The upcoming reform of income tax (IR) for 2025 aims to offer significant relief to the majority of taxpayers, bolstering both purchasing power and social cohesion. If successful, this reform could lay the foundation for a more equitable society, where the tax burden is more evenly distributed without compromising the state’s revenue.
This guide breaks down the proposed measures, expected effects, and potential impacts on households and businesses.
Tax cuts for middle and lower-income earners
The income tax reform is rooted in recommendations from the 2019 National Tax Forum, which emphasized the need to modernize the tax system for greater fairness and efficiency. Aligned with the April 2024 social dialogue agreement, the 2025 Finance Bill (PLF 2025) aims to raise incomes for public sector employees, salaried workers, and retirees. The reform introduces tax reductions that could slash income taxes by as much as 50% for some income brackets.
Key elements of the reform include:
- Salary increases for public sector employees: with a net monthly raise of up to 480 dirhams.
- Expanded IR exemptions: covering over 80% of private-sector employees and nearly 96% of retirees.
- Enhanced family support: with increased tax deductions for dependents, lightening the tax load for households with children or other dependents.
Practical tax relief measures
Lowering the tax burden gradually
The reform proposes a restructuring of tax brackets to better align with real incomes. For instance, a worker earning a net taxable income of 5,000 dirhams per month will see their monthly tax cut in half—from 333.33 dirhams to 166.67 dirhams—saving 166.66 dirhams. For taxable incomes between 8,333 and 15,000 dirhams, monthly tax savings could reach 400 dirhams.
Raising the exemption threshold and adjusting brackets
A major component of the reform is raising the annual exemption threshold from 30,000 to 40,000 dirhams, sparing monthly incomes under 6,000 dirhams from income tax. Additionally, the tax brackets will undergo a significant overhaul:
- 0% for incomes up to 40,000 dirhams,
- 10% for incomes between 40,001 and 60,000 dirhams,
- 20% for incomes between 60,001 and 80,000 dirhams,
- 30% for incomes between 80,001 and 100,000 dirhams,
- 34% for incomes between 100,001 and 180,000 dirhams,
- 37% for incomes above 180,000 dirhams (replacing the previous top rate of 38%).
Increased family deduction
Deductions for dependents will rise from 360 to 500 dirhams per person, with the cap increased from 2,160 to 3,000 dirhams for up to six dependents. This measure is designed to ease the tax burden on larger families, allowing them to allocate more income toward essential needs.
Economic benefits expected from the reform
Boost to consumption and purchasing power
With significant monthly tax savings, taxpayers are expected to have more disposable income, potentially stimulating local consumption of goods and services. Small and medium-sized enterprises (SMEs) are likely to benefit indirectly from this reform through increased demand. The reduced tax load for employees may also foster a more positive workplace atmosphere, alleviating some financial stress.
Positive impact for businesses
For companies, the reduction in tax pressures for employees could improve workplace satisfaction, potentially lowering turnover and dissatisfaction costs. Moreover, a stronger internal market driven by local consumption could create new growth opportunities for businesses across various sectors.
Flexibility to address economic challenges
The long-term success of this reform will depend on inflation trends and broader economic conditions. To ensure sustainable benefits, the government plans to implement a periodic adjustment mechanism for tax brackets, keeping pace with economic fluctuations to protect household gains.
As the reform rolls out in 2025, these income tax changes represent a bold step toward a fairer tax system that not only eases the financial strain on citizens but also invigorates the local economy. With a flexible framework in place, the reform is designed to adapt to economic shifts, aiming to create a stable and equitable fiscal environment for years to come.
Amina Idrissi Chouahdi
