Recebido: 9-04-2022 | Aprovado: 24-06-2022

Local taxation and sustainable urban development in Morocco

Naoufel Belhaj, Cadi Ayyad University, Marrakech, Morocco (


How to cite this article:
Belhaj, N. (2023). Local taxation and sustainable urban development in Morocco. RevistaMultidisciplinar, 5(1), 55-70.


Abstract: Over the last few decades, the financing of cities has been at the heart of ongoing debates of change and deep reforms as well as major concerns in all countries where decentralization is giving an increasingly dynamic role to local governments. This article presents the role of local taxation in promoting sustainable urban development in Morocco through an empirical study of 163 actors and partners involved in cities in the regions of Casablanca-Settat and Rabat-Salé-Kénitra. The results show that to increase local taxation in Morocco, it is necessary to develop the capacity of city managers, encourage public-private partnerships, and improve the quality of spending.

Keywords: local taxation, sustainable urban development, cities, Morocco.


Sustainable urban development is an integration of the concept of sustainable development with an operating mode of spatial planning: urban planning. These two concepts have a common objective, that of a harmonious development of the citizens in a well determined space: the city, answering their needs namely: housing, employment, education and access to leisure, in an economically attractive, politically stable and culturally rich universe (Camagni & Gibelli, 1997).

It is also a system that independently articulates elements of the three pillars: the economic pillar, the social pillar and the environmental pillar (Didier, 2007, p.11), « the sustainability approach establishes […] public policies that make it possible to articulate the socioeconomic development and spatial planning of urban areas with careful management of the environment» (Bochet & Cunha, 2002, p. 3).

However, to promote sustainable urban development, to support urban growth and socio-economic development, as well as to improve the quality of life of city dwellers, it is necessary to seek effective and innovative financing mechanisms, appropriate financial governance mechanisms and adapted legislative and institutional frameworks. The objective is to promote equitable and environmentally friendly socio-economic development, by promoting the attractiveness of cities and supporting the creation of businesses and jobs.

Sustainable urban development can only be conceived in a context where the local economy is consolidated. Therefore, it is essential to establish a good quality infrastructure environment. The realization of infrastructure and public investment is globally through three sources (Yatta, 2014):

1. Financial transfers from the state to cities, which can take several forms: general allocations to finance certain investments or support certain policies, subsidies to balance the budgets of local governments, etc…;

2. External resources made up of loans;

3. Revenue from local privatization and public-private partnerships, which also contribute to the financing of local public investments.

The fact remains that mobilizing local tax potential is the key to local socio-economic development. The weakness of the city's financial resources is more often linked to the low actual level of local taxation than to the economic poverty of local authorities. Several sectors of the economy are taxed very little or not at all, while land assets do not contribute enough to local economic activity. These findings indicate that most cities in developing countries are actually poorer than their inhabitants. A study about local finance in these countries concluded that it is possible to strengthen local resources considerably while maintaining the same level of local taxation (Bahl & Linn, 1992, p. 385-427). They argued that the less cities collect and spend, the poorer they become, and that «They argued that the less cities levy and spend, the poorer they become, and that "the inability of local governments to spend creates a vicious cycle in which a poor living environment leads to stagnation and even relative regression in the local economy: the more cities levy and spend, the better off the local economy becomes» (FMDV, 2014, p.12).

In addition, sustainable urban development leads to increased investment requirements to meet the needs of an increasingly demanding population. However, it is limited by budgetary requirements. Thus, it is necessary to analyze and review in depth the financial governance and the methods of mobilizing the city's fiscal potential.

We will present a review of the literature and an overview of local taxation in Morocco. We will then present the methodology adopted and conclude with an analysis and discussion of the results on the causes of the weakness of local taxation in Morocco and the tools to strengthen it in order to improve the financial autonomy of cities and promote sustainable urban development.


1. Literature Review

The development of cities' financial resources is a major concern of local decision-makers in order to meet the increased needs of citizens and promote the socio-economic development of urban centers. Generally, these financial resources are made up of own or local resources; borrowing resources; financial contributions from the State "Ministries and Public Companies"; local privatization revenues (asset sales, public-private partnerships, public service concessions) and donations and bequests (FONDAFIP, 2015).

In Morocco, the 2015 reports on local taxation by the Regional Courts of Accounts indicate that there is significant urban tax potential, but its exploitation is very weak, both in terms of the tax base and collection. Indeed, economic development and rapid urban growth are not reflected in local tax revenues (Cour des Comptes, 2015). According to the situation of revenues and expenditures of local governments in 2022, the resources transferred by the State to local governments, consisting mainly of their share in the prοduct of VAT, represent (56,7 %) of all local tax revenues, followed by resources managed directly by the municipalities (33,7 %), then by resources managed by state services for the benefit of local governments (9,6 %) (TGR, 2022). This reveals that the cities depend heavily on financial support from the state (FONDAFIP, 2015). As a result, local governments must make more efforts to develop their own sources of revenue.

