By Ali Reza Sarwar
On June 22, the World Bank reported that Tunisia is losing at least US$1.2 billion due to tax evasion by enterprises belonging to well-connected elites. The report comes after the Tunisian government conducted a number of policy reviews to improve the tax collection system and stop further fraud.
The World Bank’s Development Policy Review explains that Tunisia’s tax collection system is fraught with complexity and under reports exports and imports. Furthermore, the system fails to capture revenue from the massive informal businesses sector, which has grown larger in recent years. Currently, tax revenues contribute to 20 percent of GDP and 80 percent of corporate taxation is made by only 1 percent of firms. This means that many corporations receive some form of political treatment or simply manage to operate outside of tax collection regulations.
Tunisians protest elite capture of the government during the Arab Spring. Photo courtesy of the World Bank.
This update on tax fraud comes at a time when Tunisia, once the region’s most thriving economy, is grappling with slow economic growth, rising unemployment, and frequent interruptions in overseas export markets. This includes Libya, Tunisia’s second economic partner after the European Union. Libya committed to supplying 25 percent of Tunisia’s fuel needs at a subsidized price, but cannot honor this agreement now. Additionally, a spate of recent terrorist attacks against tourists will serve as a blow to Tunisia’s tourism sector, which accounted for 15.2 percent of GDP in 2014.
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