Summary of findings
Legislatively, the Tunisian tax system encompasses various forms of taxation related to income, wealth, and consumption. However, the report finds that the Tunisian tax policy falls short of equity imperatives. It emphasizes an overreliance on regressive taxation, particularly through high prevalence of indirect taxes (63.3% of tax revenue in 2018), such as Value Added Tax (VAT). The report notes an emphasis on consumption taxes, with recommendations from fiscal reform measures in 2016, 2017, and 2018.
Concerning income taxation, the report highlights disparities among income categories, with wage earners shouldering the majority of the tax burden. Additionally, the tax on personal income lacks progressivity, favoring capital income over labor income.
The contribution of corporations to tax revenue is decreasing, accounting for only 11% of corporate tax contributions. This decline is attributed to a reduction in the corporate tax rate, extensive tax incentives, and rampant tax evasion.
The report also addresses issues of revenue sufficiency, noting a high informal sector contributing to significant revenue losses. Furthermore, fiscal expenditures amount to approximately 3% of the GDP, diminishing revenue sufficiency.
The governance and transparency of corporate tax exemptions are criticized for undermining the corporate tax base. Exemptions, comprising 60% of the corporate tax base, suffer from poor governance and lack institutional control.
The efficiency of the tax administration is questioned due to a reported shortage of human and material resources, leading to inadequate control over tax fraud and revenue leakage.
Government expenditures, with a significant portion allocated to debt servicing, limit the funds available for wealth redistribution through subsidies and public services. Only a small percentage of GDP is allocated to subsidies, with a focus on energy, while education receives the largest share of the budget.
Despite the adoption of the Access to Information Act, the report notes a lack of effort by the government to provide budgetary and fiscal information transparently, hindering access to vital financial data.
In summary, the Tunisian tax system, as evaluated through the Fair Tax Monitor framework, exhibits deficiencies in equity, progressivity, and transparency, with a need for reforms to address these shortcomings.