Table 1
Evolution of local government resources between 2021 and 2022 in millions of dirhams and in %.

Local government resources





Transferred resources

2 186

2 084

- 4,7 %

Resources managed by state services for the benefit of local governments



- 31,3 %

Resources managed directly by the municipalities

1 147

1 238

7,9 %


3 848

3 676

- 4,5 %

Source : TGR, 2022


This inadequacy of local finances in Morocco is mainly due to a low level of local tax revenue, a higher level of operating expenditure than investment expenditure and the inability to achieve the full investment budget (FONDAFIP, 2015).


1.1. Low yield from local taxation 

According to a report by the Regional Courts of Accounts on the evaluation of local taxation, the own tax resources of urban communes cover only 54% of operating expenses; the remainder is financed essentially by the VAT transferred by the State (Cour des Comptes, 2015). This low yield of local taxation is mainly due to the absence of local tax application circulars (FMDV, 2014), the lack of collection of local debts, the weak use of information technology and exploitation of databases (Safir, 2015), the lack of qualified human resources capable of managing the local tax base and monitoring their collection (FONDAFIP, 2015), the lack of accountability, responsibility, and coordination between the different actors in the city, as well as the low quality of public services (Dedehouanou, 2019).


1.2. The superiority of operating expenditures over investment expenditures

The evolution of the structure of local government spending between 2021 and 2022 shows an increase in the share of equipment spending and investment spending, combined with a decrease in the share of personnel spending and debt interest charges, as shown in the following figure: (TGR, 2022).

Figure 1
Structure of overall expenditure of local authorities between 2021 and 2022 in %

Source : TGR, 2022

1.1.         The inability to achieve the full investment budget

In Moroccan cities, investment needs are very high. Indeed, local managers do not always realize the full amount of their investment budgets, which usually results in surpluses that are carried over from year to year (FONDAFIP, 2015). According to a report by the Consultative Commission on Regionalization, surpluses from previous years (carryovers), in 2014, reached 23,4 billion dirhams (CCR, 2014).

According to a report on the financing of African cities, Moroccan municipalities are characterized by a very low absorption capacity and do not carry out their entire investment budgets. In fact, they often have surpluses of 30 to 40 percent compared to the amount of investments made (Paulais, 2012).


1.2.         Significant budget transfers from the State to the cities

Moroccan cities regularly receive tax transfers from the State on the basis of simple, transparent and objective criteria, aimed at encouraging them to develop their own local resources, improve their propensity to invest, meet citizens' needs in terms of infrastructure and public services and achieve socio-economic promotion of urban centers.

The state is the main provider of financial resources to cities through the allocation of 30 percent of the proceeds of the VAT as well as through the institution of new taxes and fees. Any increase in state revenue systematically generates an increase in the resources transferred to cities, and any decrease automatically results in a loss of value (FONDAFIP, 2015).

This weakness in the yield of local taxation, obliges local governments to seek innovative financing to improve the profitability of local finances. Local assets can therefore be an alternative that can compensate for the weakness of tax resources.

Along with these challenges, we can add:

·       The existence of spatial and socio-economic inequalities between municipalities (Raiss, 1999);

·       Inequality in the distribution of resources between the State and local authorities (Yatta, 2014);

·       The absence of information systems  (FONDAFIP, 2015);

·       The presence of a very large informal economy (FMDV, 2014);

·       Weaknesses in accounting and budget management ;

·       Weak control of local finances and identification of taxpayers;

·       A low level of income among the local population (PFVT, 2017);

·       Weak capacity of local government;

·       Low exploitation of local taxes;

·       Low exploitation of some local taxes, such as property tax (FONDAFIP, 2015);

·       A lack of autonomy in determining the tax base and rates (Yatta, 2014);

·       Irrationality in the allocation of local expenditures (Agoumy & Refass, 2012);

·       The lack of rationality in the overall management of human resources (Safir, 2015);

·       The absence of a consolidated vision of revenues and expenditures for city management;

·       A less developed institutional framework in favor of cities (FMDV, 2014);

·       Political resistance to descentralization ;

·       Weak identification and mobilization of cities' fiscal potential (Cour des Comptes, 2015);

·       Low local debt collection;

·       Low participation of the private sector in the financing and production of the city (FONDAFIP, 2015);

·       Weak coordination between the various city actors (Beaupuy, 2008);

·       The absence of tools for good governance of local resources (Habitat III, 2016).


2. Materials & Methodology

Our sample is made up of 163 actors and partners involved in the cities in the regions of Casablanca-Settat and Rabat-Sale-Kenitra. It is composed of 45 local authorities, 6 national actors, 31 public institutions and companies, 18 regional and local actors, 7 international actors, 31 associations and 25 private companies. This sample is well distributed across the survey regions, as shown in the table and graph below.

