TUNISIA ECONOMIC MONITOR Equity and Efficiency of Tunisia Tax System Fall 2024 Tunisia Economic Monitor Equity and Efficiency of Tunisia Tax System Fall 2024 Middle East and North Africa Region © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or fail- ure to use the information, methods, processes, or conclusions set forth. 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TABLE OF CONTENTS Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Résumé Analytique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii ‫ موجز تنفيذي‬. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii Part A: Recent Economic Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1. The Tunisian economy did not gain momentum in 2024 after stalling in 2023 amidst a persistent drought, limited demand and tight financing conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2. The current slowdown of the economy comes in the context of a long-term decline in growth, aggravated after 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 3 More favorable global prices drove the reduction in the current account deficit easing some of the pressure on external financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 4. Tunisia’s increasing reliance on domestic sources to fill the external financing gap could present medium-term risks to currency and price stability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5. The rising domestic financing of the public debt has increased the sovereign-banking nexus along with the crowding out of the private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 6. Inflation continued to moderate, although but it remains above the pre-Covid average, particularly for food, prompting the government to raise the minimum wage . . . . . . . . . . . . . . . . . . . . . . . 10 7. The budget continues to be under pressure as the low growth affects tax revenues . . . . . . . . . . . . . . . . .11 8. Assuming drought conditions ease, we expect a moderate growth rebound in 2024–25 assuming but economic prospects remain uncertain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Part B: Making the Tax System More Equitable and Efficient . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 List of Figures Figure 1 Tunisia’s Elusive Economic Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 2 Tunisia’s Diverging from Regional Peers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 3 Agriculture’s Recovery Has Been Modest After the 2023 Drop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Figure 4 Hydrocarbons, Garments and Construction Dragged Growth in S1-2024 . . . . . . . . . . . . . . . . . . . . 3 iii Figure 5 Labor Participation (slightly) Down, Unemployment (slightly) Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 6 The Economy Started Again to Create Jobs After the Losses of the Second Half of 2023 . . . . . . .4 Figure 7 Tunisia in the Middle-Income Trap? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 8 Investment and Savings Rates Have Been Declining Especially After 2010 . . . . . . . . . . . . . . . . . . . 4 Figure 9 Agriculture and Mechanic Industries Led the Moderation of the Merchandise Trade Deficit in 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 10 Rising Export Prices, Declining Import Prices Have Driven Narrowing of Trade Deficit . . . . . . . . . .7 Figure 11 Main Export and Import Products Highlight the Improving Terms of Trade in 2024 . . . . . . . . . . . . . 7 Figure 12 The Trade Deficit Along with Tourism Receipts Helped Reduce the Current Account Deficit in Recent Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 13 Limited FDI, Portfolio and Capital Flows Put Pressure on Tunisia’s Financing of its External Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Figure 14 Reserves Recovered After the Drop in Early 2024 While the Dinar Has Remained Stable . . . . . . 8 Figure 15 Main Export and Import Products Highlight the Improving Terms of Trade in 2024 . . . . . . . . . . . . . 9 Figure 16 The Share of Net Government Receivables in Total Credits Continues to Increase (and Accelerates) as Receivables to the Economy Growth Falters . . . . . . . . . . . . . . . . . . . . . . . . . .10 Figure 17 Credits to Office Des Céréales Tripled Since 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Figure 18 Inflation Started to Decline in 2023 and Has Now Approached its Pre-Covid Average . . . . . . . . .11 Figure 19 Real Interest Rate Is at the Highest Level Since March 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Figure 20 The Minimum Wage Has Lagged Inflation and Private Sector Wage for Many Years . . . . . . . . . .11 Figure 21 Tax Revenues Under-Performed in the First Half of 2024 Relatively to the Expectations . . . . . . . . 12 Figure 22 Tunisia Collects More Tax Revenues than its Economic Peers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 23 The Gap between Public Expenditures and Tax Revenues Has Expanded Over Time . . . . . . . . . 16 Figure 24 Personal Income Tax Has Driven the Growth of Tax Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Figure 25 Tunisia Relies More than other Countries on Labor Income Taxation . . . . . . . . . . . . . . . . . . . . . . . 19 Figure 26 Tunisia’s Tax System Creates a Wedge between the Labor Cost for the Employer and the Wage Received by the Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Figure 27 Tunisia’s Relatively Large Informal Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Figure 28 Tunisia Taxes Capital Gains Lightly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Figure 29 Tunisia Taxes Different Saving Options Differently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Figure 30 Tunisia Taxes Capital Income Much Less than Labor Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Figure 31 Tunisia Has Reduced its Carbon Intensity of GDP Less than other Countries . . . . . . . . . . . . . . . . 22 List of Boxes Box 1 Why Agriculture Has Recovered Only Partially the 2023 Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Box 2 Escaping the “Middle-Income Trap”: Some Lessons from the WDR 2024 . . . . . . . . . . . . . . . . . . . . . 5 Box 3 Recent Progress in the Development of the Renewable Energy Program in Tunisia . . . . . . . . . . . . 6 Box 4 A Tale of Two Corporates’ Tax Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 List of Tables Table 1 Key Macroeconomic Indicators, 2020–26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 iv TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM ACKNOWLEDGEMENTS T he Tunisia Economic Monitor (TEM) is a (Consultants, MTI). It benefited from inputs and com- report that provides information on recent ments from Aziz Ben Ghacem (Senior Social Protec- economic developments and policies in Tuni- tion Specialist, SPJ), Christian Berger (Sr. Agriculture sia, as well as the country’s economic outlook and Economist, Agriculture), Yosra Bouaziz (Agriculture challenges to its development. The report is aimed Specialist, Agriculture), Rim Kanzari (Sr. Governance at a diverse audience, including policy makers, busi- Specialist, GOV), Amira Klibi (Senior Energy Special- ness leaders, financial market actors, and analysts ist, Energy), Montserrat Pallares-Miralles (Sr. Econo- and professionals working on or in Tunisia. It is pro- mist, SPJ) and Clelia Rontoyanni (Practice Manager, duced by the North Africa and Middle East depart- GOV). The report was prepared under the direction of ment of the World Bank Group’s Macroeconomics, Moustapha Ndiaye (Country Director, Maghreb), Eric Trade and Investment (MTI) global practice. Le Borgne (Practice Manager, MTI), Alexandre Arrob- Each issue of the TEM contains a section on bio (Resident Representative, Tunisia), and Abdou- recent economic developments and a discussion laye Sy (Lead Economist, MTI). on the economic outlook, followed by a special sec- The opinions and conclusions expressed in tion based on the World Bank’s analysis of Tunisia. this report are those of the World Bank staff and do The report was originally published in English with not necessarily represent the views of members of the the title “Equity and Efficiency of Tunisia Tax Sys- World Bank Board of Directors or the countries they tem” and was first published in 2024. In case of any represent. discrepancy, the original English language version For information on the World Bank and its prevails. activities in Tunisia, please visit: https://www.world- The report is authored by a team led by Massi- bank.org/en/country/tunisia or https://www.albank- miliano Calì (Senior Economist, MTI) and Mohamed aldawli.org/ar/country/tunisia (Arabic). For questions Habib Zitouna (Consultant, MTI). The team also or comments on the content of this publication, please includes Jawhar Abidi (Consultant, MTI), Riadh Ammari contact Massimiliano Calì (mcali@worldbank.org) or (Communications Specialist, External Affairs), Asma Eric Le Borgne (eleborgne@worldbank.org). Bouraoui Khouja (Senior Operations Officer, Tuni- The deadline for input and forecast preparation sia), Mhamed Ben Salah and Fatma Marrakchi Charfi is October 30th, 2024. v LIST OF ACRONYMS BCT Banque Centrale de Tunisie (Central OECD Organisation for Economic Bank of Tunisia) Co-operation and Development BNA Banque Nationale Agricole (National OdC Office Des Céréales (Grain Office, Agricultural Bank, Tunisia) Tunisia) CAD Current Account Deficit ONAGRI Observatoire National de l’Agriculture CBAM Carbon Border Adjustment Mechanism (National Observatory of Agriculture, CIT Corporate Income Taxation Tunisia) CPI Consumer Price Index PIT Personal Income Taxation EU European Union SOE State-Owned Enterprise FDI Foreign Direct Investment SSC Social Security Contributions GDP Gross Domestic Product TD Tunisian Dinar GW Gigawatt UGTT Union Générale Tunisienne du Travail INS Institut National de la Statistique (General Tunisian Labor Union) (National Institute of Statistics, Tunisia) USD United States Dollar LAC Latin America and the Caribbean VAT Value Added Tax METRs Marginal Effective Tax Rates WDR World Development Report MW Megawatt vii EXECUTIVE SUMMARY The Tunisian economy is stagnating The current slowdown of the amidst a persistent drought, economy comes in the context limited demand and tight financing of a long-term decline in growth, conditions aggravated after 2010 The Tunisian economy did not gain momentum in the While the Tunisian economy grew at a similar pace of first half of 2024, when it grew by 0.6 percent on an upper-middle income countries throughout the 1970s annual basis after the zero growth in 2023. By the end and 1980s, it started to diverge in the 1990s, a trend of 2024, Tunisia is expected to be the only country that was reinforced in the 2000s and more so after among its regional peers with real GDP still below pre- 2010. This secular slowdown in growth is consistent pandemic level. The modest recovery of agriculture with the so-called ‘middle-income trap’, i.e. the ten- along with losses in oil and gas, garments and con- dency of countries to reduce their growth rate once struction sectors dragged the growth of the economy they reach the middle-income status. The decline in in the first half of 2024. Below average rainfall contin- economic growth in Tunisia has been associated with ued to limit the growth of agriculture, which recovered a marked decrease in investment and saving rates, only a third of the large losses experienced during the particularly after 2010. Lower investments typically first half of 2023. Other key sectors suffered as well. constrain a country’s ability to bring modern technolo- Garments lost ground due to the declining demand of gies from abroad and diffuse them domestically. That Tunisia’s main export market, the European Union; oil is a key element to transition towards upper-middle and gas production continued a decade-long decline income status, according to the evidence in the 2024 due to the lack of new investments and construction World Bank’s World Development Report. was affected by the limited domestic demand and by the difficult external financing environment. The growth stagnation translated into declining More favorable global prices drove labor market indicators in the first half of the year. The the reduction in the current account unemployment rate grew slightly, reaching 16 percent deficit easing some of the pressure in Q2, the 6th consecutive year-on-year increase, and on external financing the labor force participation rate declined somewhat Tunisia’s merchandise trade deficit continued to improve and is now 1.5 percentage point lower than its pre- in 2024, declining by 3.4 percent during the first nine Covid level. The current slowdown in growth comes in months of 2024 compared to the same period in 2023 the context of a secular decline in investment and sav- (7.8 percent of GDP against 8.8 percent in 2023). The ings, aggravated after 2010. ix improvement was driven again by favorable changes in proven resilient so far, helping to stabilize the Dinar. international prices, with average import prices declin- However, the continued use of monetary financing ing by 16 percent on an annual basis and export prices of the external needs presents risks for currency and increasing by 4 percent in the first half of 2024. Con- price stability. In October 2024, members of Parlia- versely, the energy deficit widened further despite more ment proposed amending the Central Bank law to favorable prices amidst continued decline in domestic facilitate its financing of the public budget. production, and accounted for 62.9 percent of the mer- chandise trade deficit in the first 8 months of 2024 (up from 53.4 percent a year earlier). The rising role of domestic financing The narrowing trade deficit along with the con- of the public debt raises concerns tinued growth of tourism exports (+7.0 percent on on the crowding out of the private annual basis as of the end of September) lowered the sector current account deficit (CAD). These factors compen- sated the 9.2 percent increase in interest payment on The share of domestic debt in total central government foreign debt in the first half of 2024, bringing down debt increased from 29.7 percent in 2019 to 51.7 per- the CAD to 1.4 percent of GDP, from 2.0 percent of cent in August 2024. The sustained use of local fund- GDP in the same period in 2023. While the lower CAD ing to finance public debt continues to crowd out the eases the pressure on external financing needs, the financing to the private sector and to the overall econ- latter remain significant especially due to the burden- omy. In the last 24 months through May 2024 the bank- some sovereign debt service. ing sector’s exposure to the budget grew at an annual rate of 30 percent, as credit to the rest of the economy decreased at an annual rate of 3.8 percent. Tunisia’s increasing reliance on domestic sources to fill the external financing gap could present medium- Inflation continued to moderate, term