The tax exemption for natural persons in the annual income bracket of 0 to 5000 TD planned in the draft budget law for 2016 will certainly result in a shortfall for the state revenue. To ensure that there is no negative effect, Faisal Derbal, spokesman for the Arab Institute of Business Managers (IACE) deems it necessary to arrange the tax brackets so that those with high incomes are forced to pay the shortfall resulting from the exemption of the first bracket. Faisal Derbal also answered questions by African Manager on the downgrading of Tunisia in the latest Davos Report.
What about the recent Davos Report?
The report of the Davos World Economic Forum (2015-2016) has ranked Tunisia 92nd out of a total 140 countries with a score of 3.93.
With this new ranking, Tunisia loses once again five places from its last ranking in 2014 (87th with a score of 3.69). It is thus overtaken by Morocco and Algeria which occupy the 72nd place and 87th place worldwide, respectively. Countries that top the list are Switzerland, Singapore, the US, Germany and Finland.
The report ranked Tunisia tenth Arab economy and eighth in Africa.
What causes this downgrade?
The decline in ranking and score can only translate an uneasy situation and problems in the economy, at the investment climate in general, knowing that this downgrade has continued from one year to another.
We must not lose sight that under 2010-2011, the country was ranked 32nd with a score of 4.7. Now, it has been downgraded to the 92nd spot. So there was a loss of 60 ranks and the score is less than 4.
Tunisia is ranked eighth African country after Ivory Coast, Namibia and Botswana. However, it should have been ranked better.
This ranking is justified by the absence of bold and very courageous steps to stop this hemorrhage, particularly in pillars that are the cause of this very poor rating.
What are the most affected pillars?
These pillars concern the efficiency of the labor market. It is important to note that these results are not new. We already have problems for years, and it is for this reason that we have been already much misclassified especially during this year when we occupied the 133rd
This is manifested by a rigidity of the business climate, at the level of recruitment and dismissal procedures and a very bad relationship between wages and productivity.
Another pillar is that of terrorism given that we have suffered harsh blows. We have also been penalized at this level knowing that we are very poorly rated at the security level.
We were also penalized in terms of the quality of financial services, rigidity of the banking system and the availability of investment capital.
At the level of governance and transparency, Tunisia tumbled particularly in terms of efficiency of management bodies, especially board of directors and supervisory boards not to mention illegal payments.
Does this downgrade have an effect on the image of Tunisia with foreign investors?
In my opinion, foreign investors are not going to appreciate this ranking and it will certainly deter them… It will not encourage them to settle in Tunisia…
This downgrade will be detrimental to the image of Tunisia as well as for local and foreign investors.
I would have liked to see Tunisia rank among the first countries. This is possible because we work with foreign partners.
This ranking comes at a time when the government is preparing to submit the 2016 finance bill to the parliament. This bill projects a growth rate of 2.5%. What do you think?
The Finance Act will not improve much at this level of this ranking. We must admit that economic machine is not operating properly. Blocking exists on several levels starting with the relationship between the two unions. It is necessary to find solutions and reconcile points of view. It’s time to decide and avoid shaky hands. It is also time to implement a series of measures and reforms as soon as possible in order to overcome this difficult stage.
Among these measures, those intended to fight against corruption in order to create transparency and good governance.
The 2016 finance bill provides for a tax exemption for natural persons in the annual income bracket of 0 to 5000DT…Will the government be able to handle the shortfall?
It must be said that the supplementary finance law has instituted an exemption for the first income bracket from 0 to 5000 TD, unlike the old scale which was from 0 to 2500 TD.
So the first tranche from 0 to 5000TD was exempted. Of course, low-income people will benefit from the easing of such taxation. This will result in a shortfall in revenue of the state because everyone will enjoy it even those who have an income of 500 thousand dinars per year who will be exempted at the first tranche between 0 and 5000TD.
Therefore, to ensure that there is no negative impact on the resources of the State, it is necessary to arrange the tax brackets so that those with higher incomes are forced to pay the revenue lost due to the exemption of the first tranche.
Hence, the solution is to arrange the scale so that those with an income not exceeding 5000DT benefit from this exemption and the others with a very high income do not benefit from this reduction.
There is no need to lower the tax burden on people with very high income especially since Tunisia is in undergoing a very difficult period in terms of resources.
Is it possible to achieve 2.5% growth rate in 2016?
These are only predictions. At this stage, I think it’s a little difficult. However, achieving this rate remains dependent on carrying out the necessary reforms with the recovery of tourism and the promotion of the agricultural sector.