Morocco’s draft 2026 finance bill sticks closely to the roadmap laid out in the country’s sweeping tax reform law, Framework Law 69-19. While it clearly signals a continued commitment to tax fairness, broader revenue coverage, and streamlined collection, the overall design leans more toward cautious fine-tuning than bold reform.
Four years into the reform process, the government remains firmly on course: expanding the tax base without raising rates, modernizing without creating economic shocks, and improving revenue collection without stifling growth. The goals are clear, but the tools remain focused on a limited set of technical measures. Notably, the principle of tax neutrality—one of the reform’s core tenets—is still more aspirational than actual.
In a tight budgetary context, the decision to broaden the base instead of increasing tax rates reflects a clear preference for caution. But unless this approach is backed by a stronger tax administration, active support for transitioning the informal economy, and bolder steps in direct taxation, its real impact on fairness and efficiency could remain marginal.
The expansion of withholding tax to cover services billed by banks, insurers, and large corporations, along with a new 5% levy on commercial rents, shows a tactical push toward taxable areas with higher transparency. While these measures are likely to yield short-term revenue gains, their long-term success will depend on how well they’re integrated into a deeper overhaul of income and corporate tax systems.
In agriculture, exempting all input materials from VAT resolves a long-standing inconsistency in tax policy and offers some relief for farmers. However, it also raises questions about how the policy distinguishes between small-scale subsistence farms and large commercial operations—two realities with vastly different resources and economic footprints.
One of the more controversial elements is the extension of the Social Solidarity Contribution until 2028. Though framed as a redistribution tool, it continues to place much of the fiscal burden on highly structured companies, with little clarity on whether offsetting relief is provided elsewhere.
The bill does make measurable progress on VAT. Efforts to reduce rates, broaden eligibility for reimbursements, and simplify the system point in the right direction. The principle of neutrality is gaining ground. Still, businesses—especially smaller ones—remain hampered by threshold effects, cash flow pressures, and persistent administrative complexity.
Despite these moves, the 2026 finance bill does not speed up the reform effort launched in 2021. The tax system is gradually being cleaned up, but the pace is cautious. So far, changes have mostly benefited the formal economy. The informal sector remains largely out of reach, with few signs of real transformation in how the tax administration engages with less-structured operators.
One of the more curious additions this year is the introduction of a tailored tax regime for sports companies. These entities will benefit from a full corporate tax exemption for five years, a VAT holiday until 2030, and gradually reduced income tax on wages within the sector. While the intent is to foster a still-nascent industry, this preferential treatment raises eyebrows. Sports, at least in its current form, is neither a major economic driver nor a critical source of tax revenue. Without clear benchmarks for performance and transparency, these incentives risk becoming windfalls with little return.
The government’s approach remains carefully balanced—perhaps too much so. The bill avoids major disruptions, reinforces the system’s structural integrity, and plugs gaps. But its moderation may ultimately limit its effectiveness. Tax policy is still largely viewed as a tool for collection, rather than a catalyst for economic development, social justice, or competitiveness.
Looking at the broader picture, the draft bill aims to blend fiscal efficiency with continued social support. The renewed solidarity contribution underscores this redistributive intent. Yet, without a deeper overhaul of income tax, the system’s real progressivity remains shallow. Higher-income earners still carry a relatively light burden, while the informal sector is being pushed toward compliance through automatic taxation mechanisms like withholding—without meaningful support for formalization.
On the technical front, the bill includes updates to investment incentives, simplification of existing tax regimes, and better alignment of fiscal law with economic conditions. These are positive adjustments that will improve legal predictability for businesses. However, they do little to address the widening divide between well-structured corporations and smaller, more vulnerable operators struggling with growing red tape.
In the end, the 2026 finance bill offers a coherent vision, but not a transformative one. Its balanced approach is both its strength and its weakness: it avoids missteps, but lacks the boldness to drive deep, lasting reform.