risks to currency and price although it remains above the pre- stability Covid average, particularly for food, prompting the government to raise Tunisia continues to depend on sovereign financing the minimum wage to cover its external financing needs as other sources of funding are either inaccessible (international pri- Inflation continued to moderate since the peaks of vate financing) or cover only a small share of the exter- February 2023, reaching 6.7 percent in September nal financing needs, as is the case for foreign direct 2024, the lowest level since January 2022. The reduc- investments (FDI), portfolio and capital account flows. tion came on the back of lower global prices and lim- As sovereign financing is shrinking (in the first half of ited domestic demand. With declining inflation and a 2024 it covered only 6.7 percent of budgetary exter- stable Central Bank policy rate (at 8 percent), the nom- nal financing needs for 2024, vis-à-vis 32.5 percent in the same period in 2023), the government has turned inal interest rate in August was the highest in 3 years. to domestic sources to cover its external needs. The However, food inflation is still higher and above its pre- main source was monetary financing, using a bill Covid average, as the drought and import compres- approved in February 2024 authorizing the central sion reduced the supply in domestic food markets. bank (BCT) to finance the budget up to TD 7 billion (4 This presents a significant challenge particularly for percent of GDP) in 2024 including using its reserves. lower income households, for which food accounts In October 2024, members of parliament proposed for a relatively greater share of expenditures. Seeking amending the Central Bank law with a view to increas- to protect the purchasing power of lower income work- ing its involvement in state budget financing. Despite ers, the government raised the guaranteed minimum their use for debt repayment, foreign reserves have wage by 7 percent, in line with inflation in 2024. This is x TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM the first time since 2019 that the minimum wage does scale-up of the external financing in the face of the sig- not decline in real terms. nificant debt reimbursement in the near term. The budget continues to be under While Tunisia collects a relatively pressure as the limited growth high level of tax revenues, the tax affects tax revenues system could be fairer and more efficient Tax revenues grew by 10 percent in the first six months of 2024 compared to the same period in 2023. That is Albeit insufficient to cover expenditures, Tunisia col- a less robust increase than projected in the 2024 Bud- lects proportionately more tax revenues than most get Law (16 percent). The reduced growth of indirect of its peers. Tax revenues have risen faster than the taxes, particularly VAT (5 percent) and customs (4 per- economy in the past two decades, mainly driven by cent), likely reflecting the growth slowdown, weighted the growth of personal income taxation. At the same down on the overall tax revenue growth, which how- time, corporate income tax declined as a share of total ever was higher than that in the same period in 2023 revenues and of GDP driven by reductions in the stat- (7 percent), as well as the inflation rate. utory tax rate. However new World Bank analysis in The compression of the public wage bill growth Tunisia suggests that this decline may not be effective allowed the balancing of the budget on a cash basis in increasing investment and employment. in the first half of the year despite the modest tax per- Partly because of the reduction in corporate formance. Reversing the decline in public capital taxes, tax policy has progressively shifted the burden expenditures by re-orienting less productive recur- of direct taxation from capital to labor income. The tax rent expenditures continues to be key to revive eco- burden on labor income is made heavier by the out- nomic growth. sized role that social security contributions play in the Tunisia tax system. While the personal income tax is Assuming drought conditions ease, progressive, the tax burden on wage income is rela- we expect a moderate growth tively high even at low-income levels because of the rebound in 2024-25, but economic structure of social security contributions and of the prospects remain uncertain deductions. This raises the cost of labor for employ- ers, limiting their incentives to hire labor (formally at We expect the economy to grow by 1.2 percent in least), and reduces the progressivity of the tax system. 2024, below our previous forecasts, as the drought At the same time, capital income tax benefits from sev- and challenging external financing conditions have eral concessions and exemptions on various sources, continued to affect key sectors in 2024, including agri- which reduce its contribution to tax revenues. As a culture, agro-industry and construction. In addition, result of this tax structure, Tunisia’s effective tax rate limited external demand along with the lack of eco- on labor is much higher than on capital, and the dif- nomic reforms further limit growth prospects. At the ference is the highest among developing countries same time, the agricultural sector is expected to gain according to new data. As richer individuals earn pre- some momentum in the second half of 2024. Growth is dominantly capital income, while less wealthy individ- projected to moderately increase to an average of 2.3 uals rely more on labor income, the higher effective percent in 2025–26, although the forecasts are sub- tax rate on labor relative to capital is likely to fuel ject to significant downside risks, related to financing income inequality. conditions, external demand and the drought. While Redressing the balance between labor and the macro situation is expected to stabilize, Tunisia’s capital income taxation, while using more effectively public finance and external position will remain vul- indirect taxes—including through a wide-ranging car- nerable in the absence of sufficient external financing. bon tax—could increase the efficiency and the fair- The financing of the deficits will require a significant ness of Tunisia’s tax system. Executive Summary xi RÉSUMÉ EXÉCUTIF L’économie tunisienne fait face à Le niveau de la croissance a impacté les indi- des défis en raison de la sécheresse cateurs du marché du travail au premier semestre de persistante, d’une demande limitée l’année. Le taux de chômage a légèrement augmenté et de conditions de financement pour atteindre 16 % au second trimestre, ce qui repré- restreintes sente la sixième augmentation consécutive en glis- sement annuel, tandis que le taux de participation à L’économie tunisienne n’a pas suffisamment rebondi la population active a quelque peu reculé, se situant au premier semestre 2024, enregistrant une crois- désormais à 1,5 point de pourcentage en dessous de sance de 0,6 % en glissement annuel après une crois- son niveau prépandémique. sance nulle en 2023. D’ici la fin de 2024, la Tunisie devrait être le seul pays de la région dont le PIB réel restera inférieur au niveau prépandémique. La reprise Le ralentissement actuel de modeste de l’agriculture combinée aux pertes dans l’économie s’inscrit dans un contexte les secteurs du pétrole et du gaz, de l’habillement et de la baisse à long terme de la de la construction a freiné la croissance économique croissance, notamment après 2010 au premier semestre 2024. Des précipitations infé- rieures à la moyenne ont continué de limiter la crois- Alors que l’économie tunisienne a connu une crois- sance de l’agriculture, qui n’a récupéré qu’un tiers sance similaire à celle des pays à revenu intermédiaire des pertes importantes subies au cours du premier supérieur dans les années 1970 et 1980, elle a com- semestre 2023. D’autres secteurs clés ont connu mencé à diverger pendant les années 1990, une ten- des difficultés. L’habillement a perdu du terrain en rai- dance qui s’est renforcée pendant les années 2000 son de la baisse de la demande du principal marché et plus encore après 2010. Ce ralentissement de la d’exportation de la Tunisie, l’Union européenne, la croissance est cohérent avec ce que l’on appelle le production de pétrole et de gaz continue de décroi- « la trappe des pays à revenu intermédiaire », c’est- tre, et ce depuis environ dix ans, en raison de l’ab- à-dire la tendance des pays à voir leur taux de crois- sence de nouveaux investissements, et le secteur de sance décliner une fois qu’ils atteignent un niveau de la construction a été affecté par une demande locale limitée et un environnement de financement externe revenu intermédiaire. Le déclin de la croissance éco- restreint. nomique en Tunisie a été associé à une baisse mar- quée des taux d’investissement et d’épargne, en par- xiii ticulier après 2010. La baisse des investissements pour la stabilité de la monnaie et limite généralement la capacité d’un pays à impor- des prix ter des technologies modernes et à les diffuser à un niveau national. C’est un élément clé de la tran- La Tunisie continue de dépendre du financement sou- sition vers un niveau de revenu intermédiaire supé- verain pour couvrir ses besoins de financement exté- rieur, selon le Rapport sur le Développement dans le rieur, alors que d’autres sources de financement sont Monde 2024 de la Banque mondiale. soit inaccessibles (financement privé international) soit ne couvrant qu’une faible part des besoins de finan- cement extérieur, comme c’est le cas des investisse- Des prix mondiaux plus favorables ments directs étrangers (IDE), des flux de portefeuille ont contribué à réduire le déficit et du compte de capital. Alors que le financement sou- du compte courant, allégeant ainsi verain se réduit (au premier semestre 2024, il couvre une partie de la pression sur le seulement 6,7 % des besoins de financement extérieur financement extérieur budgétaire pour 2024, contre 32,5 % durant la même période en 2023), le gouvernement s’est tourné vers Le déficit commercial de la Tunisie a continué de s’amé- des sources domestiques pour combler ses besoins liorer en 2024, enregistrant une baisse de 3,4% au cours extérieurs. La principale source était le financement des neuf premiers mois de 2024 par rapport à la même monétaire, autorisé par une loi adoptée en février 2024, période en 2023 (7,8% du PIB contre 8,8% en 2023). permettant à la Banque centrale (BCT) de financer le Cette amélioration est due une fois de plus à l’évolution budget jusqu’à 7 milliards de dinars tunisiens (4 % du favorable des prix internationaux, les prix moyens à l’im- PIB) en 2024, y compris en utilisant ses réserves. Mal- portation ayant baissé de 16% en glissement annuel, gré leur utilisation pour le remboursement de la dette, alors que les prix des exportations ont augmenté de les réserves de change se sont avérées résilientes 4 % au premier semestre 2024. En revanche, le défi- jusqu’à présent, aidant à stabiliser le dinar. Cepen- cit énergétique s’est encore creusé malgré des prix dant, le recours continu au financement monétaire des plus favorables, en raison d’une baisse continue de la besoins extérieurs présente des risques pour la mon- production intérieure, et a représenté 62,9 % du déficit naie et pour la stabilité des prix. En octobre 2024, les commercial des marchandises au cours des huit pre- députés ont proposé une modification de la loi régis- miers mois de l’année 2024 (contre 53,4 % en 2023). sant la banque centrale afin de faciliter sa contribution La réduction du déficit commercial, conjugué à la au financement du budget de l’Etat. croissance continue des exportations touristiques (+7,0 % en glissement annuel à fin septembre), ont permis de réduire le déficit du compte courant (DCC). Ces facteurs Le rôle croissant du financement ont compensé l’augmentation de 9,2 % des intérêts sur domestique de la dette publique la dette extérieure au premier semestre 2024, ramenant soulève des questions concernant le DCC à 1,4 % du PIB, contre 2,0 % du PIB au cours de l’effet d’éviction sur le secteur privé la même période en 2023. Si la baisse du DCC allège la La part de la dette intérieure dans la dette totale du pression sur les besoins de financement extérieur, ces gouvernement central est passée de 29,7 % en 2019 derniers restent importants notamment en raison du à 51,5 % en juin 2024. Le recours soutenu aux finan- poids du service de la dette souveraine. cements domestiques pour financer la dette publique continue de limiter le financement du secteur privé et La dépendance croissante de la de l’économie dans son ensemble. Au cours des 24 Tunisie aux ressources domestiques derniers mois jusqu’en mai 2024, l’exposition du sec- pour combler le déficit de teur bancaire au budget de l’Etat a augmenté à un financement extérieur pourrait taux annuel de 30 %, tandis que le crédit à l’économie présenter des risques à moyen terme a diminué à un taux annuel de 3,8 %. xiv TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM L’inflation ralentit progressivement, malgré les modestes performances fiscales. Inver- bien que demeurant au-dessus de la ser la baisse des dépenses publiques en capital en moyenne pré-Covid19, en particulier réorientant autrement les dépenses courantes moins pour les produits alimentaires, productives reste essentiel pour relancer la crois- incitant le gouvernement à relever sance économique. le salaire minimum garanti L’inflation a continué de ralentir depuis les pics de En supposant que les conditions février 2023, atteignant 6,7 % en septembre le taux le de sécheresse s’atténuent, nous plus bas depuis janvier 2022. Cette baisse s’explique prévoyons une reprise modérée de par la réduction des prix mondiaux et la demande inté- la croissance en 2024-25, mais les rieure limitée. Avec une inflation en baisse et un taux perspectives économiques restent directeur stable de la Banque centrale (à 8 %), le taux incertaines d’intérêt nominal en août était le plus élevé depuis 3 ans. Cependant, l’inflation alimentaire reste plus éle- Nous prévoyons une croissance économique de 1,2 vée et supérieure à sa moyenne d’avant Covid, la % en 2024, inférieure à nos prévisions précédentes, sécheresse et la compression des importations ayant en raison de la sécheresse et des conditions de finan- réduit l’offre sur les marchés alimentaires nationaux. cement externe qui continuent d’affecter les secteurs Ceci représente un défi important, en particulier pour clés en 2024, notamment l’agriculture, l’agro-industrie les ménages à faible revenu, pour lesquels l’alimen- et la construction. En outre, la demande extérieure tation constitue une part relativement plus impor- limitée ainsi que le besoin de réformes économiques tante des dépenses. Cherchant à protéger le pouvoir limitent encore davantage les perspectives de crois- d’achat des travailleurs à faible revenu, le gouverne- sance. Parallèlement, la croissance du secteur agri- ment a relevé le salaire minimum garanti de 7%, en