0%

    2 times median income 23,1% 21,7% 21,7% 10,6% 13,2% 14,8% 8,2%

    Single breadwinner HH

    Male-breadwinner HH

    Female-breadwinner HH

    Dual breadwinner egalitarian M

    Dual breadwinner egalitarian F

    Dual breadwinner (M

    earn > F) M

    Dual breadwinner (M

    earn > F) F

    Table 16 : effective average tax rate of a household

    Graph 9 : effective average tax rate of a household

    Results of hypothetical scenariosEffective average tax rate of a Household

    0%

    5%

    10%

    15%

    20%

    25%

    1/2 Median income 2,1% 0,0% 0,0% 0,0% 0,0% 0,0%

    median income 13,2% 10,6% 10,6% 1,1% 1,5% 3,5%

    2 times median income 23,1% 21,7% 21,7% 11,9% 12,3% 12,7%

    Single breadwinner without Dep

    Male-breadwinner

    HH

    Female-breadwinner

    HH

    Dual earner egalitarian

    Dual earner (M earn > F)

    Dual earner (F earn >M)

    19

  • Gender and taxation in Morocco

    20

    E- Summary and conclusions

    a. Explicit gender biases A review of the Moroccan PIT code reveals that article 74 contains an explicit gender bias in considering as dependant of the taxpayer (men) his wife and his own children and children under his legal responsibility.

    In addition, according to this article, women can benefit from tax reduction for family charges only if she proves that her husband and children are legally dependent on her"15.

    These provisions treat explicitly women as dependant of men and should be removed from the tax code, because it is conflicting with the CEDAW provisions and with 2004 Moroccan new family code which places the family under the co responsibility of both spouses (article 4).

    b. Implicit gender biases The fundamental principle that is relevant here is that women should be equally free to choose how to live their lives and governments should not provide incentives for any particular choice. This would imply that the income tax system should be neutral.

    However, it may be argued that women do not make choices on how to live their lives in conditions of substantive equality, but in conditions in which stereotypes roles shape their choices.

    As shown previously in the section related to the gendered picture of the Moroccan economy, implicit biases exist in revenue allocation between male and female workers and all tax incentives (deductions and reduction…) contribute to implement a tax system which appears to be gender neutral but nevertheless benefit more to those who already benefit from the whole economic system and hence is not equitable.

    CEDAW article 5 enjoins States Parties to take all appropriate measures (to modify the social and cultural patterns of conduct of men and women) in order to achieve substantive equality. This suggests that the design of income tax system should promote an equal sharing of both paid and unpaid work between women and men and not give incentives for the perpetuation of families with breadwinner husbands and dependant wives.

    E. Recommendations for policy Based on findings on gender biases and gender discrimination within the Moroccan tax code we will formulate some relevant recommendations for more equity and fairness in the tax system.

    • Data and information system: Tax Administration must release sex desegregated data about taxpayers.

    • Reductions for family loads: The review of PIT code reveals that there is an explicit gender bias in article 74 which treats explicitly women as dependant of men. This provision should be removed. Separate tax reductions must be granted for both breadwinners within households in order to be in compliance with CEDAW articles (1, 2, 5, 13, 15, 16) and General Recommendation No.21 which imply that there must be no discrimination against women in tax systems. Women must be treated as equal to men in tax laws; as individual, autonomous, citizens, rather than as dependents of men". Another option would consist in dealing with family matters outside the tax code in the form of direct transfers.

    • Deductions: tax code allows the benefit from deduction for professional expenses of 20% normal rate both for women and men. Taking into consideration the burden on women due to unpaid work, and the weak opportunity they have to access to the formal labour market (27.3% in 2007), it is more equitable to improve these professional expenses for them to

    15 Article 74, General Tax Code.

  • Gender and taxation in Morocco

    21

    achieve substantive equality. The value of unpaid work can be taken into account in the sense of recognizing it by giving tax allowances to women who participate in paid employment in order to offset some of the costs of buying substitutes for the unpaid domestic work and to encourage them stay in the labour market.

    • Tax preferences in general should meet in their drafting and design some criteria to ensure their effectiveness and success (transparency, clarity and ease of use, durability and low cost of use). Besides this criteria tax system should worry also about achieving gender equity while monitoring and post-evaluating performance and results.

    Table listGraph listA. IntroductionB- Description of employment structure and income profileWomen payroll shareAverage public sector salaryGender wage gap in the public sectorAverage private sector salaryGender wage gap in the private sectorPublic and private sector comparison

    C. Summary of Personal Income Tax Systema- Exemptions that lower the tax baseb- Exempted persons from income taxa- Deductions on global taxable incomeb- Deduction for professional expensesc- Reductions

    D. Hypothetical scenarios of PIT impacts on household typesPIT incidence over years for different earnersPIT incidence on different household's earners

    E- Summary and conclusions E. Recommendations for policy