Tunisia struggles to cut govt deficit after tax proposals rejected

The Tunisian government is struggling to cut its fiscal deficit after two initiatives to raise taxes were rejected by the public and parliamentarians this week.

Yesterday, Tunisia’s parliament rejected a bill to raise the retirement age by two years to 62, in a severe blow to Prime Minister Youssef Chahed, whose government is under pressure from international lenders to cut state spending.

The draft law also proposed imposing a one per cent social security tax on employees and a two per cent tax on employers in a bid to cut the state’s $1 billion deficit of social security funds. Although the bill needed support from just a third of deputies or 73 votes to pass, only 71 lawmakers voted in favour of it.

On Wednesday, protests were also held outside Chahed’s office, with hundreds of lawyers and doctors demonstrating against a new law that will force them to disclose their salaries as part of a government bid to raise taxes.

Two days earlier, parliament passed a bill which allowed the government to force doctors and lawyers to disclose their salaries. Both professions currently do not need to do this due to professional secrecy rules, which officials say is used by some to avoid tax by understating their actual income.

Hundreds of lawyers protested in front of the prime minister’s office holding up banners saying “professional secrecy is a red line”.

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On the same day, hundreds of Tunisian teachers also protested in Tunis demanding better salaries and improved working conditions. Educators have been demanding an increase in their salaries, a lowering of the retirement age from 60 to 55 and a reformation of the educational system, with teachers’ unions starting a boycott of secondary school exams this month.

Tension between the government and the educational sector has been ongoing for three years due to disagreements over the increase in special grants and professional promotions, in addition to the Union’s accusation of the Ministry of Education of reneging on previous agreements.

Tunisians have been battling with several austerity measures as part of the government’s commitment to an International Monetary Fund (IMF) programme in 2016, worth some $2.8 billion. The country has witnessed dozens of protests since the beginning of the year over cuts to wages and subsidies of basic food staples, amid high unemployment and inflation.

According to a poll conducted by the private company Sigma Conseil earlier this year, nearly 80 per cent of Tunisians believe that the country is on the wrong track, with many expressing increased dissatisfaction with the actions of the president and prime minister.

Tunisia’s economy has been in turmoil since the 2011 revolution toppled dictator Zein El-Abidine Ben Ali. Slow economic growth has also been complicated by continuing political instability; the country has witnessed seven prime ministers since the ousting of Ben Ali and cabinet reshuffles are a regular occurrence.

Impatience has also been rising among lenders such as the IMF, which have kept the country afloat with billions of dollars in loans

Last month Chahed said his government could not find the political support to implement economic reforms and subsequently appointed ten new ministers in a cabinet reshuffle in a renewed attempt to resolve the crisis. Yet, in a sign of growing distrust inside the ruling party, President Beji Caid Essebsi rejected the reshuffle stating that the prime minister authorised it without consulting him.

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