cole devrait prendre de l’élan au cours du second fonction de l’inflation en 2024. C’est la première fois semestre de 2024. La croissance devrait augmenter depuis 2019 que le salaire minimum ne baisse pas en modérément pour atteindre une moyenne de 2,3 % termes réels. en 2025-26, bien que les prévisions soient soumises à des risques de baisse importants, liés aux condi- tions de financement, à la demande extérieure et à la Le budget de l’Etat reste sous sécheresse. Même si la situation macroéconomique pression alors que la croissance devrait se stabiliser, les finances publiques et la posi- modérée affecte les recettes fiscales tion extérieure de la Tunisie resteront vulnérables en l’absence de financements extérieurs suffisants. Le Les recettes fiscales ont augmenté de 10 % au cours financement des déficits nécessitera une augmenta- des six premiers mois de 2024 par rapport à la même tion significative des moyens extérieurs face au rem- période de 2023. Il s’agit d’une augmentation moins boursement important de la dette à court terme. importante que celle projetée dans la loi de finances 2024 (16 %). La croissance réduite des impôts indi- rects, notamment de la TVA (5 %) et des droits de Bien que la Tunisie ait réussi à douane (4 %), reflétant probablement le ralentisse- collecter un niveau relativement ment de la croissance, a pesé sur la croissance glo- élevé de recettes fiscales, le système bale des recettes fiscales, qui a toutefois été supé- fiscal pourrait être plus équitable et rieure à sa valeur de la même période en 2023 (7 %), plus efficace et supérieure aussi au taux d’inflation. La compression de la masse salariale dans le Bien que les recettes fiscales soient insuffisantes secteur public a permis d’équilibrer le budget sur une pour couvrir les dépenses, la Tunisie collecte pro- base de trésorerie au premier semestre de l’année, portionnellement plus de recettes fiscales que la Résumé exécutif xv plupart de ses pairs. Les recettes fiscales ont aug- employeurs, ce qui limite leur incitation à embaucher menté plus vite que l’économie au cours des deux de la main-d’œuvre (du moins formellement) et réduit dernières décennies, principalement grâce à la crois- la progressivité du système fiscal. En même temps, sance de l’impôt sur le revenu des personnes phy- l’impôt sur le revenu du capital bénéficie de plusieurs siques (IRPP). En revanche, l’impôt sur les sociétés a concessions et exonérations de diverses sources, ce diminué en proportion des recettes totales et du PIB, qui réduit sa contribution aux recettes fiscales. Adop- en raison de la réduction du taux d’imposition légal. tant cette structure fiscale, le taux effectif d’impo- Cependant, une nouvelle analyse de la Banque mon- sition de la main-d’œuvre en Tunisie est beaucoup diale en Tunisie suggère que cette baisse pourrait ne plus élevé que celui du capital, et l’écart est le plus pas être efficace pour accroître l’investissement et élevé parmi les pays en développement selon de nou- l’emploi. velles données. Comme les revenus des individus les En partie du fait de la réduction de l’impôt sur plus riches proviennent principalement des revenus les sociétés, la politique fiscale a progressivement du capital, tandis que ceux des individus les moins déplacé le fardeau de l’impôt direct du capital vers riches dépendent davantage des revenus de la main- les revenus du travail. La charge fiscale sur le revenu d’œuvre, le taux effectif d’imposition du travail plus de la main-d’œuvre est alourdie par le rôle prépon- élevé par rapport au capital est susceptible d’alimen- dérant que jouent les cotisations de sécurité sociale ter les inégalités de revenu. dans le système fiscal tunisien. Même si l’impôt sur Rétablir l’équilibre entre la fiscalité des reve- le revenu des personnes physiques est progressif, la nus de la main-d’œuvre et celle du capital tout en charge fiscale sur le revenu salarial est relativement utilisant plus efficacement la fiscalité indirecte — y élevée y compris pour les faibles revenus en raison de compris par l’introduction d’une taxe carbone éten- la structure des cotisations de sécurité sociale et des due — pourrait accroître l’efficacité et l’équité du sys- déductions. Cela augmente le coût du travail pour les tème fiscal tunisien. ‫موجز تنفيذي‬ ‫وبشكل أكرب بعد ‪ .2010‬ويتامىش هذا التباطؤ املزمن يف النمو مع ما يسمى‬ ‫يواجه االقتصاد التونيس تحديات تتمثل يف جفاف‬ ‫«فخ الدخل املتوسط»‪ ،‬أي اتجاه معدالت منو البلدان اىل االنخفاض مبجرد‬ ‫مستمر وطلب محدود وظروف متويل صعبة‪ ،‬ما يؤدي‬ ‫ية الدخل املتوسط‪ .‬وقد ارتبط تراجع النمو االقتصادي‬ ‫وصولها إىل وضع ّ‬ ‫إىل تباطؤ النمو االقتصادي‪.‬‬ ‫يف تونس بانخفاض ملحوظ يف معدالت االستثامر واالدخار‪ ،‬وخاصة بعد‬ ‫ة إىل تقييد قدرة البالد عىل جلب‬ ‫‪ .2010‬يؤدي انخفاض االستثامرات عاد ً‬ ‫مل يكتسب االقتصاد التونيس زخام يف النصف األول من ‪ ،2024‬حيث حقق‬ ‫د ذلك عنرصا‬ ‫التكنولوجيات الحديثة من الخارج وتعميمها محليًا‪ .‬ويع ّ‬ ‫وا للناتج املحيل الخام بنسبة ‪ 0.6‬باملئة عىل أساس سنوي بعد عام ‪2023‬‬ ‫من ً‬ ‫أساسيا لالنتقال نحو مرتبة الدخل املتوسط املرتفع‪ ،‬وفقًا للشواهد الواردة‬ ‫الذي مل يشهد أي منو‪ .‬وبنهاية عام ‪ ،2024‬من املتوقع أن تكون تونس‬ ‫يف تقرير البنك الدويل عن التنمية يف العامل لعام ‪.2024‬‬ ‫البلد الوحيد بني نظرائه يف املنطقة الذي ال يزال إجاميل الناتج املحيل‬ ‫الحقيقي أقل من مستوى ما قبل الجائحة‪ .‬وأدّت االنتعاشة املحدودة يف‬ ‫أدى تحسن األسعار العاملية إىل خفض عجز الحساب‬ ‫الفالحة إىل جانب الخسائر يف قطاعات النفط والغاز والنسيج والبناء إىل‬ ‫الجاري‪ ،‬مام خفف بعض الضغوط عىل التمويل‬ ‫إعاقة منو االقتصاد يف النصف األول من عام ‪ .2024‬استمر هطول األمطار‬ ‫الخارجي‬ ‫دون املعدل يف الحد من منو الفالحة‪ ،‬التي استعادت ثلث الخسائر‬ ‫الكبرية التي شهدتها خالل النصف األول من عام ‪ .2023‬هذا كام شهدت‬ ‫واصل مستوى عجز امليزان التجاري يف تونس تحسنه يف ‪ ،2024‬حيث‬ ‫قطاعات رئيسية أخرى أيضً ا تراجعا يف مردوديتها حيث تقلصت أرباح‬ ‫انخفض بنسبة ‪ 3.4‬باملئة خالل التسعة أشهر األوىل مقارنة بنفس الفرتة‬ ‫قطاع النسيج واملالبس بسبب تراجع الطلب يف سوق التصدير الرئيسية‬ ‫من ‪ 7.8( 2023‬باملئة من الناتج املحيل اإلجاميل مقابل ‪ 8.8‬باملئة يف‬ ‫يف تونس‪ ،‬وهي االتحاد األورويب؛ وواصل إنتاج النفط والغاز انخفاضه‬ ‫‪ .)2023‬وكان التحسن مدفوعا مرة أخرى بالتغريات املالمئة يف األسعار‬ ‫املستمر منذ عقد من الزمن بسبب نقص االستثامرات الجديدة‪ ،‬كام تأثر‬ ‫الدولية‪ ،‬حيث انخفض متوسط أسعار الواردات بنسبة ‪ 16‬باملئة عىل أساس‬ ‫قطاع البناء مبحدوديّة الطلب املحيل وبظروف التمويل الخارجي الصعبة‪.‬‬ ‫سنوي فيام ارتفعت أسعار الصادرات بنسبة ‪ 4‬باملئة يف النصف األول من‬ ‫وترجم ركود النمو إىل تراجع يف مؤرشات سوق العمل خالل‬ ‫‪ .2024‬يف املقابل‪ ،‬توسع عجز الطاقة أكرث عىل الرغم من األسعار األكرث‬ ‫النصف األول من العام‪ ،‬حيث منا معدل البطالة بشكل طفيف ليصل إىل‬ ‫مالءمة مع استمرار انخفاض اإلنتاج املحيل‪ ،‬مشكّال ‪ 62.9‬باملئة من عجز‬ ‫‪ 16‬باملئة يف الثاليث الثاين‪ ،‬وهي الزيادة السادسة عىل التوايل عىل أساس‬ ‫تجارة السلع يف أول ‪ 8‬أشهر من ‪( 2024‬ارتفاعاً من ‪ 53.4‬باملئة يف ‪.)2023‬‬ ‫سنوي ‪ ،‬وانخفض معدل مشاركة اليد العاملة قليالً وهو اآلن أقل بنقطة‬ ‫أدى تقلص العجز التجاري إىل جانب منو صادرات السياحة (‪7.0 +‬‬ ‫مئوية ونصف عن مستواه قبل كوفيد‪.‬‬ ‫باملئة عىل أساس سنوي حتى نهاية سبتمرب) إىل خفض عجز الحساب الجاري‪.‬‬ ‫وضت هذه العوامل زيادة نسبتها ‪ 9.2‬باملئة يف مدفوعات الفائدة عىل‬ ‫وقد ع ّ‬ ‫يندرج التباطؤ االقتصادي الحايل يف سياق تراجع طويل‬ ‫الدين الخارجي يف النصف األول من ‪ ،2024‬مام أدى إىل خفض عجز الحساب‬ ‫األمد يف النمو‪ ،‬تفاقم بعد ‪.2010‬‬ ‫الجاري إىل ‪ 1.4‬باملئة من الناتج املحيل اإلجاميل‪ ،‬من ‪ 2.0‬باملئة يف نفس الفرتة‬ ‫من ‪ .2023‬وعىل الرغم من أن االنخفاض يف عجز الحساب الجاري يخفف‬ ‫رغام عن منو االقتصاد التونيس بوترية مامثلة للدول ذات الدخل‬ ‫الضغط عىل احتياجات التمويل الخارجية‪ ،‬فإن األخرية ال تزال مرتفعة‪ ،‬وذلك‬ ‫املتوسط املرتفع خالل السبعينيات والثامنينيات‪ ،‬إال أنه بدأ يف الرتاجع يف‬ ‫خاصة بسبب األعباء املرتبطة بخدمة الدين السيادي ‪.‬‬ ‫ّ‬ ‫التسعينيات‪ ،‬وهو اتجاه تعزز يف العقد األول من القرن الحادي والعرشين‬ ‫‪xvii‬‬ ‫يا من نفقاتها‪ .‬يف‬ ‫الدخل املحدود‪ ،‬حيث ميثل الغذاء الحصة األكرب نسب ً‬ ‫قد يشكل اعتامد تونس املتزايد عىل املصادر املحلية‬ ‫محاولة لحامية القدرة الرشائية للعاملني من ذوي الدخل املحدود‪ ،‬رفعت‬ ‫يات عىل‬ ‫لسد فجوة التمويل الخارجي بعض التحد ّ‬ ‫الحكومة األجر األدىن املضمون بنسبة ‪ 7‬يف املائة‪ ،‬مبا يتامىش مع التضخم‬ ‫املدى املتوسط عىل استقرار العملة واألسعار‬ ‫يف ‪ .2024‬وهذه هي املرة األوىل منذ ‪ 2019‬التي ال ينخفض فيها األجر‬ ‫األدىن املضمون يف قيمته الحقيقية‪.‬‬ ‫تستمر تونس يف االعتامد عىل التمويل السيادي لتغطية احتياجاتها‬ ‫التمويلية الخارجية حيث إن مصادر التمويل األخرى إما غري متاحة حاليا‬ ‫تستمر الضغوط عىل امليزانية مع تأثري مستوى النمو‬ ‫(التمويل الخاص الدويل) أو تغطي حصة صغرية من احتياجات التمويل‬ ‫عىل عائدات الرضائب‬ ‫الخارجي‪ ،‬كام هو الحال بالنسبة لالستثامرات األجنبية املبارشة وتدفقات‬ ‫املحافظ االستثامرية وحسابات رأس املال‪ .‬ومع تقلّص التمويل السيادي‬ ‫منت اإليرادات الرضيبية بنسبة ‪ 10%‬يف األشهر الستة األوىل من ‪2024‬‬ ‫(يف النصف األول من ‪ 2024‬غطى ‪ 6.7‬يف املائة من احتياجات التمويل‬ ‫مقارنة بنفس الفرتة من ‪ .2023‬وهي زيادة أقل من تها املتوقعة يف‬ ‫الخارجي للميزانية لعام ‪ ،2024‬مقابل ‪ 32.5‬يف املائة يف نفس الفرتة من‬ ‫ميزانية ‪ 16( 2024‬يف املائة)‪ .‬وقد أثر انخفاض منو الرضائب غري املبارشة‪،‬‬ ‫‪ ،)2023‬لجأت الحكومة إىل املصادر املحلية لتغطية احتياجاتها الخارجية‪.‬‬ ‫وخاصة اآلداء عىل القيمة املضافة (‪ 5‬يف املائة) والجامرك (‪ 4‬يف املائة)‪ ،‬عىل‬ ‫وكان املصدر الرئييس هو التمويل النقدي‪ ،‬عرب قانون متت املصادقة عليه يف‬ ‫األرجح بسبب تباطؤ النمو‪ ،‬عىل تطور اإليرادات الرضيبية اإلجاملية‪ ،‬والتي‬ ‫فرباير ‪ 2024‬يأذن للبنك املركزي التونيس متويل امليزانية يف حدود ‪ 7‬مليار‬ ‫كانت أعىل من نفس الفرتة من ‪ 7( 2023‬يف املائة)‪ ،‬وكذلك معدل التضخم‪.‬‬ ‫دينار تونيس (‪ 4‬يف املائة من الناتج املحيل اإلجاميل) يف ‪ 2024‬مبا يف ذلك‬ ‫وقد سمح تراجع منو كتلة األجور يف القطاع العام بتحقيق توازن‬ ‫استخدام احتياطاته‪ .‬يف أكتوبر‪/‬ترشين األول ‪ ،2024‬اقرتح عدد من أعضاء‬ ‫امليزانية عىل أساس نقدي يف النصف األول من العام عىل الرغم من‬ ‫مجلس النواب تعديل قانون البنك املركزي لتسهيل متويله للميزانية‪ .‬وعىل‬ ‫محدوديّة األداء الرضيبي‪ .‬وال يزال الرفع من النفقات الرأساملية العامة‬ ‫الرغم من استخدامها لسداد الديون‪ ،‬فقد أثبتت االحتياطيات من العملة‬ ‫من خالل إعادة توجيه النفقات الجارية ذات اإلنتاجية املتدنية أمرا‬ ‫األجنبية صمودها حتى اآلن‪ ،‬مام ساعد عىل استقرار الدينار التونيس‪ .‬ومع‬ ‫أساسيا إلنعاش النمو االقتصادي‪.‬‬ ‫ذلك‪ ،‬فإن االستمرار يف استخدام التمويل النقدي لالحتياجات الخارجية‬ ‫يشكل تحديّات عىل مستوى استقرار العملة واألسعار‪.‬‬ ‫ً‬ ‫معتداًل‬ ‫اعتبارا لرتاجع حدة الجفاف‪ ،‬نتوقع انتعاشً ا‬ ‫للنمو يف ‪ ،25-2024‬لكن آفاق التطور االقتصادي تظل‬ ‫الدور املتزايد للتمويل املحيل للدين العمومي‬ ‫غري واضحة‬ ‫يستدعى القلق بشأن مزاحمة متويل القطاع الخاص‬ ‫نتوقع أن ينمو االقتصاد بنسبة ‪ 1.2‬يف املائة يف ‪ ،2024‬وهو أقل من‬ ‫ارتفعت حصة الدين املحيل يف إجاميل ديون الحكومة من ‪ 29.7%‬يف‬ ‫توقعاتنا السابقة‪ ،‬حيث استمر الجفاف وظروف التمويل الخارجي‬ ‫‪ 2019‬إىل ‪ 51.7%‬ي أغسطس‪/‬آب ‪ .2024‬ويستمر االستخدام املستدام‬ ‫الصعبة يف التأثري عىل القطاعات الرئيسية يف ‪ ،2024‬مبا يف ذلك الفالحة‬ ‫للتمويل املحيل لتمويل الدين العمومي يف مزاحمة التمويل للقطاع‬ ‫والصناعات الغذائية والبناء‪ .‬وباإلضافة إىل ذلك‪ ،‬فإن محدودية الطلب‬ ‫الخاص واالقتصاد عامة‪ .‬خالل األشهر الـ ‪ 24‬املاضية حتى مايو ‪،2024‬‬ ‫الخارجي إىل جانب ّ‬ ‫تعرّث تنفيذ املزيد من اإلصالحات االقتصادية يحدان‬ ‫منا متويل القطاع املرصيف للميزانية مبعدل سنوي بلغ ‪ ،30%‬مع انخفاض‬ ‫من آفاق النمو‪ .‬يف الوقت نفسه‪ ،‬من املتوقع أن يشهد القطاع الفالحي‬ ‫االئتامن لبقية االقتصاد مبعدل سنوي بلغ ‪.3.8%‬‬ ‫ورا يف النصف الثاين من ‪ .2024‬ومن املتوقع أن يزداد النمو بشكل‬ ‫تط ّ‬ ‫معتدل إىل متوسط ‪ 2.3‬يف املائة يف ‪ ،2026-2025‬عىل الرغم من أن‬ ‫من احتامالت تراجع هامة‪ ،‬مرتبطة بظروف التمويل‪،‬‬ ‫التوقعات تتض ّ‬ ‫استمر مستوى التضخم يف الرتاجع‪ ،‬عىل الرغم من‬ ‫والطلب الخارجي‪ ،‬والجفاف‪ .‬ويف حني أنه من املتوقع أن يستقر الوضع‬ ‫أنه يظل أعىل من متوسط ما قبل كوفيد‪ ،‬وخاصة‬ ‫الكيل‪ ،‬سيظل وضع املالية العامة واملالية الخارجية لتونس هشّ ا يف غياب‬ ‫بالنسبة للمواد الغذائية‪ ،‬مام دفع الحكومة إىل رفع‬ ‫التمويل الخارجي الكايف‪ .‬وسيتطلب متويل العجز زيادة كبرية يف التمويل‬ ‫الحد األدىن لألجور‬ ‫الخارجي يف مواجهة السداد الكبري للديون يف األجل القريب‪.‬‬ ‫استمر التضخم يف الرتاجع منذ ذروته يف فرباير ‪ ،2023‬حيث وصل إىل‬ ‫‪ 6.7‬يف املائة يف سبتمرب ‪ ،2024‬وهو أدىن مستوى منذ جانفي‪/‬يناير ‪.2022‬‬ ‫عا نسب ً‬ ‫يا من عائدات‬ ‫يف حني تحقق تونس مستوى مرتف ً‬ ‫وجاء هذا االنخفاض عىل خلفية تراجع األسعار العاملية والطلب املحيل‬ ‫الرضائب‪ ،‬فإن النظام الرضيبي ميكن أن يكون أكرث‬ ‫املحدود‪ .‬ومع انخفاض التضخم واستقرار سعر الفائدة للبنك املركزي‬ ‫إنصافًا وفاعلية‬ ‫(عند ‪ 8‬يف املائة)‪ ،‬كان سعر الفائدة االسمي يف ر أوت هو األعىل خالل ‪3‬‬ ‫سنوات‪ .‬ومع ذلك‪ ،‬ال يزال تضخم أسعار املواد الغذائية أعىل من متوسطه‬ ‫عىل الرغم من عدم كفايتها لتغطية النفقات إال أن تونس تجمع إيرادات‬ ‫قبل كوفيد‪ ،‬حيث أدى الجفاف والضغط عىل الواردات إىل تقليل العرض‬ ‫رضيبية أكرث نسبياً من معظم نظرائها‪ .‬وقد ارتفعت اإليرادات الرضيبية‬ ‫يف أسواق املواد الغذائية املحلية‪ .‬وميثل هذا تحديًا كب ً‬ ‫ريا خاصة لألرس ذات‬ ‫‪xviii‬‬ ‫‪TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM‬‬ ‫حوافزهم للتوظيف (رسمياً عىل األقل)‪ ،‬ويقلل من تصاعدية النظام‬ ‫بوترية أرسع من االقتصاد يف العقدين املاضيني‪ ،‬مدفوعة ً‬ ‫أساسا بنمو‬ ‫الرضيبي‪ .‬ويف الوقت نفسه‪ ،‬تستفيد رضيبة دخل رأس املال من العديد‬ ‫الرضائب عىل الدخل الشخيص‪ .‬يف الوقت نفسه‪ ،‬انخفضت رضيبة الدخل‬ ‫من التنازالت واإلعفاءات عىل مصادر مختلفة‪ ،‬مام يقلل من مساهمتها‬ ‫عىل الرشكات كنسبة من إجاميل اإليرادات والناتج املحيل اإلجاميل بسبب‬ ‫يف عائدات الرضائب‪ .‬ونتيجة لهذا النظام الرضيبي‪ ،‬فإن معدل الرضيبة‬ ‫تخفيضات يف نسب الرضيبة عىل الرشكات‪ .‬ومع ذلك‪ ،‬تشري التحليالت‬ ‫الفعيل عىل العمل يف تونس أعىل كثريا ً من معدل الرضيبة عىل رأس املال‪،‬‬ ‫الجديدة للبنك الدويل يف تونس إىل أن هذا االنخفاض قد ال يكون ً‬ ‫فعااًل‬ ‫والفارق هو األعىل بني البلدان النامية وفقاً للبيانات الجديدة‪ .‬ومبا أن‬ ‫يف زيادة االستثامر والتشغيل‪.‬‬ ‫ء يكسبون دخالً ًمتأت ّيا يف املقام األول من رأس املال‪ ،‬يف‬ ‫األفراد األكرث ثرا ً‬ ‫إن السياسة الرضيبية يف تونس أدت جزئياً إىل تحويل عبء‬ ‫ء بشكل أكرب عىل دخل العمل‪ ،‬فمن املرجح‬ ‫حني يعتمد األفراد األقل ثرا ً‬ ‫الرضائب املبارشة من رأس املال إىل دخل العمل‪ ،‬وذلك بسبب خفض‬ ‫أن يؤدي ارتفاع معدل الرضيبة الفعلية عىل العمل مقارنة برأس املال إىل‬ ‫الرضائب عىل الرشكات‪ .‬ويزداد العبء الرضيبي عىل دخل العمل ثقالً‬ ‫زيادة عدم املساواة يف الدخل‪.‬‬ ‫بسبب الدور الضخم الذي تلعبه مساهامت الضامن االجتامعي يف‬ ‫ومن شأن إعادة التوازن بني الرضيبة عىل دخل العمل والرضيبة‬ ‫النظام الرضيبي يف تونس‪ .‬ويف حني أن رضيبة الدخل الشخيص تصاعدية‪،‬‬ ‫عىل دخل رأس املال‪ ،‬مع استخدام الرضائب غري املبارشة بشكل أكرث‬ ‫فإن العبء الرضيبي عىل الدخل عىل األجور مرتفع نسبياً حتى يف‬ ‫فعالية ــ مبا يف ذلك من خالل فرض رضيبة واسعة النطاق عىل الكربون ــ‬ ‫مستويات الدخل املنخفضة بسبب هيكل مساهامت الضامن االجتامعي‬ ‫من شأنه أن يزيد من فاعليّة وعدالة النظام الرضيبي يف تونس‪.‬‬ ‫واالقتطاعات‪ .‬وهذا يرفع تكلفة العاملة بالنسبة للمشغّلني‪ ،‬ويحد من‬ ‫‪xix‬‬ A PART RECENT ECONOMIC DEVELOPMENTS The Tunisian economy did not gain 1.  