Table 2: Survey sample

who are you?

Number of observations


Local authority



National actor



Regional and/or local actor






Private company



Public institution or company



International actor






Figure 2
Distribution of the sample between the regions of Casablanca-Settat
and Rabat-Sale-Kenitra

These data were processed using an exploratory data analysis method. We used the stratified random sampling method, which gives the same chances to all the units in the population and allows us to generalize the results obtained from the sample.

In our case, the strata, which are heterogeneous groups, correspond to the groups of actors: national actors, international actors, regional and local actors, local authorities, civil society and private companies.

Among the 12 regions of the Kingdom, we chose the regions of Rabat-Salé-Kénitra and Casablanca-Settat for several reasons, particularly their demographic and economic weight compared to the other regions. Demographically, the Rabat-Sale-Kenitra and Casablanca-Settat regions have 11,442,605 inhabitants, or 33.8 percent of the Moroccan population (HCP, 2014).

Economically, the regions of Casablanca-Settat and Rabat-Salé-Kénitra create the most wealth and contributed the most to the national GDP in 2014, These two regions alone contributed 48.3% of the national GDP (TGR, 2022).

Table 3
Distribution of local government revenues by region

Despite their economic and demographic potential, these two regions depend heavily on financial support from the state and have a relatively low level of local taxation, hence the need for a profound review of the financial governance of the cities in these regions, in order to mobilize more resources and manage them better.

Table 4
Weight of local taxation in the budget of Casablanca-Settat and Rabat-Sale-Kenitra regions in 2019, in millions of dirhams

Source: Author

3. Results, analysis and discussion

Local taxation represents an important part of the fiscal resources for local governments, the other part being paid by the State within the framework of decentralization laws. Local taxation concerns several urban sectors such as: real estate, administrative, industrial, commercial, professional, transport, tourism, etc.. (FMDV, 2014).

Cities in Morocco are highly dependent on financial support from the state and are subject to the mutations and effects of globalization by transitivity. They are influenced by the effects of the mobility of tax bases, due to the erosion of the tax base and the transfer of profits. Almost 86% of the financial resources of local authorities come essentially from revenues transferred or managed by the State. This heavy dependence on state allocations puts local governments at risk if the state's public finances do not generate sufficient resources (FONDAFIP, 2019).

Among the shortcomings detected, almost all of the actors interviewed affirm that there is significant fiscal potential in cities, but that it is poorly exploited. The development generated by rapid urbanization and economic growth is not reflected in local tax revenues. They also claim that the financial resources available to cities are not sufficient to meet the needs of citizens, that the annual investment budget is not sufficient, and that the distribution of local expenditures is not equitable.

Table 5
City actors' perception of local taxation

Also, local governments are not independent in determining the tax base and tax rates for local taxation. They do not intervene in the resources transferred, they intervene very little in the resources allocated (they set the rental value of homes and businesses every five years), and even in local taxation, there is a range of tax rates set by the public authorities, thus reducing the level of intervention by local decision-makers (for example, this range is 5 to 20 dirhams per m² for the tax on undeveloped land).

The actors interviewed said that in order to develop the financial resources of cities, it is necessary to improve the base and/or rates of local taxes, increase local fees, improve the collection of local taxes, encourage borrowing and strengthen public-private partnerships. They also affirmed that it is the real estate sector that brings in the most revenue from local taxation (taxes on edifices, constructions, subdivisions, subdivision operations and undeveloped land), followed by the industrial sector and finally the commercial sector.

Other questions were asked only to the local authorities in order to find out what tools they use to make taxpayers aware of the payment of local taxes, among the tools mentioned we can mention communication around projects and sources of financing, dialogue with representatives of the different professions, the intervention of the tax department and legal tools, etc...

The local authorities also mention that they have difficulties in identifying taxpayers, this is mainly due to the lack of an updated database, the low tax civic-mindedness of citizens, internal fraud and the low collaboration of taxpayers.

Also, local authorities say that they do not have sufficiently qualified human resources to manage the local tax base and monitor their collection, and that they do not make sufficient use of information, communication and database technologies.

In order to increase a city's financial autonomy, it is necessary to guarantee sufficient financial resources to local managers to enable them to carry out their missions, and among them, local taxation. The financing of investments, goods and public facilities is ensured by local authorities through the collection of local taxes. A positive dynamism of tax revenues makes it possible to constitute the guarantees necessary to mobilize additional funds. In addition, local taxation aims to reduce inequalities through the redistribution of income from assets and economic activity within the city. It plays a central role in strengthening the city's financial autonomy, in the structure of local budgets and in the construction of local democratic life (AREA, 2003). Therefore, in order to obtain additional financing, local and regional governments must be made more attractive to investors (a solid fiscal base and good local financial governance). In addition to private operators, cities need to diversify their sources of funding, especially from international donors (international markets, finance companies and commercial banks). This allows them to mobilize significant funds to finance large-scale projects.

