Tunisia will not impose new taxes on citizens next year and will cut the tax burden for some sectors to boost growth, according to a draft budget, after years of tax hikes that have stoked public anger and sometimes violent protests.
The draft showed Tunisia’s economy growing in 2019 by 3.1 percent, up from an estimated 2.6 percent this year. It expanded by 1.9 percent last year. Prime Minister Youssef Chahed has said 2018 will be the last difficult year for Tunisians, but his government is under pressure from the International Monetary Fund to trim the budget deficit by cutting subsidies and reforming the public sector.
However, the draft showed the 2019 budget would be 8 percent bigger than this year, totalling some 40.6 billion Tunisian dinars ($14.21 billion). It did not say how the expansion would be funded. It also showed the budget deficit falling to 3.9 percent of gross domestic product in 2019, from about 5 percent expected this year.
Tunisia has financing needs worth 10 billion dinars next year, including 7 billion dinars of external borrowing – almost the same level as this year, an official told Reuters last month. Tunisia, praised as the only democratic success among the nations which experienced “Arab spring” revolts, has relied much on foreign loans in recent years.
The government will halve tax for companies operating in various sectors including technology, textiles, engineering and pharmaceuticals to 13.5 percent from 25 percent, the draft showed. This year’s budget raised taxes on cars, alcohol, telephone calls, the internet, hotel accommodation and other items in an effort to help balance the books.
Taxes on bank profits were raised to 40 percent from 35 percent. Ihe government also raised this year by 1 percentage point the value-added tax and imposed a new 1 percent social security tax on employees and companies.