economy in the first half of 2024. While rainfall lev- momentum in 2024 after stalling els in the first part of 2024 have been higher than in in 2023 amidst a persistent 2023, they were still below historical averages, con- drought, limited demand and tight tributing to protracted water scarcity and low agri- financing conditions cultural productivity (see box 1). As a result, in the first half of 2024, agriculture recovered a third of the The Tunisian economy did not gain momentum losses experienced during the same period in 2023, in the first half of 2024 after the zero growth in when sectoral GDP fell by 14 percent (figure 3). This 2023, deepening the challenges of the labor is compounded by the negative growth of three key market. The economy grew by 0.6% in real terms in sectors (figure 4): garments (–9.7 percent year-on- the first half of 2024 over the same period last year, year growth in the first semester), which suffers from remaining well below the pre-Covid level (figure 1). declining real import demand for garments by the Continued below average rainfall, limited domestic European Union, Tunisia’s main export market; oil and external demand and challenging financing con- and gas (–15.7 percent), whose production contin- ditions slowed down an already mild economic recov- ues a decade-long decline due to the phasing out of ery, marred by the continued regulatory barriers to various fields and lack of new investments; and con- growth (see the 2022 and 2023 issues of the Tunisia struction (–4.3 percent), affected by the low domes- Economic Monitor). The Tunisian economy appears tic demand, both private and public, and by the to be diverging from that of its neighbors (figure 2). challenging financing environment. The continued By the end of 2024, Tunisia is expected to be the only recovery of tourism—reflected in the growth of hotels, country among its regional peers with real GDP still restaurants and cafés (+7.4 percent)—helped main- below pre-pandemic level. tain some positive growth rate, although it could not The modest recovery of agriculture along compensate the under-performance of most of the with losses in oil and gas, garments and con- rest of the economy. All of the main sectors remain struction sectors dragged the growth of the below their pre-Covid size. 1 BOX 1: WHY AGRICULTURE HAS RECOVERED ONLY PARTIALLY THE 2023 LOSSES After the large drop in production in 2023, Tunisia’s agricultural FIGURE B1 • Water Inflows to Dams Remain sector grew by 5 percent in the first half of 2024, recovering Below the Historical Average a third of the losses experienced in the same period in 2023. (million cubic meters) The main reason for this slow recovery is the persistent drought conditions, which have plagued Tunisia since 2015, resulting 3,000 in 8 dry years out of 9, including 5 consecutive years since 2019. Rainfall during the 2023/2024 agricultural season (as 2,500 of end of August 2024) was 64 percent of the historical levels 2,000 Historic average average across Tunisia, with rains often occurring away from dam catchment areas or too late in the cereal cycle, affecting 1,500 crop quality. Additionally, rains have often followed long drought periods, preventing sufficient runoff to dams. 1,000 This has caused water inflows to dams in the season 2023/24 Rainfall level to drop on average to 37 percent of historic levels. Consequently, 500 dams have remained fairly dry with a fill rate of 22.3 percent as 0 of September 27th 2024, according to the Observatoire National 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 de l’Agriculture (ONAGRI). As a result, available water reserves are down by 13.5 percent relative to the same period in 2023 and by 21.3 percent compared to the last three years’ average. The lack of rainfall during critical periods for cereal crops, Source: ONAGRI. particularly in March 2024, led to an estimated cereal production Note: historic average refers to the average annual water inflows to dams since data of 1.1 million tons, double the amount of 2023 (0.53 million tons) recording started. but still well below the historic average of 1.8 million tons (source ONAGRI). These conditions have also impacted dairy production through reductions in cereal and fodder production, which resulted into a 9 percent drop in livestock numbers in January 2024 compared to a year earlier (source: Ministry of Agriculture). Fruits and vegetables have also been significantly affected. Cultivated areas of the seasonal tomato crop shrank from 16,000 hectares in 2021 to 11,500 hectares in 2023, and only partially recovered to 13,800 hectares in 2024 due to the restrictions on water available for irrigation. Similarly, while the real growth in citrus exports was positive during the first 8 months of 2024 (+8.1 percent) compared to the same period in 2023, the level of quantities exported was still 50 percent below that of the same period 2022 (ONAGRI data). As rainfall conditions are expected to deteriorate further in the future because of climate change, Tunisia needs to act swiftly to ensure its food security, building the resilience of agriculture as well as the water sector as a whole. To that end, some of the priority measures could include: managing water demand, promoting the use of nature-based solutions, expanding non-conventional water sources, improving irrigation efficiency, increasing uptake of climate-smart practices, developing disaster risk financing and insurance.a a See World Bank (2023) Tunisia: Climate Change and Development Report. The 0.6 percent growth of the economy below the pre-Covid rate, suggesting a higher num- in the first half of 2024 translated into a slight ber of discouraged workers. The 80,000 net jobs the uptick in unemployment and mild decline in the economy created in the first half of 2024 relative to labor participation rate in the first half of the year. the previous year roughly compensated the net jobs The stalled recovery translated into further pressure lost in the second half of 2023 (87,400) (figure 6). on the labor market. In the second quarter of 2024 Almost three fourth of the new jobs were for female unemployment increased to 16 percent up from 15.6 workers, compensating the 2023 losses, which were percent a year before, marking the 6th consecutive concentrated among women. However, women con- quarter of year-on-year increase. At the same time, tinue to suffer a large penalty in the labor market, with the labor force participation rate declined slightly to much lower participation rate than men (27.9 versus 45.8 percent in Q2-2024 (down from 46.0 percent a 65.2 percent in Q2-2024) and higher unemployment year earlier), and it is hovering 1.5 percentage point rate (21.4 versus 13.6 percent). 2 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM FIGURE 1 • Tunisia’s Elusive Economic Recovery FIGURE 2 • Tunisia’s Diverging from Regional (Quarterly GDP, constant 2015 TD) Peers (GDP constant prices; 2019=100) 2019 24,200 2019 120 24,000 2024 2022 115 23,800 2023 2023 110 23,600 Egypt 2022 2021 105 Algeria 23,400 Morocco 100 23,200 Tunisia 23,000 95 22,800 90 2019 2020 2021 2022 2023 2024 (F) Q1 Q2 Q3 Q4 Source: Tunisia’s National Statistics Institute (INS). Source: World Bank Macro-Poverty outlooks. FIGURE 3 • Agriculture’s Recovery Has Been FIGURE 4 • Hydrocarbons, Garments and Modest After the 2023 Drop Construction Dragged Growth in (Agriculture value-added, 4-quarters S1-2024 moving average, TD mln constant (Half yearly GDP in constant 2015 prices and share in GDP) prices; 2019=100) 3,200 15% 125 3,000 14% 115 Oil and gas Garments Value added (mTND) 105 2,800 (left axis) 13% 95 2,600 12% 85 Construction Share in GDP (right axis) 2,400 11% 75 2,200 10% Hotel/Resto 65 2,000 9% 55 Q4-2010 Q2-2011 Q4-2011 Q2-2012 Q4-2012 Q2-2013 Q4-2013 Q2-2014 Q4-2014 Q2-2015 Q4-2015 Q2-2016 Q4-2016 Q2-2017 Q4-2017 Q2-2018 Q4-2018 Q2-2019 Q4-2019 Q2-2020 Q4-2020 Q2-2021 Q4-2021 Q2-2022 Q4-2022 Q2-2023 Q4-2023 Q2-2024 45 S1-2021 S2-2021 S1-2022 S2-2022 S1-2023 S2-2023 S1-2024 Source: INS and World Bank calculations. Source: INS and World Bank calculations. The current slowdown of the 2.  to diverge in the 1990s, a trend that was reinforced economy comes in the context in the 2000s and more so after 2010 (figure 7). This of a long-term decline in growth, secular slowdown in growth is consistent with the so- exacerbated after 2010 called ‘middle-income trap’, i.e. the tendency of coun- tries to reduce their growth rate once they reach the The current slowdown in growth comes in the con- middle-income status. The 2024 World Bank’s World text of a secular decline in investment and savings, Development Report (WDR) discusses the reasons aggravated after 2010. While the Tunisian econ- behind this ‘trap’ and the lessons from countries that omy grew at a similar pace of upper-middle income managed to escape it (see box 2). The decline in eco- countries throughout the 1970s and 1980s, it started nomic growth in Tunisia has been associated with a Recent economic Developments 3 FIGURE 5 • Labor Participation (slightly) Down, FIGURE 6 • The Economy Started Again to Create Unemployment (slightly) Up Jobs After the Losses of the Second (Percent, 4-quarter moving average) Half of 2023 (Quarterly year-on-year net change 18.0 48.0 in jobs, ‘000) 17.5 47.5 100 Labor part. rate (right axis) 50 17.0 47.0 0 16.5 46.5 –50 –100 16.0 46.0 Unemployment –150 (left axis) 15.5 45.5 –200 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Q3-2023 Q4-2023 Q1-2024 Q2-2024 15.0 45.0 T3-20 16 T1-20 17 T3-2017 T1-20 18 T3-20 18 T1-2019 T3-20 19 T1-20 20 T3-2020 T1-20 21 T3-20 21 T1-2022 T3-20 22 T1-20 23 T3-2023 T1-20 24 Men Women Total Source: World Bank staff calculations based on INS. Source: World Bank staff calculations based on INS. FIGURE 7 • Tunisia in the Middle-Income Trap? FIGURE 8 • Investment and Savings Rates Have (GDP per capita in constant Been Declining Especially After 2010 2015 USD) (Percent of GDP and of disposable income) 10,000 9,000 25 8,000 Investment (%GDP) 7,000 20 Savings (% disposable income) 6,000 5,000 Tunisia 15 4,000 Manufacturing share in GDP Upper Middle 3,000 Income 10 2,000 1,000 Lower Middle Income 0 5 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: World Development Indicators. Source: INS and Ministry of Economy and Planning. marked decrease in investment and saving rates, par- More favorable global prices 3.  ticularly after 2010 (figure 8). Lower investments typi- drove the reduction in the cally constrain a country’s ability to bring modern tech- current account deficit easing nologies from abroad and diffuse them domestically, some of the pressure on external which is a key transition towards upper-middle income financing status, according to the evidence in the WDR. That tran- sition is usually associated with an increasing share of Tunisia’s merchandise trade deficit continued to manufacturing in GDP, while in the case of Tunisia that improve in 2024 on the back of favorable changes share has been constantly declining since 2012. in international prices. The trade deficit narrowed by 4 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM BOX 2: ESCAPING THE “MIDDLE-INCOME TRAP”: SOME LESSONS FROM THE WDR 2024 The 2024 WDR focuses on the so-called “middle-income trap”, i.e. the tendency of countries to reduce their rate of economic growth and transformation once they reach middle-income status. The report first shows empirically that such a trap exists by detailing that over the past decades only 34 over 142 middle income countries managed to achieve high income status. It then discusses at length what determines this trap and what middle-income economies can do to escape it. The report argues that in addition to institutional quality —especially economic and political freedom—which is crucial at any levels of income, economic growth in middle-income countries is different than that for countries at other income levels. Specifically, as capital returns diminish with the accumulation of capital, sustained growth in middle-income countries depends crucially on technological progress and improved efficiency in converting capital and labor into goods and services. Successful middle-income countries will have to engineer two successive transitions to develop economic structures that can eventually sustain high-income levels. The first transition is from a so-called 1i strategy of accelerating investment to a 2i strategy focusing on both investment and infusion. The latter is the strategy through which a country brings technologies from abroad and diffuses them domestically. Successful lower-middle- income countries managed to infuse modern technologies and business practices from global leaders into their own economies. Once a country has succeeded in the first transition, the second transition is to switch to a 3i strategy, which entails paying more attention to innovation. Upper-middle-income countries that have mastered infusion, such as Korea in the 1970s,1980s Chile and Poland in the 1990s and 2000s, can complement investment and infusion with innovation, thereby developing industrial structures and technical competencies to add value to and advance the global technology frontier. Different countries have followed different strategies to facilitate these transitions. However, common themes include disciplining incumbents, including SOEs, rewarding merit, promoting contestability, ensuring macroeconomic stability as well as mobility and displacing outdated arrangements and create new ones. Source: World Bank (2024), World Development Report: The Middle-Income Trap. 3.4 percent during the first nine months of 2024 com- ities—declined by 18 and 20 percent respectively, as pared to the same period in 2023, reaching 7.8 per- international market conditions stabilized after the dis- cent of GDP (vis-à-vis 8.8 percent a year earlier). This ruptions of the war in Ukraine. pattern continued the improvement of 2023, when The energy deficit widened further despite the trade deficit shrank by two third after the adverse more favorable prices, continuing to account for terms of trade shock due to the war in Ukraine in 2022. the bulk of the merchandise trade deficit. As a net The deficit reduction in 2024 was mainly driven by the energy importer, Tunisia benefited from a reduction in agro-industrial sector, which turned the deficit of 2023 global energy prices in 2024. In the first half of 2024 into a small surplus thanks to booming olive oil exports the average price of hydrocarbons imported by Tunisia (figure 9). These sectors, as most other ones in Tuni- declined by 17.8 percent compared to the same sia, benefited from improving terms of trade. In the first period in 2023. Yet, imported quantities increased by six months of 2024, average import prices declined 40.1 percent as Tunisia’s production of oil and gas by 16 percent on an annual basis, while export prices declined.3 Thus, energy imports increased by 15.1 per- increased by 4 percent (figure 9).1 These price trends were partly compensated by opposite trends in quan- 1 At the time of writing, data on trade values were available tities. As a result, export values increased by 2.2 per- up to August 2024, while quantities were only available cent and imports remained stable.2 Tunisia’s main up to June. Hence the analysis of unit values spans only traded commodities provide an illustration of the more the first six months of 2024. benign terms of trade in the first six months of 2024 2 Improving export prices with stagnant import prices (figure 10). The price of oils and fats exports increased were also responsible for the shrinking trade deficit in the first semester of 2023 (see figure 8). by 78 percent, benefiting from Europe’s reduced sup- 3 In the first eight months the production of oil declined ply of olive oil, while the exported quantity did not by 13 percent while that of natural gas by 26 percent change. Conversely, the import prices of hydrocar- (source: Ministry of Industry, Mining and Energy (2024) bons and cereals—Tunisia’s main imported commod- Conjoncture Energétique, August). Recent economic Developments 5 FIGURE 9 • Agriculture and Mechanic Industries 2024 (up from 53.4 percent a year earlier). That share Led the Moderation of the has more than doubled since 2017, making the recent Merchandise Trade Deficit in 2024 development of renewable energy projects particu- (Trade balance by sector January– September, TD million) larly important (see Box 3) not only for Tunisia’s energy security but also for its external balance (see Tunisia 5,000 Economic Monitor, Spring 2024 issue). 