The fight against tax evasion requires the use of new technologies

Julien Briot-Adar

(Independent Compliance Expert)

As everyone knows, the phenomenon of social fraud is not new. During the time of ancient Greece, certain practices of enrichment through tax tricks were revealed. Similarly, under the tribunate of the Gracchi in Rome in the 3rd century BC J.-K., the phenomenon of false declarations about land, which was established by wealthy Roman owners, including senators, was condemned.

In the fight against tax evasion, the Kingdom of Morocco is exemplary today, but the problems remain to be solved. The share of tax resources in Morocco’s GDP is less than 25%, while in many developed countries this figure easily exceeds 40% of GDP.

The fight against tax evasion should be one of the main tasks of the head of government, Mr. Aziz Ahannoush. It’s no secret that if the Moroccan government succeeded in eradicating tax evasion, it could heal all the economic and social flaws in their states.

Tax features:

Taxation is the key to economic or social justice. Taxation is a positive-sum game in which those who earn more resources contribute more to the collective effort than others, which calms the community, generates empathy among its members, and creates a sense of belonging that is essential for it to thrive.

Taxation is the most important factor determining national sovereignty. The independence of a country lies primarily in its ability to free itself from the help of others. The attributes of sovereignty mean little in the face of economic and financial dependence. As they say, “the hand that gives is always higher than the one that receives.” The economic independence of developing countries is related to their ability to generate domestic resources that allow them to satisfy their basic needs, which is impossible without appropriate taxation. This is true both for a country and for a continent like Africa. This results in significant instability and the need for external resources to fund our priorities. Finally, taxation is the key to international justice.

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Many multinational corporations are exempted from their tax liability through particularly complex tax arrangements and the presence of some of their subsidiaries in tax havens. It should be kept in mind that Morocco’s economy is a free trade economy and the country benefits from a significant presence of foreign companies, subsidiaries of large multinational corporations. Aware of this shortcoming, Morocco joined the club of countries in January 2021 that formally adopted a multilateral convention to combat base erosion and profit shifting. Dahir implementing Law 75-19 ratifying this agreement was published in Official Bulletin dated January 18, 2021.

Commitment to cooperation between organizations and training

Combating tax evasion is painstaking work that requires political will and modern management in synergy between various government agencies. Once this goal is achieved, action must be initiated to identify and punish all tax fraud. In the fight against tax evasion, it seems more than necessary for Moroccan politicians to invest in the training of tax authorities.

The weight of the informal economy, often forgotten by some, but not to be overlooked

Estimates of the share of informal employment in total employment range from 36% (according to the latest 2013 High Commission for Planning (HCP) informal sector study) to 79% (according to International Labor Organization (ILO) estimates (2019) Weight of the informal sector in the Moroccan economy is significant and creates a high level of tax pressure on companies operating in the formal sector.

To avoid increasing the weight of the informal sector, the solutions are to educate people in rural areas in entrepreneurship, convince the informal sector to properly manage the Kingdom of Morocco, and finally improve the business climate.

Using new technologies to combat tax evasion

Therefore, to eradicate tax evasion, the use of new technologies seems to be the most promising solution. The first step will be to use the blockchain. Blockchain is an immutable digital register built on the basis of consensus between participants in all stages or sequences of an operation. In order to guarantee the reliability and integrity of the data, the blockchain uses “miners” selected from among the interested parties, who, according to predetermined rules, verify the information before it is registered (permanently) on the blockchain. Blocks of information that are timestamped and added to the chain can no longer be modified. Thus, any financial transaction passing through an offshore financial center is tracked.

Then the second step is to use machine learning.[1], which will allow the tax authorities to detect any atypical transaction very quickly. This proposal obviously requires the efforts of all administrations and the adaptation of the regulatory framework to this new practice.

(1) Machine learning can be defined as an artificial intelligence technology that allows machines to learn without being programmed specifically for that purpose.