Improving the quality of spending contributes to citizens' acceptance of taxes. "The inability of local governments to spend creates a vicious cycle in which a poor living environment leads to stagnation or even relative regression in the local economy: the less a city levies and spends, the poorer everyone ends up being" (FMDV, 2014, p.12). Cities can double or even triple the level of levies and spending to make the local economy better off. But such an ambition requires dialogue between local managers and local socio-professional groups, as well as efficient and transparent management of the resources collected. Managers need to balance elective and participatory democracy to increase fiscal efficiency: citizens have more incentive to pay for services that meet their priorities, especially if they have been involved in the decision-making process regarding the provision of these services.  Improving the quality of spending is closely linked to the establishment of effective systems of local financial control to ensure good local management.

The local tax system applied to land, buildings, subdivisions and undeveloped land makes it possible to mobilize significant resources and to finance public urban development facilities, such as roads, networks and infrastructure. These expenses are so important that they cannot be covered solely by local taxation, nor by the local authority budget. It is therefore necessary to think about new and innovative financing mechanisms to involve private operators in the financing of public facilities. These mechanisms would make it possible to mobilize additional resources within contractually negotiated frameworks and to improve the effectiveness and efficiency of the construction of these facilities.

Improving local taxation also requires developing the capacities of city managers and the skills of local authorities in defining the tax base and tax rates. The city must therefore support and develop the capacities of local managers (elected officials, executives, financial managers) through training and the use of intermediaries and experts, "Our cities today have a greater need for competent and qualified manager-strategists, capable of transforming our cities into islands of prosperity, expertise, competitiveness and innovation" (FONDAFIP, 2015). This will allow the city to improve the effectiveness of the consultation of these local actors, and thus improve the mobilization and management of local assets.

The main contribution of this publication is to confirm the positive impact of improving local taxation on city financing and thus on sustainable urban development. It is therefore essential to develop the capacities of city managers, encourage public-private partnerships and improve the quality of expenditure.



Local taxation in cities in developing countries has many shortcomings, and its revenue does not sufficiently feed the local budget. This is due to a number of factors, including the existence of a less developed institutional framework for cities, a low level of income among citizens, poor use of some local taxes, inequality in the distribution of resources between the central government and local authorities, political opposition to decentralization, erosion of the tax base due to certain national policies, weak autonomy of local authorities, weak local government capacity, and lack of confidence in local authorities on the part of citizens and investors (AREA, 2003). In these countries, the collection of local taxes is often poor, mainly due to the lack of suitable instruments for determining tax potential, the complexity of tax assessment methods and the definition of the tax base, and the difficulties of issuing tax rolls and collecting them.

In most developing countries, it is the state that determines the base, rate and basis of local taxes. Thus, cities are entirely passive in determining what constitutes the basis of their financial autonomy. Generally, there is no contractual relationship between the state departments and the local governments for which they are supposed to work. The latter have no possibility of reacting to underperformance on the part of the state departments (Jnah, 2018).

Nowadays, financing has become a fundamental element in the problem of urban governance. Indeed, urban sprawl, spatial dispersion, concentration of employment locations, and movement of inhabitants often pose a problem of financing public services and infrastructure (OCDE, 2019). There is a need to provide cities with the necessary and sufficient funds to meet the increased expectations and needs of citizens and businesses. Cities must therefore consider, in coordination with relevant stakeholders and the local population, operational taxation strategies to mobilize financial resources that will allow them to meet the expectations and needs of their residents and properly carry out their missions (FONDAFIP, 2015).

The problem of financing cities is not only about the availability of financial resources, but also about their mobilization, management and direction (FMDV, 2014). Therefore, cities must effectively manage local financial resources while adhering to the principles of integrity, transparency, participation, democracy, accountability and equity (Moindze, 2010). Furthermore, the implementation of sustainable urban development must be accompanied by sufficient financial resources and appropriate governance of these resources. The objective is to promote the socio-economic development of cities, fostering their attractiveness and competitiveness and supporting the creation of businesses and jobs.

Strengthening the financial system of Moroccan cities and regions requires a more balanced sharing of powers and financial resources between the State and local authorities. It is necessary to encourage local authorities to broaden the tax base and develop their local taxation, to increase borrowing and to seek effective and innovative financing mechanisms, appropriate financial governance mechanisms and suitable legislative and institutional frameworks. These principles are all assets that confront the budgets of cities and regions and that will make it possible to improve regional finances without increasing the financial burden on the State. In this perspective, the encouragement of investment and the creation of wealth are closely linked to national, regional and local economic development.


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