0 The narrowing trade deficit along with the –5,000 continued growth of tourism exports lowered the –10,000 current account deficit (CAD) in the first half of –15,000 2024. The significant reduction in the merchandise –20,000 deficit was accompanied by the continued recovery –25,000 of tourism. Receipts grew by 7.2 percent as of Sep- tember 10th on an annual basis, reaching TD 5.1 bil- –30,000 2022 2023 2024 lion, or 3.0 percent of GDP (the same ratio as over the Agriculture Energy Mining same period in 2023). In the first half of 2024, how- Textile Mechanical and electrical Other manuf. Trade balance ever, the contribution of tourism to GDP was still lower than its pre-Covid level (3.5 against 4.4 percent). Tour- Source: World Bank staff elaboration based on INS data. ism receipts were slightly lower than remittance inflows (TD 5.4 billion or 3.1 percent of GDP against 3.3 per- cent of GDP for remittances), which recorded a more cent in value up to June 2024, and by 16.6 percent up modest increase (+3 percent), although they remain to August. This led the energy trade balance to deteri- a key source of foreign exchange for Tunisia. These orate by 15.2 percent, accounting for 62.9 percent of flows and the shrinking trade deficit compensated the the merchandise trade deficit in the first 8 months of 9.2 percent increase in interest payment on foreign BOX 3: RECENT PROGRESS IN THE DEVELOPMENT OF THE RENEWABLE ENERGY PROGRAM IN TUNISIA As highlighted in the 2024 WDR the climate and energy crises provide an opportunity for middle-income countries to infuse global technologies domestically to join low-carbon value chains for global markets, while also deploying low-carbon energy. In this context the Tunisian government has set the target of generating 35 percent of electricity from renewables by 2030, up from just 3 percent in 2022.a While ambitious, this target is in line with Tunisia’s large untapped renewable potential, which is estimated at up to 280 GW of solar and 90 GW of wind power. To achieve the renewable energy target, Tunisia is advancing the implementation of its ambitious renewable energy development program based on public-private partnerships. The construction of the first 500 MW of energy generation in the program is progressing at pace after some delays due to rising prices and financing costs in the wake of both the Covid and Ukrainian crises. Works for the development of the first 100MW solar plant in Kairouan started last May, and those for the 50MW solar plants each in Sidi Bouzid and Tozeur—in cooperation with Norwegian renewable energy company Scatec and Japanese Aeolus—started last September. The agreements have recently been signed also for the remaining projects in Gafsa (100MW) and Tataouine (200MW), which should be under way in 2025. In addition, in December 2022, the government announced projects for a further 1,700 MW to be awarded over the period 2024–2026, including 1,100 MW of solar and 600 MW of wind energy. Nine bids were received last May covering the first 500 MW of solar projects, with construction planned to start in 2025. Once implemented, this 2,200 MW program is expected to increase the share of renewable energy in the electricity mix to 17 percent. This would allow estimated savings of 1 million ton of oil equivalent of imported gas—around 30 percent of total gas imports in 2023—and a significant reduction in production costs. a Source: Ministère de l’Industrie, des Mines et de l›Energie and UNDP (2023), Stratégie énergétique de la Tunisie à l’horizon 2035, Tunis: April. 6 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM FIGURE 10 • Rising Export Prices, Declining FIGURE 11 • Main Export and Import Products Import Prices Have Driven Narrowing Highlight the Improving Terms of of Trade Deficit Trade in 2024 (Annual percent change, first (Annual percent change, first semester of each year) semester) 22% 75% 17% 55% 12% 35% 7% 2% 15% –3% –5% –8% –25% Garments Oils and fats Hydrocarbons Cereals –13% Exports Imports –18% Exports Imports Exports Imports Unit Value Quantity Value 2024 2023 Source: World Bank staff elaboration on INS trade data. Unit Value Quantity Value Note: in 2023 garments accounted for 13.8 percent and oils and fats for 6.6 percent of export value; hydrocarbons accounted for 17.0 percent and cereals for 5.8 percent of Source: World Bank staff elaboration on INS trade data. import value. debt in the first half of 2024 (accounting for 51 percent dependent on sovereign financing to cover its external of the CAD). As a result, the CAD in the first half of 2024 financing needs as other sources of funding are either declined to 1.4 percent of GDP, down from 2.0 percent inaccessible (international private financing)5 or cover of GDP in the same period in 2023 (figure 11). only a small share of the external financing needs, as While the lower CAD eases the pressure on is the case for foreign direct investments (FDI), portfo- external financing needs, the latter remain signif- lio and capital account flows (figure 12). Portfolio and icant especially due to the burdensome debt ser- capital account flows are virtually absent in Tunisia vice. Despite the reduced CAD, external financing mainly as the country maintains strict controls on cap- needs remained significant in 2023 (TD 12.7 billion, ital outflows. FDI is more significant, and it increased or 8.0 percent of GDP) with amortization accounting by 18 percent in the first half of 2024, though it only for 73 percent.4 These needs rose by 42 percent in covers 14 percent of external financing needs. If prop- the first half of 2024 (5.3 percent of GDP) compared erly designed, the update of the 48-year-old foreign to the same period in 2023, most of which (74 per- exchange code could be important to stimulate these cent) again due to debt reimbursement. private capital inflows, but the updated code is still to be voted on by Parliament after the cabinet approved it last March. At the same time external Budget financing  unisia’s increasing reliance 4. T has been declining over the past couple of years fol- on domestic sources to fill the lowing Tunisia chose not to proceed with an IMF pro- external financing gap could present medium-term risks to currency and price stability 4 External financing needs are defined as current account deficit + debt (public + private) reimbursement. 5 The Tunisian government has not been able to With limited private sources of capital, Tunisia con- issue foreign-denominated bonds since 2019, as its tinues to depend on sovereign lending to finance sovereign credit rating has been consistently assessed its foreign exchange needs amidst tight exter- as noninvestment grade (including by Moody’s, Fitch nal financing conditions. Tunisia continues to be Ratings and Rating and Investment Information). Recent economic Developments 7 FIGURE 12 • The Trade Deficit Along with Tourism FIGURE 13 • Limited FDI, Portfolio and Capital Receipts Helped Reduce the Current Flows Put Pressure on Tunisia’s Account Deficit in Recent Periods Financing of its External Needs (Percent GDP) (Percent GDP) 10% 10 9 5% 8 7 0% 6 –5% 5 4 –10% 3 2 –15% 1 H1-18 H2-18 H1-19 H2-19 H1-20 H2-20 H1-21 H2-21 H1-22 H2-22 H1-23 H2-23 H1-24 0 H1-09 H1-10 H1-11 H1-12 H1-13 H1-14 H1-15 H1-16 H1-17 H1-18 H1-19 H1-20 H1-21 H1-22 H1-23 H1-24 Goods Services Primary Secondary Current account Capital FDI Portfolio Ext. fin. needs Source: World Bank staff estimates based on Central Bank of Tunisia data. Source: World Bank staff estimates based on Central Bank of Tunisia data. gram. The data so far suggests that sovereign financ- last February decreased their level to the lowest level ing appears insufficient to cover the country’s external since July 2023. Despite a TD 1 billion (US$ 335 mil- needs for 2024. According to the Budget execution lion) debt repayment of a Japanese bond maturity in data, in the first half of 2024 external financing to the early October, that level has gone up since then and budget totaled TD 1.1 billion, equivalent to 6.7 percent hovered around TD 24.3 billion, or US$ 7.9 billion by of budget external financing needs for the entire year October 11st (figure 14). This provides a buffer vis-à- identified in the 2024 Budget Law. That’s well below vis both imports (110 days of coverage) and short- the share in the same period in 2023 (32.5 percent). term external debt repayment, and helps explaining With shrinking sovereign financing, the gov- ernment has turned to domestic sources to cover FIGURE 14 • Reserves Recovered After the Drop its external needs, including through monetary in Early 2024 While the Dinar Has financing. Up to October 10 2024, the government Remained Stable used around TD 5 billion in foreign exchange from the (Reserves in TD and in days of imports and TND-USD exchange rate; Central Bank facility instituted by the Tunisian parlia- 2020=100) ment in February 2024. The facility allows the BCT to finance the budget up to TD 7 billion in 2024 (4 per- 150 Reserves (Imp. days) cent of GDP and 42.7 percent of government external 140 Reserves (TD) financing needs for the year), including from its foreign 130 exchange reserves. The loans were used to cover exter- nal debt service obligations. Similarly, the government 120 also tapped into the domestic banking system to help 110 finance its external needs, contracting a US$ 185 mil- 100 X-rate lion syndicated loan from 16 domestic banks in May. Foreign reserves and the Dinar have been 90 overall stable, although the continued use of 80 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 Jul-24 Oct-24 monetary financing of external needs presents risks for currency and price stability. The use of reserves to reimburse foreign denominated bonds Source: World Bank staff estimation based on Central Bank of Tunisia data. 8 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM why the Dinar has remained stable in the face of large FIGURE 15 • Tunisia Increasingly Relies on recent reimbursements. The recent relative macro sta- Domestic Financing of the Debt (Domestic Debt, % of Total Debt bility has also prompted a slight upgrade in Tunisia’s and TD Mln) Long-Term Foreign-Currency Issuer Rating by Fitch Ratings in September.6 However, if protracted beyond 55 this year, the use of monetary financing of the budget 50 Domestic debt (% total debt) could eventually erode reserves, carrying risks to cur- rency and price stability. In October 2024, members 45 of Parliament proposed amending the Central Bank law to facilitate its financing of the public budget. 40 35  he rising domestic financing of 5. T Domestic debt (% GDP) the public debt has increased the 30 sovereign-banking nexus along with the crowding out of the 25 2021 2022 2023 2024 (budget law) Aug-24 private sector Sources: Central Bank of Tunisia and Ministry of Finance. The challenging external financing environment along with the rising public debt have resulted in share of claims to the government has displaced the the growing role of the domestic banking system credit to the rest of the economy, which decreased for debt financing. As access to external financing at an annual rate of 3.8 percent between June 2022 became more limited, the nominal domestic debt stock and May 2024. This displacement is aggravated by rose rapidly over the past few years, moving from 24.7 the increasing banking exposure to SOEs, as it is the billion in 2019 to 66.4 billion in August 2024. In paral- case of the Banque Nationale Agricole (BNA), one of lel, public debt grew rapidly (from 67.8 percent to 80.2 the largest Tunisian banks, which increased its credits percent of GDP between 2019 and 2024), reflecting to the Office Des Céréales (OdC) three-fold between rising public expenditures and the deceleration of the 2019 and 2024 (figure 17). The OdC now accounts for economy.7 As a result, Tunisia has increasingly tapped almost a third of all BNA credits. In this context imple- into local markets as a financing source so that the menting some of the measures proposed in the 2022 share of domestic debt in total debt increased from government’s emergency plan, such as facilitating the 29.7 percent in 2019 to 51.7 percent in 2024 (figure use of movable assets as collateral, could be impor- 15). This domestic financing necessitated a high level tant to strengthen access to credit to the economy. of refinancing to local banks by the Central Bank.8 The sustained use of local funding to 6 The rating improved from CCC– to CCC+, which still finance public debt continues to crowd out indicates a significant risk of default. This is a similar risk credit to the economy. The injection of liquid- to that identified by Moody’s, whose most recent rating in September has remained stable at Caa2. ity through refinancing operations is directing bank 7 The debt figure covers only the central government’s liquidity towards government lending, which is likely but not SOEs’ debt, much of which is guaranteed by the to crowd out credit to the rest of the economy. In the State as well as payment arrears to public and private last 24 months through May 2024 the banking sec- companies. tor’s exposure to the State grew at an annual rate of 8 Refinancing consists of the Central Bank lending money 30 percent. As a result, the share of central govern- to banks with liquidity needs, generally short-term. They are carried out on the initiative of central banks (through ment in total claims of the banking sector increased tenders) or banks (lending facilities). While refinancing is from an average of 14.4 percent in 2015 to 25 per- associated with money creation, the relation is not one- cent in the