World Bank Report Highlights Inequities in Tunisia's Tax System
According to the latest World Bank report, titled "Equity and Efficiency of the Tunisian Tax System," Tunisia's growing dependence on national resources to finance its budget, which reached 51.5% in 2024 compared to 29.7% in 2019, poses risks to the country's currency and price stability.
The current tax system, characterized by an excessive burden on labor income and benefits granted to capital income, limits companies' ability to invest and create formal jobs. High social security contributions increase labor costs and reduce employers' margins.
Meanwhile, tax exemptions on capital contribute to income inequalities, with an effective tax rate on labor income significantly higher than that on capital, among the highest in developing countries.
To address these imbalances, the World Bank proposes six reforms:
- Strengthen property taxes to capture property values and finance local public services.
- Introduce a carbon tax, encouraging eco-friendly practices and generating revenue for sustainable projects.
- Review exemptions and reduced rates for corporate and capital taxes to make the system more equitable.
- Reduce taxation on modest incomes, increasing their purchasing power.
- Increase the progressivity of income tax, so that higher-income households contribute more.
- Optimize indirect taxes by taxing harmful products to health and the environment more heavily, while eliminating tax benefits for luxury goods.
The report also emphasizes the importance of using big data to broaden the tax base and reduce informality. A transparent dialogue with citizens and the private sector is crucial to ensure adherence to these reforms and their long-term success.
