Study: VAT Fears Drive Informal Sector Growth in Morocco

Entitled "The informal sector in Morocco: main characteristics and trends", the study revealed that "the heads of informal production units (UPI) are supplied upstream, from suppliers who themselves, underreport or work in the informal sector. This allows them to buy without a regulated invoice, and therefore to avoid invoicing in VAT mode." A situation linked to the lack of financial inclusion of UPIs and lack of liquidity, "the main handicap" for the informal sector, characterized by its fragility and the irregularity of financial income.

In addition, the increase in the SMIG often forces companies, especially VSEs and SMEs, to reduce their workforce or simply avoid declaring them. The "overall income" effect also undermines the development of UPIs, mainly the growth rate of gross national income (GNI) per capita, the authors of the study pointed out, stressing that the burdensome regulations, including laws, documents to be provided, as well as the multiple formalities to be completed for the establishment of a small business, are time-consuming or costly, and rather complicated, given the level of education of UPI managers.

The current crisis has lifted the veil on the weakness of the informal sector and revealed the importance of public aid put in place to support the purchasing power of its employed staff. Thus, to strengthen the resilience of the sector and develop its economic performance, "a national strategy dedicated to informal activities based on an integrated and coherent approach is essential". This must take into account several dimensions, mainly access to financing and the market, training, social security, tax reform and the improvement of governance, particularly in terms of easing and adapting the current regulations, the HCP study stressed.