last 12 months up to May 2024 (figure to-one as it depends on the terms of the reimbursement 16). In a context of limited credit growth, this rising and the loan maturities. Recent economic Developments 9 FIGURE 16 • The Share of Net Government Credits to Office Des Céréales FIGURE 17 •  Receivables in Total Credits Tripled Since 2019 Continues to Increase (and (Mln TND for credits and percentage Accelerates) as Receivables to for share of OdC in total credit stock the Economy Growth Falters extended by BNA) (Year-on-year percent increase, six month moving average) 8,000 34% 7,000 40% 10% 32% yr-o-yr growth in credit to the 9% 6,000 35% economy (right axis) 8% 30% 5,000 7% 4,000 28% 30% 6% 5% 3,000 26% 25% Share of govt in 4% total credit (left axis) 2,000 24% 3% 20% 2% 1,000 22% 1% 0 20% 15% 0% 2019 2020 2021 2022 2023 2024 (June 30th) Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23 Jun-23 Aug-23 Oct-23 Dec-23 Feb-24 Apr-24 Office des Céréales SOEs Share OdC Source: Central Bank of Tunisia. Source: BNA. nflation continued to moderate, 6. I and import compression reduced the supply in although but it remains above the domestic food markets. Despite the decline, food pre-Covid average, particularly for inflation (9.2 percent in September) remains above food, prompting the government the pre-Covid average (7 percent in 2018–19). The to raise the minimum wage rate of price increases for food has been consis- tently higher than average inflation since May 2021 Inflation continued to moderate since the peaks of and the gap has been expanding over the past cou- February 2023 on the back of lower global prices ple of years as the drought and import compression and low domestic demand. Year-on-year price infla- reduced the domestic supply of agricultural products. tion continued its gradual decline from the record level This presents a significant challenge particularly for of February 2023 (10.4 percent), reaching 6.7 percent lower income households, for which food accounts in September 2024, the lowest level since January 2022 for a relatively greater share of expenditures.11 (Figure 18). This followed the reduction in core infla- With declining inflation and a stable Central tion to 6.2 percent (September 2024) from 7.4 percent Bank policy rate, the nominal interest rate is the (September 2023) driven in part by a limited domestic highest in 3 years. As the Central Bank (CBT) main- demand given the slowdown in economic growth.9 The tained its key policy rate unaltered at 8 percent since decline in international prices compounded this effect, the beginning of 2023, the real interest rate became helping reduce the pressure on domestic prices. Driven by the drop in international prices of energy and 9 Core inflation is computed by excluding energy and food cereals, Tunisia’s merchandise import prices declined products from the CPI. on average by 16.1 percent in the first half of 2024 (see 10 That is an average obtained by weighing each 2-digit figure 9 above).10 At the same time electricity and gas sector level price change by the corresponding share in total Tunisian merchandise import in the first 6 months. inflation declined from 14.9 percent in February 2023 11 According to the 2021 Household Budget survey, the to 0.1 percent in September 2024. share of food in total expenditures is 35.5 percent for However, food inflation is still high and the bottom quintile of the income distribution and above its pre-Covid average, as the drought 27.2 percent for the top quintile. 10 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM Inflation Started to Decline in FIGURE 18 •  FIGURE 19 • Real Interest Rate Is at the Highest 2023 and Has Now Approached Level Since March 2021 its pre-Covid Average (Real interest, inflation and policy (Year-on-year percent increase) rates, in percent) 16% 11% 2.0% Food inflation 1.5% 14% 10% 1.0% 12% 9% 0.5% CPI 0.0% 10% 8% –0.5% 8% 7% –1.0% –1.5% 6% Core inflation 5% –2.0% –2.5% 4% 5% –3.0% 2% 4% –3.5% Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23 Nov-23 Jan-24 Mar-24 May-24 Jul-24 0% Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Real interest rate CPI Policy rate Source: Central Bank of Tunisia. Source: World Bank estimates based on INS and OECD. positive as of January 2024 after more than 2 years For the first time in years the government of having been negative. The real rate was 1.3 per- raised the guaranteed minimum wage in line with cent in August 2024, the highest since March 2021 inflation in 2024, hoping to protect the purchasing (figure 19). The challenge for the authorities contin- power of lower income workers. The 7 percent mini- ues to be to limit inflationary pressures fueled by a mum wage hike decided by the government in 2024 is price-wage spiral, although the extent of the challenge above the September inflation rate and aligned with the appears less significant than a year ago. Maintaining average inflation expected for the entire year. This is the a strong and independent Central Bank will continue first time since 2019 that the minimum wage does not to be a central pillar in the pursuit of price stability. decline in real terms. In fact, the data shows a gradual divergence of the minimum wage vis-à-vis inflation since 2011, following a decade when the minimum wage was FIGURE 20 • The Minimum Wage Has Lagged indexed to the consumer price index (figure 20). As a Inflation and Private Sector Wage for Many Years result, minimum wage earners lost 20 percent in pur- (Nominal prices and wages, 2000=100) chasing power between 2011 and 2023. While this loss has likely affected lower income workers, the average wage earner in the private sector appears to have fared 300 better, as their wages grew more than inflation (and of Avg pvt sec wage minimum wage) both in 2000–10 and in 2011–23. 250 Consumer prices 200 SMIG  he budget continues to be under 7. T (40 hours) pressure as the low growth affects 150 tax revenues 100 The increase in tax revenues in the first eight 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 months of 2024 has been more modest than expected, dragged by the slowdown in growth. Source: INS. The budget execution report shows that tax reve- Recent economic Developments 11 nues grew by 10 percent in the first eight months of FIGURE 21 • Tax Revenues Under-Performed 2024 (15.9 percent of GDP) compared to the same in the First Eight Months of 2024 Relatively to the Expectations period in 2023 (15.7 percent of GDP) (figure 21). That (Year-on-year percent change) is below the 2024 Budget Law’s projection (16 per- cent, 25.6 percent of GDP) but higher than the 2023 25% growth rate (7 percent, 23.9 percent of GDP) and the 20% inflation rate. The comparatively modest performance of indirect taxes, particularly VAT (5 percent growth 15% to 4.2 percent of GDP) and customs (4 percent to 0.7 percent of GDP), weighted down overall tax reve- 10% nues. That is consistent with the effect of the growth slowdown, with lower demand for consumption and 5% investments, including for imports. On the other hand, direct taxes showed greater resilience (+16 percent 0% Total Direct Indirect VAT Customs Excises Other to 6.8 percent of GDP) as their largest component— 2023 Budget law 2024 8 months 2024 labor income taxes—is less responsive to short-term variations in growth. The much higher tax burden that Source: Tunisia’s Ministry of Finance. labor income faces relative to capital income contin- ues to be a source of distortion and potential inequal- ity in the economy (see part B). growth and employment creation, successive govern- The authorities have managed to compress ments over the past decade have increased recurrent the wage bill growth which remains, however, public expenditures to provide public employment relatively substantial in international perspec- and to keep market prices for basic goods and ser- tive. The public wage bill grew by 4 percent in the vices below cost recovery. These measures crowded first six months of 2024 relatively to the same period out public investments by the government, which in 2023. While Tunisia still has one of the highest declined from 6.0 to 3.5 percent of GDP between 2016 public wage bills in the world relative to the size of and 2023. Reversing this decline in capital expendi- its economy, it declined from 14.7 percent of GDP in tures is crucial to revive Tunisia’s growth trajectory. 2022 to 13.8 percent in 2024 and from 53 percent to 51 percent of total public expenditures. The relative compression of the wage bill follows the agreement Assuming drought conditions ease, 8.  between the government and the trade union (UGTT) we expect a moderate growth in October 2022 and the continued freeze of pub- rebound in 2024–25 assuming lic sector recruitment. This allowed to contain overall but economic prospects remain expenditure growth to 8.1 percent at the same pace uncertain as subsidies and transfers (3 percent of GDP). Capital expenditures remained constant well below the rate Given the persistent drought and challenging of overall expenditure and its share in GDP declined external financing conditions, we expect the further to 1.1 percent (from 1.2 percent in the first economy to grow by 1.2 percent in 2024, below half of 2023). The moderate growth in expenditures our previous forecasts. These factors have contin- helped maintain the budget in balance in the first half ued to affect key sectors in 2024, including agricul- of 2024, in line with the result in 2023. ture, agro-industry and construction. In addition, low Reversing the decline in public capi- external demand along with the need for more eco- tal expenditures by re-orienting less productive nomic reforms further limit the growth prospects, par- recurrent expenditures continues to be key to ticularly for manufacturing. At the same time, the agri- revive economic growth. With slowing economic cultural sector is expected to gain some momentum in 12 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM the second half of 2024, given the expected increase terms of trade. With FDI projected to be relatively sta- in olive oil production, and the more humid climate ble and minimal portfolio investments, foreign lending with the expected imminent arrival of La Niña.12 This would still have to shoulder the financing of the CAD. helps to raise the growth forecast for 2024 above the We expect inflation to decrease somewhat due to the growth in the first semester 2024. relatively large post-Covid output gap and the mild Growth is expected to moderately increase increases in public wages following the government- in 2025–26, although the forecasts are subject UGTT agreement last year. These conditions along to significant downside risks. We expect the econ- with economic reforms should help Tunisia reduce its omy to grow by 2.2 and 2.3 percent in 2025 and current account and budget deficits, easing financing 2026, respectively. That would bring the economy conditions. closer to the long-run growth path, from which the The financing of the deficits will require a economy deviated during the Covid-19 crisis. How- significant scale-up of the external financing and ever, these medium-term prospects are conditional on reforms in the face of the significant debt reim- an improvement of financing conditions and external bursement schedule in the near term. Despite the demand as well as a moderation of the drought. If the lower deficits, gross financing needs in 2024–26 are financing conditions did not improve, it may be chal- expected to remain above 16 percent of GDP, well lenging to secure sufficient foreign currency in the above the 2023 level (13.8 percent). That is mainly due economy, which could lead to pressures on exchange to significant debt service, with almost two-thirds of the rate and prices, exerting a negative impact on eco- financing expected to be amortization, most of which nomic activity and employment. In addition, should external.13 It should also maintain Tunisia’s reliance on the drought conditions persist, the projections could external funding sources elevated. Given the paucity be revised downwards given the negative impact on of other financial inflows as described above, sover- agriculture and the trade balance. eign lending would have to cover most external financ- While the macro situation is expected to ing needs if Tunisia were to avoid a risky dependence stabilize, Tunisia’s public finance and external on monetary financing of the budget through reserves. position will remain vulnerable in the absence of sufficient external financing and reforms. The bud- get deficit is expected to decline somewhat to 6.0 per 12 As a result of these climate conditions, we expect a cent of GDP in 2024, as subsidies and wage bill are slightly higher date harvest, and potentially improved cereal and fodder production. constrained in real terms and tax revenues should 13 A number of debt obligations mature in the next months, moderately increase. The CAD is projected to decline including a Yen 50 billion (US$ 350 million) bond next slightly at 2.3 percent of GDP in 2024 with contin- December and a US$ 1 billion Eurobond in January ued growth in travel and olive oil exports and stable 2025. Recent economic Developments 13 TABLE 1 • Key Macroeconomic Indicators, 2020–26 2020A 2021A 2022A 2023A 2024E 2025F 2026F Real GDP Growth. at Constant Market Prices –8.6 4.3 2.7 0.0 1.2 2.2 2.3 Private Consumption –2.1 2.4 2.2 –0.6 2.4 3.8 3.5 Government Consumption –1.0 1.5 –1.2 –2.4 1.9 1.9 –1.8 Gross Fixed Capital Formation –20.0 3.2 1.8 –7.7 6.0 –0.5 3.4 Exports. Goods and Services –20.0 11.9 17.3 10.4 0.0 4.0 4.0 Imports. Goods and Services –16.6 10.9 11.5 5.7 3.7 5.0 4.5 Real GDP Growth. at Constant Factor Prices –8.5 4.3 2.6 –0.1 1.2 2.2 2.3 Agriculture 0.4 –2.3 1.9 –16.1 8.5 5.9 5.9 Industry –10.4 9.8 0.7 –1.0 –3.5 –0.2 –0.3 Services –9.1 4.1 3.4 2.7 1.9 2.6 2.6 Inflation (CPI) 5.6 5.7 8.3 9.3 7.0 6.0 5.0 Current Account Balance (% of GDP) –6.0 –6.0 –8.7 –2.6 –2.3 –2.0 –1.8 Foreign Exchange Reserves ($ bn) 8.2 8.3 7.4 8.5 10.2 12.7 15.1 Foreign Exchange Reserves (months of imports) 5.4 4.0 4.1 4.6 4.8 5.1 5.1 Central Government Overall Fiscal Balance (% of GDP) –8.7 –7.6 –6.7 –6.8 –6.0 –4.3 –2.5 Primary Fiscal Balance (% of GDP) –5.6 –4.7 –3.5 –3.1 –2.3 –0.3 1.3 Fiscal Revenues (% of GDP) 25.5 25.7 28.5 27.2 28.6 27.8 28.1 Fiscal Expenditures (% of GDP) 34.2 33.3 35.2 33.9 34.8 32.9 32.0 Gross Financing Needs of the Central Government 13.3 10.9 12.7 11.9 16.4 16.9 17.4 (%GDP) Central Government Debt (% of GDP)* 77.8 79.9 79.9 79.6 80.2 79.9 79.2 Interest Payments (on CG Debt; % of GDP) 3.1 2.8 3.2 3.7 4.0 3.9 4.0 * The figures for 2020–2024 are based on government data; 2025–26 are based on World Bank staff forecast. 