Tax Reform in Morocco: What Impact on Medication Accessibility in 2024?
The 2024 Finance Bill proposes a significant measure: the expansion of VAT exemption to all medicines, as well as non-recoverable raw materials and packaging. This initiative aims to enhance citizens’ access to essential treatments. However, this measure also raises concerns within the Moroccan pharmaceutical industry.
Expansion of VAT Exemption: A Crucial Step Forward
Historically, pharmaceutical products were subject to a 7% VAT. The current proposal extends this exemption, now encompassing anticancer drugs, antivirals for hepatitis B and C, as well as treatments for diabetes, asthma, cardiovascular diseases, AIDS, and meningitis. Vaccines, therapies for infertility and multiple sclerosis, as well as medicines with a pre-tax price exceeding 588 DH are also included.
Concerns of the Pharmaceutical Industry
However, this reform raises concerns within the Moroccan Federation of Pharmaceutical Industry and Innovation (FMIIP). The non-deductibility of VAT, estimated at 600 million MAD, could impact the profitability of industry players. In an article by Médias24, Layla Sentissi, executive director of the FMIIP, emphasizes that “the removal of VAT on medicine has always been demanded in Morocco. It has already been removed on all medicines priced above 588 DH, as well as those for cancer, chronic diseases, cardiovascular diseases, diabetes, and asthma.” However, she insists on the need for a deductibility system to encourage industry players to continue investing.
According to the same source, Mohamed Houbachi, president of the Moroccan Association of Generic Medicines (AMMG), supports this position by calling for VAT exemption for the entire circuit surrounding medication, including transportation, innovation, personnel, and promotion, currently taxed at 20%.
Implications for Industrialization
Medication manufacturers fear that this exemption may favor imports at the expense of local production. Indeed, according to industry players, the measure risks hindering the competitiveness of local laboratories and leading to a halt in production on the territory. They stress the need to exempt the entire circuit surrounding medication, including transportation, innovation, personnel, promotion, and investment, currently taxed at 20%.
Ministry of Health: Commitment to Accessibility to Care and Medications
The Ministry of Health, as the driving force behind this reform, is committed to universalizing Mandatory Health Insurance (AMO), aiming to ensure universal access to care and medications. The VAT exemption aligns directly with the realization of the social objective set by the framework law on tax reform. This measure aims to improve citizens’ accessibility to essential treatments and to promote optimal medical care for the entire Moroccan population.
While the 2024 tax reform in Morocco promises a significant advancement in medication accessibility, concerns are voiced by the pharmaceutical industry. Constructive dialogue between stakeholders is necessary to reach a balanced solution beneficial to the entire Moroccan population. It remains to be seen how this proposal will materialize within the framework of the Finance Bill.
Indeed, “non-deductibility of VAT” means that manufacturers cannot reclaim or deduct the VAT they paid when purchasing raw materials and other expenses related to the production of medicines. In other words, they cannot subtract this VAT from their costs. The estimate of 600 million MAD means that, according to calculations or estimates by the FMIIP, the entire pharmaceutical industry could potentially bear a financial burden of 600 million Moroccan dirhams due to this non-deductible VAT.