Morocco: Changes in Minimum Wages affect the Informal Sector

The High Commission for Planning (HCP) revealed, at the beginning of the current month, that the value-added tax is the main tax affecting the informal sector in Morocco other than any other taxes

The High Commission for Planning (HCP) revealed, at the beginning of the current month, that the value-added tax is the main tax affecting the informal sector in Morocco other than any other taxes.

In a study by the HCP, entitled “The informal sector in Morocco: Main Characteristics and the Rhythm of Rising”, the managers of informal sector production units bring their needs from other production units that work in turn in the informal sector through commercial operations without billing, which enables them to avoid paying the value-added tax (VAT).

According to the study, this situation is attributed to the low financial coverage of these units and lack of liquidity, these are the main obstacles to these production units, which are characterized by their fragility and irregular financial receipts.

The study added that changes in the minimum wage also affect the informal sector. Because of the pay scale, the large increase in the minimum wage often forces micro, small and medium enterprises to lay off some workers or not to declare them officially.

According to the HCP’s study, the helping factors to reduce the size of the informal sector may also contribute to improve the living conditions and incomes of workers in developing countries.

On the other hand, laws and documents that must be provided and the multiple procedures that must be completed for the creation of small companies are costly in terms of time and money, and they are considered complicated in view of the educational level of heads of informal sector production units.

The study stated that the current health crisis (Corona virus pandemic) showed clearly the fragility of the economic, financial and social situation of workers in the informal sector, and the importance of governmental financial aid to support the purchasing power of the informal sector workforce.

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