14 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM B PART MAKING THE TAX SYSTEM MORE EQUITABLE AND EFFICIENT Summary Albeit insufficient to cover expenditures, Tunisia collects proportionately more tax revenues than most of its peers. Tax revenues have risen faster than the economy in the past two decades, mainly driven by the growth of personal income taxation. At the same time, corporate income tax declined, but new World Bank analysis in Tunisia suggests that this decline may not be effective in increasing investment and employment. At the same time, more targeted tax incentives, such as those reducing the cost of labor for young, innovative firms, appear more effective. Indirect taxes remain an important source of tax revenues, but they could be more transparent, equitable and more targeted to address negative externalities. Tax policy in Tunisia has progressively shifted the burden of direct taxation from capital to labor income. The tax burden on labor income is made heavier by the outsized role that social security contributions play in the Tunisian tax system. While the personal income tax is progressive, the tax burden on wage income is rela- tively high even at low-income (formal) levels because of the structure of social security contributions and of the deductions. This raises the cost of labor for employers, limiting their incentives to hire labor (formally at least), and reduces the progressivity of the tax system. This high cost of labor emanating from the tax system also increases incentives for businesses to remain informal and/or to under-declare revenues, profits and wages. Capital income tax benefits from several concessions and exemptions on various sources, which reduce its contribution to tax revenues. Capital income is also taxed differently across different sources. This horizontal inequity reduces the efficiency of capital allocation. As a result of this tax structure, Tunisia’s effective tax rate on labor is much higher than on capital, and the difference is the highest among developing countries according to new data. As richer individuals earn predominantly capital income, while less wealthy individuals rely more on labor income, the higher effective tax rate on labor relative to capital is likely to fuel income inequality. Redressing the balance between labor and capital income taxation, while using more effectively indirect taxes could increase the efficiency and the fairness of Tunisia’s tax system. The introduction of an annual prop- erty tax in 2023 has been a step in the right direction, although it is limited in scope, and it faces implementation hurdles. Tunisia could also tax more extensively carbon emissions to avoid losing revenues as its trading partners implement carbon adjustment taxes and as an effective way to internalize the negative externalities of production. 15 Albeit insufficient to match the fast-grow- cent in 2021–23. Much of this growth is due to the ing public spending, Tunisia’s tax revenues are rapid rise of personal income taxation (PIT), which higher than most peers. Tunisia has historically doubled its share in GDP in the past two decades, raised significant amount of tax revenues compared from an average of 3.6 percent in the 2000s to 7.1 per- to countries at similar level of incomes. Accounting cent in 2021–23 (figure 24). This increase was partly for the positive relation between tax and income per due to the rising share of the public sector in employ- capita, Tunisia’s tax revenues-GDP ratio in 2010 was ment. At the same time, corporate income taxation around 4 percentage points higher than the average (CIT) declined significantly, as the general CIT rate of countries at the same level of income (figure 22). was slashed from 30 to 15 percent between 2013 and The gap increased further, and by 2022 it was around 2021.During that period the CIT-to-GDP ratio shrank 7 percentage points. At 24.6 percent Tunisia had one from 4.3 to 2.4 percent. While the reduction in CIT has of the highest ratios among middle-income coun- in part sought to promote investments, exports and tries. At the same time, Tunisia’s tax revenues have employment, our analysis in Tunisia suggests that this been largely below the level of public expenditures. instrument may not be effective to achieve those gains In the 1990s they covered an average of 68 percent (see box 4). More targeted tax incentives appear to be of expenditures, rising to 77 percent to eventually fall more effective, as the evidence from the Start-up Act back to 70–71 percent in 2022–23, as the growth suggests (box 4). of tax revenues could not keep the pace with that of The rising PIT and declining CIT reve- public expenditures in the post-revolution period (fig- nues translate into a shift in the tax burden from ure 23). capital to labor incomes. That is because the tax Personal income taxation was a key driver on wage income accounts for the bulk of PIT in of the tax revenue growth, while corporate income 2000–19.14 The share of PIT in total taxes in Tuni- tax declined along with tax rate reductions, whose economic impact appears elusive. Tax revenues 14 Between 2000 and 2019, the last year for which we grew faster than the economy for the most part of the have the breakdown of PIT between wages and other past quarter century, moving from an average tax-to- incomes, tax on wage income accounted for an average GDP ratio of 18.4 percent in the 2000s to 24.0 per- of 72 percent of total PIT. FIGURE 22 • Tunisia Collects More Tax Revenues FIGURE 23 • The Gap between Public than its Economic Peers Expenditures and Tax Revenues (Tax revenues-GDP ratio and per Has Expanded Over Time capita GDP in constant US$, 2015 (Percent of GDP) and 2022) 36% 40 34% 32% Tax revenues/GDP (percent) 30 TUN 2022 30% TUN 2015 28% TUN 2010 26% Public expenditures 20 24% 22% 10 20% Tax revenues 18% 0 16% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 6 8 10 12 GDP per capita, constant 2015 USD (log) Source: World Development Indicators. Source: Tunisia’s Ministry of Finance. 16 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM BOX 4: A TALE OF TWO CORPORATES’ TAX INCENTIVES Recent analysis by the World Bank evaluates two different set of FIGURE B2 • The 2014 CIT Increase for Offshore tax incentives for firms in Tunisia. Firms Has Not Affected Firms’ The first is the exemption of CIT for firms registered in the so- Revenues called ‘offshore’ regime, dedicated to export-oriented firms. Since (Total revenues for onshore and the inception of the regime in 1972, offshore firms benefited from offshore sectors, 2013=1) a full exemption of the CIT, along with other favored treatment, such as a special import and export regime and the possibility 1.6 of holding a bank account in foreign exchange. While the law established the tax exemption only for the first 10 years of the Total Revenue Before Tax 1.4 offshore firm, this was eventually renewed upon its expiration by successive laws so that it remained in force for the subsequent 1.2 decades. At the end of 2006 the authorities decided to eliminate this tax exemption altogether by applying a reduced tax rate of 1.0 10 percent on new offshore firms’ profits starting in 2008, but it took until 2014 for the new rate to be applied. This exemption 0.8 was costly for the Tunisian budget. Our estimates suggest that in 2013 had the offshore firms paid the general 30 percent CIT rate, they would have generated tax revenues equivalent to 0.6 2008 2010 2012 2014 2016 2018 6.8 percent of GDP. Year We study the impact of this increase in CIT rate by comparing economic outcomes of offshore firms before and after the Offshore Onshore change with the same before-after difference for the other firms. The comparison is based on the universe of registered Source: World Bank staff estimates on the basis of INS and Smart Capital data. Tunisian firms. The key identifying assumption is that trends in the offshore and onshore sectors would have been similar without the reform. We provide evidence that the assumption holds not only in the raw data, which show very similar pre-reform trends for both group of firms, but also as a result of a wide battery of aggregate and firm-level tests. The main results suggest that the CIT rate increase did not have any impacts on the key economic performance indicators of firms. As figure B2 shows, total revenues of offshore and onshore sector continued to grow at very similar rates before and after FIGURE B3 • The Start-Up Label Has Increased the end of the offshore CIT exemption. We obtain similar results Employment for employment and the wage bill as well. The results are (Average treatment effect on the confirmed through dynamic regressions that allow to control for firms benefiting from the program, confounding factors. in log points) The second evaluation focuses on the impact of a recent flagship program supporting start-up in Tunisia, the so-called 4 “Startup Act”, which was introduced in 2019 to promote the creation and growth of innovative firms. Our analysis focuses on 3 the program’s “start-up label” initiative, which awards selected firms a special “start-up” designation that grants them access 2 to a range of benefits. These benefits include tax incentives in ATT the form of reduced social security contributions and profit tax 1 exemptions, eased foreign currency restrictions, simplified customs procedures, and—for firms less than a year old—also a stipend to up to three founders. 0 The analysis, covering applications from March 2019 to –1 December 2021, includes 466 firms that applied for the label. –2 –1 0 1 2 3 We employ a difference-in-differences design, comparing Periods to Treatment the performance of successful applicants before and after receiving the label with that of firms that applied but were not Pre-treatment Post-treatment selected. To mitigate selection bias, we utilize detailed data on the program’s selection process to identify marginal entrants Source: World Bank staff estimates on the basis of INS and Smart Capital data. (continued on next page) Making the tax system more equitable and efficient 17 BOX 4: A TALE OF TWO CORPORATES’ TAX INCENTIVES (continued) and rejects. Applications are evaluated by a 9-person committee, where firms with five or more approval (rejection) votes are selected (rejected) right away, and those with neither outcomes proceed on to a pitch stage for a further evaluation. The firms that proceed to the pitch stage are arguably more similar to each other than those immediately accepted or rejected. Hence our preferred specifications focus on those 118 firms, comparing the outcomes of those that obtained the label against those who failed to obtain it as a result of the pitch stage. Our main finding is that program participation promotes survival and job creation. One to three years after program entry, labeled firms are 11 percentage points (pp) more likely to survive. Treated firms increase their employment on average by 169% and their wage bill by 142% (figure B3). The results are in line with survey evidence among global investors that show that tax incentives are second order factors in the decision of firms to invest and employ relatively to leading country characteristics, such as political and economic stability, a transparent regulatory framework, availability of skills, infrastructure quality and a large local market.a However, for certain categories of firms, the younger and more innovative, targeted tax incentives reducing labor costs, could be effective to stimulate growth, particularly when bundled with other types of support. a See for instance, World Bank, (2017) “Global investment competitiveness report 2017/2018: Foreign investor perspectives and policy implications”, and UNIDO (2011) “Africa investor report”. sia is higher than comparator countries and other Taxes on goods could also be used more effectively developing regions, including Latin America and to address negative externalities, including environ- the Caribbean (LAC) and Asia, and similar to that of mental and health effects (taxes on transport fuels OECD countries (figure 25). Conversely Tunisia has and on tobacco are low by international standards). the lowest share of CIT in total tax among the same The tax burden on labor income is made comparators. heavier by the outsized role that social security Indirect taxes remain an important source contributions (SSC) play in the Tunisia tax system. of tax revenues, but they could be more transpar- These contributions fund directly the social secu- ent, equitable and more targeted to address neg- rity system, so they are not part of the central gov- ative externalities. The role of indirect taxes declined ernment’s budget. However, for the employees, who from the peaks of the late 1980s-early 1990s, when represent the bulk of the SSC, the contributions are they accounted for around four fifth of overall tax transferred by both the employee and the employer revenues and 15.8 percent of GDP. However, they as a share of the employee’s wage. Therefore, they remain important and in 2021–23 they represented effectively act as a tax on labor income as well as on 58.5 percent of overall taxes and 14.0 percent of GDP employment for firms. In 2021 SSC accounted for 9.7 (figure 24). The value added tax (VAT) continues to be percent of GDP and 29.7 percent of total taxes, higher the most important indirect tax, accounting for about than peer countries, such as Morocco and Turkey, as half of total indirect taxes, or 6.8 percent of GDP.15 The well as the averages for LAC, Asia and the OECD (fig- VAT includes several exemptions, whose final impact ure 25).16 Because of the large weight of PIT and SSC, on the VAT paid and on prices remains uncertain. indirect taxes, including VAT, have a relatively lower That is because the VAT remains embedded in final weight in total taxation in Tunisia. consumer prices through the input-output linkages, which can create a cascading effect through the sup- ply chain (tax-on-tax). In addition, various activities 15 That places Tunisia in the top 40th percentile of countries in terms of VAT to GDP ratio, although slightly below enjoy reduced VAT rates (7 and 13 percent, below comparators like Morocco and the OECD average. the general 19 percent rate), which in some cases are 16 Despite the large footprint of SSC, the social security likely to be regressive as they target consumption of system is in structural deficit in Tunisia, remaining a wealthier households, such as hotels and restaurants. source of budget pressure and fiscal risk. 18 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM FIGURE 24 • Personal Income Tax Has Driven the FIGURE 25 • Tunisia Relies More than other Growth of Tax Revenues Countries on Labor Income Taxation (Type of tax revenues in percent of (Percent of overall tax in 2021, by GDP) source) 25% OECD 20% LAC 15% Asia 10% Turkey 5% Morocco 0% Tunisia 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Personal income Corporate income VAT Other indirect PIT SSC CIT VAT Other indirect Other tax Source: Tunisia’s Ministry of Finance. Source: OECD. While the PIT is progressive, the tax bur- FIGURE 26 • Tunisia’s Tax System Creates a den on wage income