Tunisia’s draft budget seen by Reuters reveals that the country will not impose new taxes on citizens in 2019 and will cut the tax burden for some sectors to boost growth. This comes after years of tax hikes that have led to public anger and sometimes violent protests.
The draft budget also shows Tunisia’s economy growing in 2019 by 3.1 percent, up from an estimated 2.6 percent in 2018. Prime Minister Youssef Chahed said 2018 will be the last difficult year for Tunisians. His government is however under pressure from the International Monetary Fund to trim the budget deficit by cutting subsidies and reforming the public sector.
Although the draft does not show how the expansion will be funded, it reveals that the 2019 budget, which will be about 40.6 billion Tunisian dinars, would be 8 percent bigger than 2018. The draft also showed the budget deficit falling to 3.9 percent of gross domestic product in 2019, from about 5 percent expected in 2018.
An official told Reuters that Tunisia needs financing worth 10 billion dinars in 2019, this includes 7 billion dinars of external borrowing, almost the same amount needed in 2018.
Tunisia, which has been heavily reliant on foreign loan in recent years, has been praised as the only democratic success among the nations which experienced “Arab spring” revolts. The draft showed that the Tunisian government will halve tax for companies operating in various sectors such as technology, textiles, engineering and pharmaceuticals to 13.5 percent from 25 percent.
In an effort to help balance the books in 2018, the government raised taxes on cars, alcohol, telephone calls, the internet, hotel accommodation and other items. Taxes on bank profits were also raised to 40 percent from 35 percent and a new 1 percent social security tax was imposed on employees and companies.