Morocco's Finance Bill 2011. The Moroccan government has made some important changes to the finance policies in order to make Morocco a better place for a business to grow or to have place in.

University Degree Business and Administrative studies

Anas Chokairy

Business in context

BM1

SIST/UWIC

Finance Bill 2011

Introduction

In order for new businesses to come up to life or for any business organizations to establish a sustainable growth rate, it is crucial that the parties in charge have a favorable business environment created, because as we all know there are several factors influencing the environment where small and medium enterprises operate, therefore potential investors run researches and go through all the information available with the purpose of learning about the elements of the business environment they are dealing with, the opportunities they have, the risks they need to be aware of, the obstacles they might face, and facilities they will have to access in order to successfully penetrate the market. The Moroccan business environment is very good when it comes to social and economic growth, but it is being especially improved in the legal and political aspects. The Moroccan government has made some important changes to the finance policies in order to make Morocco a better place for a business to grow or to have place in.

Body

Business environment is a mixture of many factors such as political, economic, legal, social, cultural, technological etc. these factors affect businesses in the way that they influence everything they do, from the decisions they take to the strategies they follow, “Firms which systematically analyze and diagnose the environment are more effective than those which don’t analyze the environment. Environmental analysis is a careful study of various factors influencing the business. It is the process by which organization monitor their relevant environment to identify opportunities and threats affecting their business.”(TR Jain, Mukesh Trehan, Ranju Trehan)

In order words, by mastering the business environment the businesses are more likely to succeed but that can be a hard goal to achieve. TR Jain, Mukesh Trehan and Ranju Trehan said that there are constant changes in the business environment factors with the passage of time and that is what makes it dynamic and hard to cope with, that is why businesses have to change their plans and policies to keep pace with the changing environment. This can simply be achieved by conducting one of the best and most accurate studies of the environment which is the pestle analysis, it includes all the aspects a business should analyze in order to build a good strategy that meets the environment it operates in. to further understanding of the important role of the business environment we are going to go through the Moroccan business environment aspects. In one hand there is a modern economy that is manifested by a relatively good infrastructure, companies that are active in global markets, and a relatively open banking sector which has benefited from significant reforms, a stable currency and an administration that is being modernized as stated in the following:

“The Improving the Business Environment Program fosters an improved business environment to comply with FTA requirements. Over the past decade, Morocco has made great strides in modernizing its economy and business environment. Regulatory reform has been driven by Morocco’s membership in the World Trade Organization, the Association Agreement with the European Union, free trade agreements with other countries in the region, and the recent negotiation of a free trade agreement with the United States. “( Morocco Improved Business Environment Program, 2005-2009).

From what was stated above, it’s obvious that the authorities have worked towards the improvement of the business environment, notably through some plans and projects, our country now has a stable framework clear to its economic development, and capacity of flexibility against the effects and impacts of the global financial crisis. Indeed, they have
largely favored the position of Morocco as an attractive destination for productive investment and as a major channel for exchanges on the regional and international levels.

We all know that in Morocco as in all countries “SMEs” Small and Medium Enterprises have certainly great importance (L’Environement de ...

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We all know that in Morocco as in all countries “SMEs” Small and Medium Enterprises have certainly great importance (L’Environement de la PME). Morocco has recognized the need to promote the Small and Medium Enterprise due to the critical and catalytic role to the development of the country, and has also realized that Small and Medium Enterprises are the one that first get affected by the business environment, like for example the textile industry has a problem with the labor force, there is a shortage in the labor forces because the training centers in charge do not provide enough skilled and competent labor.