is relatively high even at Wedge between the Labor Cost for the Employer and the Wage low-income levels due to high SSC, which also Received by the Employee raises the cost of labor for the employer. As in the (Marginal tax wedge in percent standard systems, the PIT rate is progressive with a of wage, by wage levels in TD, zero tax up to TD 5,000 per year, and then four rates 2023 rules) increasing with the level of earnings, from 26 percent 60% to 35 percent for incomes above TD 50,000. How- 50% ever, the SSC applies to all income brackets to differ- 40% ent degrees, including earnings subject to zero PIT. In 30% addition, the 2018 Budget Law introduced a solidarity contribution, further raised with the 2023 Budget Law, 20% again applying to varying extent across all income 10% levels. Along with the PIT, these contributions gener- 0% 1,000 4,000 7,000 10,000 13,000 16,000 19,000 22,000 25,000 28,000 31,000 34,000 37,000 40,000 43,000 46,000 49,000 52,000 55,000 58,000 61,000 64,000 67,000 70,000 73,000 76,000 79,000 82,000 85,000 88,000 91,000 94,000 97,000 ate a significant difference between the employee’s 10,0000 cost to the employer and the salary received by the Tax wedge (incl employer SSC) employee even at low level of incomes (the so-called Income tax + employee SSC + solidarity contribution tax wedge). For earners below TD 5,000 per year, who Income tax are exempted from PIT, this tax wedge is 23 percent Source: World Bank staff estimation on Tunisia’s Ministry of Finance data. and then it increases steeply with earnings already at relatively low levels (figure 26). For instance, the mar- ginal tax wedge for earners at TD 8,000 per year is dren, which benefits richer households more in aggre- 41 percent. This structure raises the cost of labor for gate terms. employers, thus could discourage hiring incentives The high cost of labor from the tax sys- and reduce wages. In addition, the system of deduc- tem contribute to increasing incentives for tions from the PIT limits the progressivity of the PIT, businesses to remain informal and/or to under- including the 10 percent deduction up to the TD 2,000 declare revenues, profits and wages. The high ceiling and the fixed deduction for spouse and chil- labor tax wedge has helped create incentives for Making the tax system more equitable and efficient 19 FIGURE 27 • Tunisia’s Relatively Large Informal FIGURE 28 • Tunisia Taxes Capital Gains Lightly Economy (Tax revenues from capital gains as (Percent and constant 2015 percent of overall taxes in 2021) US$ in log) 80 Uruguay Philippines Informal output/GDP (percent) 60 Indonesia LAC 40 TUN 2019 OECD Asia TUN 2010 20 Tunisia Morocco 0 Egypt 6 8 10 12 Turkey GDP per capita, constant 2015 USD (log) Source: World Bank staff estimates on World Development Indicators and Elgin, C., M. 0.0% 0.5% 1.0% 1.5% 2.0% A. Kose, F. Ohnsorge, and S. Yu (2021). “Understanding Informality”, C.E.P.R. Discussion Paper 16497, Centre for Economic Policy Research, London. Source: OECD. businesses to remain informal and/or to abuse the are capital gains on mutual funds are exempt from advantages of the auto-entrepreneur regime, which tax for individuals. Investment funds are also com- doesn’t require detailed bookkeeping.17 This helps paratively tax favored, as annual returns to the fund explain Tunisia’s larger informal economy relative are taxed at the concessionary 15 percent rate, while to other countries with similar GDP per capita. Infor- there is no additional taxation on distribution to the mal output was estimated at 37.6 percent of GDP individual investor. Housing benefits from a particu- in 2019, up from 35.6 percent in 2010, when Tuni- larly advantageous tax regime. Recurrent property tax sia’s share was in line with its GDP per capita (figure remains very limited, despite the recent introduction 27).18 The recent changes to the auto-entrepreneur of a tax on real estate property (see below). Capital regime (simplification, creation of an online plat- gains and imputed rental are not taxed for owner- form and new record keeping requirements) should occupied residential property, while capital gains for encourage better business management and help rented residential property are taxed at a concession- with monitoring/audit. However substantial non- ary 10 percent rate. The beneficial regime for capital compliance is still likely and the large advantages gains is reflected into low tax revenues from capital of the auto-entrepreneur regime vis-à-vis the corpo- gains, which amount to only 0.2 percent of overall tax rate regime in terms of employment taxes may cre- revenues, one of the lowest shares among compara- ate incentives for businesses to remain small and/or tors (figure 28). under-declare revenues to stay within the auto-entre- preneur threshold (TND 75,000). 17 The auto-entrepreneur regime applies to businesses with Capital income tax benefits from several annual revenues up to TD 75,000 (US$ 24,000)—down concessions and exemptions on various sources, from TD 100,000 until 2020—and it allows the payment of which further reduce its contribution to tax reve- a tax on the declared revenues (3 percent until 2020, 0.5 nues. Besides the relative low taxation of corporate percent thereafter) and an advantageous SSC regime. 18 This is based on a multiple indicators multiple causes profits, capital income also benefits from multiple con- model (MIMIC), developed in Elgin, C., M. A. Kose, F. cessions and exemptions, which considerably reduce Ohnsorge, and S. Yu (2021). “Understanding Informality”, its actual tax burden. For example, the distribution of C.E.P.R. Discussion Paper 16497, Centre for Economic dividends below TND 10,000 is tax exempt, and so Policy Research, London. 20 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM FIGURE 29 • Tunisia Taxes Different Saving FIGURE 30 • Tunisia Taxes Capital Income Much Options Differently Less than Labor Income (Marginal effective tax rates across (Rate differential between labor and asset types, 2023 rules) capital income taxation, developing countries, percentage points, 2017 circa) 70% 60% 15% 50% 10% 40% 5% 30% 0% 20% –5% 10% –10% 0% –15% Bank deposits Bonds at par Bonds below par Shares 100% dividend Shares zero dividend Investment funds Pensions deductible Pensions non-deductible Housing-owner occupied Housing -rented –20% –25% –30% TUN GEO UZB SDN MAR CAF TLS LAO UKR BDI EGY BEN MDG COG MLI SEN KEN GIN BFA NIC PNG AFG LSO SWZ ZMB COD KOS ZWE MRT PAK VNM MOZ Source: World Bank staff estimations on Bachas, P., Fisher-Post, M. H., Jensen, A., & Source: World Bank staff calculations following OECD (2018) “Taxation of Household Zucman, G. (2022). Globalization and factor income taxation (No. w29819). National Savings” methodology. Bureau of Economic Research. Capital income is also taxed differently cerns for inequality. According to calculations in a across different sources, which likely increases recent study, Tunisia has the highest labor-capital income inequality and reduces the efficiency tax rate differential among developing countries for of capital allocation. The system of deduc- which data is available (figure 30). The tax rate on tions and reduced rates applied to different sav- labor (including also social security contributions) is ings options generates asymmetric tax treatment 13.4 percentage point higher than that on capital. As across capital income sources. This can be seen a comparison, in Morocco the tax rates are equalized by computing marginal effective tax rates (METRs) and in Egypt the differential is slightly negative (–2 for a range of different savings options for a mid- percentage points). To illustrate the difference, con- dle-income earner subject to 26 percent PIT rate sider for instance a gross wage of TD 15,000 (USD (in the 30,000–50,000-income bracket).19 As illus- 1,200) per month. Given the current PIT brackets, the trated in figure 29, METRs differ widely across sav- average income tax on this wage (17.3 percent) would ings options, with bank deposits, bonds and shares be higher than the current tax on corporate profits (15 whose returns are fully distributed each year being percent). As higher income individuals tend to earn the highest taxed assets. This asymmetric tax treat- predominantly capital income, while less wealthy indi- ment of capital income sources may enable wealth- viduals rely more on labor income, the higher effec- ier taxpayers with greater information to seek out savings options that are taxed favored, thus poten- 19 Following the methodology in OECD (2018) “Taxation tially fostering inequality. It could also affect portfo- of Household Savings”, the METRs consider a saver lio allocation decisions, thus distorting the allocation contemplating investing an additional currency unit in of capital relatively to the market based one, which one of a range of assets. The approach assumes a fixed raises concerns in terms of efficiency. pre-tax real rate of return and calculates the minimum post-tax real rate of return that will, at the margin, make As a result of this tax structure, Tunisia’s the savings worthwhile. The METR is then calculated effective tax rate on labor income is much higher as the difference between the pre- and post-tax rates of than on capital income, and the difference is very return divided by the pre-tax rate of return. The model in large by international standard, which raises con- this case assumes a 5 percent inflation rate. Making the tax system more equitable and efficient 21 tive tax rate on labor relative to capital is likely to fuel FIGURE 31 • Tunisia Has Reduced its Carbon income inequality. Intensity of GDP Less than other Countries The recent introduction of a property tax (Total greenhouse gas emissions represents important progress, although more (kt of CO2 equivalent) per 1 million would need to be done to redress the balance GDP (constant 2015 US$). 1990=1) between labor and capital income taxation. The 1.0 introduction of an annual property tax in 2023 has been a step in the right direction, although it is lim- 0.9 ited in scope, and it faces implementation hurdles. First, it applies to a relatively small set of assets, as 0.8 Tunisia it includes only real estate assets valued above TD 0.7 3 million (about US$ 1 million), which are not a pri- Upper middle income mary residence and are not used for business pur- 0.6 Lower middle poses. Second, the rate (0.5 percent) applies to the income 0.5 commercial value of the assets, which is difficult to ascertain in the absence of a functioning fiscal 0.4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 cadaster. Tunisia could tax more systematically car- Source: World Development Indicators. bon emissions of production, while protecting vulnerable households. As countries start to intro- duce tariffs on imports based on their carbon inten- Africa, Chile and Costa Rica. Part of the revenues sity, this raises incentives for developing nations to generated by such tax could be used to protect vul- raise taxes on carbon emissions. That applies also nerable households that may be negatively affected to Tunisia, as its main trading partner, the EU, is soon by the tax. to impose an import tariff to bridge the gap between To increase the efficiency and the fairness the carbon price of imports and that of domestic of the tax system, Tunisia could reform direct production, i.e. the so-called carbon border adjust- and indirect taxes, through a strategy devised ment mechanism (CBAM). In a positive move, Tuni- together with citizens, workers and the private sia increased taxes on fuels and motor vehicles in sector. Reinforcing property taxes, introducing a 2023.20 However when accounting for the govern- wide-ranging carbon tax, reviewing the exemptions ment’s price support to fuels and electricity, Tunisia and reduced rates on capital income tax as well as subsidizes fossil fuels, whose price remains below the CIT rate, reducing the effective taxation of labor that of most comparators.21 In addition Tunisia does income for lower-income taxpayers and increase the not tax production activities based on their carbon progressivity of the PIT and SSC could go a long way emissions. The existing taxes on fossil fuels could in making the tax system fairer and more efficient, be absorbed in a more systematic tax on emissions while combating informality. In the 2025 Budget Law, from production. Such carbon tax would allow Tuni- Tunisia has started addressing some of these issues, sia to avoid losing tax revenues which will otherwise its producers will have to pay to the EU, and it would internalize the negative environmental externalities of production in an efficient way. This could also help 20 Specifically, the 2023 Budget Law established following increases: from 0.01 to 0.05 TD/liter for gasoline; from Tunisia accelerate the reduction in the carbon inten- 0.02 to 0.1 TD/liter gasoile50; 1 to 5 TD/metric ton on sity of its economy, which has lagged other mid- fuel, GPL; 2 to 10 TD/metric ton for coal; from 0.01 to dle-income countries (Figure 31). Several countries 0.05 TD/kilowatt-hour of electricity. have started implementing a carbon tax, including 21 See World Bank (2023) “Tunisia Climate Change and also among middle-income countries, such as South Development Report”. 22 TUNISIA ECONOMIC MONITOR – EQUITY AND EFFICIENCY OF TUNISIA TAX SYSTEM notably through reforms of the PIT and CIT regimes.22 22 Tunisia’s 2025 Budget Law reviews various tax rates, This could be accompanied by a more effective use particularly for PIT and CIT. The Law lowers the PIT rate of indirect taxation to achieve social and economic for individuals earning between TD 5,000 and TD 20,000 goals, for instance by increasing the use of health and per year, while it increases the rates for earners above environmentally-related taxes and removing reduced TD 20,000 with the top marginal PIT rate (for earnings VAT rates targeting goods and services consumed above TD 50,000 per year) raised from 35 to 40 percent. It also raises the general CIT rate from 15 to 20 percent by wealthier households.23 At the same time Tunisia for companies with annual turnover between TD 5 and could strengthen its tax administration to expand the TD 20 million, and from 15 to 25 percent for companies tax base, reduce informality and ensure everyone pay above TD 20 million. their fair share of taxes. To that end it could be use- 23 In formulating tax policies, the government could use ful to upgrade its Information Technology capabilities simulations to estimate the impacts of the envisaged to use big data from different external sources (e.g. policy changes on tax revenues, and on households across the income distribution. banks, foreign jurisdictions). Achieving the targeted policy goals would require a transparent and inclusive engagement of the state with citizens, workers and the private sector. Making the tax system more equitable and efficient 23 1818 H Street, NW Washington, DC 20433