In the past decade morocco has made great efforts in modernizing its business environment and building institution necessary to the growth of the businesses and to accelerate the pace of the job creation, regarding the measures taken to improve the business climate in morocco and to boost the competitiveness of the national economy the government introduced the new 2011 finance bill, which features the key orientations, “which include boosting sustainable development, addressing the challenges of openness and competitiveness, pursuing reforms necessary for consolidating good governance and for broadening the middle class base. The 2011 finance bill aims to continue to support growth by maintaining public investment and by improving the business climate” (Ulrika Lomas, 2011). In the following paragraph we will go through some of the major and principle changes and additions to the Moroccan finance bill 2011 that affect the economy growth including the impact on our chosen sector.

In regards of The VAT there is an exemption on goods for investment firms that carry out the construction of their investment projects. The 24-month period begins from the date of issuance of building permit. The Capital goods are exempted from Tax for the duration of acquisition or construction, in condition that applications for purchase exemptions will have to be filed and deposited within the departments concerned within 24 months(Loi de finances 2011 : les principaux changements). In terms of the corporate tax (IS), the government provides some very important facilities, as the finance ministry finally accepted to apply the principle of differential taxation, which will consist of a different taxation according to the level of activity the business. For the small and medium businesses (SMEs) making an annual turnover of less than 2 million DH, the Moroccan finance bill of the year 2011 offers an IS at the modest rate of 15%, A rate which, according to ministry executives, will also and highly fight against the informal sector, and to support its commitment, the government also provides another measure which will consist of an amnesty for the companies that decide to leave the informal sector, These companies newly listed on the tax records will not be subject to tax audit for prior years. Therefore encouraging every businessman operating in the informal sector to leave it and relocate to the formal and legal sector promoting the economy growth(,2010). The government has also introduced some incentives measures for other types of operators. Like for example the Companies that will be installed in the future international financial center in Casablanca, Casa Financial City (CFC). The measure simply consist of the fact that the companies that export services with the status CFCs will be exempted from the (IS) in respect of their export sales for 5 years before being taxed at 8.75% after that. For the approved international or regional headquartered in morocco, it is an (IS) at a rate of 10% but only with a minimum of 5% of their operating expenses that will be applied. On another hand The Moroccan finance bill 2011 provides a favorable tax benefit for the companies that will operate in the tourism promotion residential real estate(RIPT). They will thus be fully exempted from corporate tax during the first 5 years of existence and, subsequently subjected to an (IS) at 17.5%. (Article 19 -II-A-page 9, ). After all what has been stated above, it is pretty obvious that the government is been doing a great effort in terms of setting up a favorable business framework in order to help the economy grow in a faster pace.

Now that we have seen the improvement of certain aspects of the Moroccan finance bill we have to know and understand more about the impact of these changes, the Moroccan government has applied to the finance bill. As we all know all operator, businesses and SMEs are simply just collectors of VAT to the government, so in terms of the impact the new Moroccan finance bill on the demand and supply can simply be explained or demonstrated by a basic economics theory, the lower the VAT the lower the PRICE in other words, when the government does not impose a high VAT rate the supplier can display the products or the merchandise he is selling at a lower price which in fact are the same prices as before just with a lower tax rate therefore consumer notice the fall in the prices which result in a noticeable increase in demand, that causes in its turn the willingness of the supplier to supply more and more merchandise. If we combine these remarkable improvements in the VAT with the huge improvements in the (IS) in a sector it will give us a favorable business environment that will attract investors that will be willing to invest more and more and that same sector. By promoting the creation of new businesses or simply by improving the business climate to the business to expend the Moroccan government is decreasing the unemployment rate as more business are in need of workforce, it is known that the SMEs are recognized for their increasing important role in the job creation and economic growth. All in all if we combined all of these aspects together we will end up with a great economic strategy going as follows, the government decrease the VAT and (IS) rates which enables the Small And Medium enterprises to expand in size or to simply be created resulting and its turn an increasing demand for the workforce, that we help decrease the unemployment rate resulting in a big working part of the country therefore having a big purchasing power that will result in its turn to an increase in the population consumption, all this leading to one thing, a remarkable and increasing growth of the economy.

After these improvement that government have made to the finance bill, The Moroccan finance executives expect a 4.6% growth in the GDP instead of only 3.3% in 2010.( Le PIB augmenterait de 4,6 %)

As we have mentioned before SMEs tend to have influence on many business environment aspect, we have already looked at the economical advantages of helping the growth of SMEs, but they also have great affect on the social aspect. SMEs are the main driver of the society in many levels, one of which is the job creation aspect. SMEs make a very significant portion of the job creation outlets in the economy, and by creating more jobs they are helping the social growth of the country. When you have more people in the society with secure jobs that bring them income to live on, they will be generally content and happy, therefore the society will be stable and it will create room for social growth. Also SMEs are innovating and new companies that create new ideas and use new equipments all the time, therefore they have a high demand of skilled workers, which means their growth will directly promote the educational outlets of society. And increase the education options for students, and therefore they will help increase the country’s educational level. We can state a lot of reasons for increasing the number of SMEs in the country, but I believe that there are some social elements that should be dealt with before that can successfully occur. For example the illegal practices in the black markets can cause a huge barrier for new companies, because you can find almost a company that operates illegally in any sector, and they market products to clients without having to pay the taxes or obligations. And that will be hurtful to the country’s economic growth and also it will hurt investors who want to put their money into new small businesses. The society might not be accepting of new codes that forces companies to operate more legally, but in the long-term it is very necessary to assure continuous economical growth. Another social issue that should be taken care of is the problem of corruption and bribes, because the corruption of administration procedures affects businesses and society, for the businesses an entrepreneur might choose not to start the business in Morocco due to the financial burdens that can be imposed by corrupted official. And for the society in general the negative perception of the administrative process will affect their willingness to become more active as members of the society, and generate more ideas. So to sum up the point, the success of the economy is dependant on the social integrity and cooperation.

Conslusion

Morocco has known significant changes in terms of the business environment, the government has put a great amount of efforts into making a favorable business climat and that by making changes to improve the finance bill of the year 2011, improving the tax policy as VAT and (IS) for example to help new SMEs survive in the few early years, indirectly helping the growth of the economy and decreasing the unemployment rate and increasing the purchasing power, as a conclusion we can tell that it is safe to say that the government has made efforts to improve the business environment in morocco, that had a positive impact on the Moroccan SMEs.

REFERENCES

TR Jain, Mukesh Trehan, Ranju Trehan(2000) business Environment. 1st. Edition, FK Publications.

Morocco Improved Business Environment Program, 2005-2009 [Internet], Available from:<http://tcboostproject.com/_resources/resource/Morocco%20Improved%20Business%20Environment%20Program.pdf> [Accessed 3 juin 2011].

L’environment De La PME [Internet], Available from:< http://www.blog.saeeed.com/2011/03/lenvironnement-de-la-petite-et-moyenne-entreprise/> [Accessed 5 juin 2011].

Ulrika Lomas, Tax-News.com, Brussels." Morocco's FM Presents 2011 Finance Bill (November 04, 2010) [Internet], Available from:< http://www.tax-news.com/news/Moroccos_FM_Presents_2011_Finance_Bill____46206.html> [Accessed 10 Juin 2011].

Loi de finances 2011 : les principaux changements [Internet], Available from:< http://www.mizania.com/content/view/258/2/ > [Accessed 10 juin 2011].

." Loi de finances 2011. 15% d’impôt sur les sociétés. Non, ce n’est pas en France… mais au Maroc ! [Internet], Available from:< http://www.paperblog.fr/3772352/loi-de-finances-2011-15-d-impot-sur-les-societes-non-ce-n-est-pas-en-france-mais-au-maroc/> [Accessed 11 juin 2011].

L’environ Article 19 -II-A-page 9, ment De La PME [Internet], Available from:< http://www.lemagazinedumanager.com/finance/2143-maroc-les-principaux-changements-et-nouveautes-de-loi-des-finances-2011.html> [Accessed 11 juin 2011].