Draft Operations Manual - Mena Transition Fund€¦ · Web viewDuring the Global Forum plenary...

Date of Submission to Coordination Unit:

A. GENERAL INFORMATION

1. Activity NameNorthern Africa: Improving Connectivity in the Maghreb

2. Requestor Information Name: Mr. Mohamed Boussaïd Title: Minister for Economy and Finance

Organization and Address: Ministry of Economy and Finance of the Kingdom of Morocco

Bd Mohammed V

Quartier Administratif Chellah – Rabat, Morocco

Telephone: +212 537 760 661 Email: [email protected]

3. Recipient Entities Name: Mme Amal ZDAIK Title: Chef de Division, Division du Système d’Informa-

tion

Organization and Address: Administration des douanes et impôts indirects (ADII)

Avenue Annakhil, Centre des Affaires, Hay Riad – 10000 Rabat, Morocco

Telephone: +212 (0)5 37 57 91 20 Email: [email protected]

Name: Mr. Jalal BENHAYOUN Title: Directeur Général

Organization and Address: PortNet S.A.

Enceinte Portuaire, Batiment de la Capitainerie, Port de Casablanca – Casablanca, Morocco


- Name: Mr. Younès TAZI Title: Directeur Général

Organization and Address: Agence Marocaine de Développement de la Logistique (AMDL)

11, Rue Al Kayraouane, Hassan, Rabat, BP 4434 Tour Hassan – 10020, Rabat, Morocco

Telephone: +212-(0)5-38-00-93-01 Email: [email protected]

Name: Mr. Mohamed Jalal BENJELLOUN Title: General Manager

Organization and Address: Société Nador West Med

20, Angle Avenue Mohamed VI et Rue D, Mabella-Youssoufia – Rabat, Morocco

Telephone: +212-(0)537-65-75-86 Email: [email protected]

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Name: Abdellah CHATER Title: Directeur General par intérim

Organization and Address: Comité Régional de l’Environnement des Affaires (CREA) – Centre Régional d’investisse-ment de Casablanca

60, Avenue Hassan II, 20000 – Casablanca, Morocco

Telephone: +212-(0) 522 481 888 Email: [email protected]

Name: Mr. Omar Faraj Title: Director-General Taxation

Organization and Address: General Tax Administration of Morocco

Avenue Haj Ahmed Charkaoui – Rabat, Morocco


4. ISA SC RepresentativeName: Franck BOUSQUET Title: Senior Regional Adviser

Organization and Address: The World Bank, 1818 H Street NW, Mailstop J5-500, Washington, DC 20433

Telephone: 001-202-473-0309 Email: [email protected]

Name: Andreas SCHAAL Title: Head of Sherpa Office

Organization and Address: Organisation for Economic Co-operation and Development (OECD)

2 rue André Pascal, 75775 Paris Cedex 16, France

Telephone: Email: [email protected]

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5. Type of Execution (check the applicable box)√ Type Endorsements Justification

Country-Execu-tion

Attach written endorsement from designated ISA

Joint Country/ISA-Execution


(Provide justification for ISA-Execution)

√ ISA-Execution for Country


This project is "ISA-executed" as the nature of the actions envisaged involves facilitating trade through international technical assistance. These actions are meant to support cross-border investments in the region. The Government of Morocco would like to benefit from Technical Assistance (TA) from both the World Bank Group and OECD to sup-port implementation of reforms identified in previous diagnostic reports and TA projects, to build local capacities and introduce inter-national best practice through training and public-private dialogue to ensure sustainability of reform processes. Building on existing TA projects: The ISAs have extensive experience in supporting developed and emerging economies in identifying bar-riers to trade and competitiveness and improving their investment attractiveness. The WBG and OECD have undertaken a number of analyses of the state of regional integration in Morocco, notably the OECD Investment Policy Review of Morocco examined its achieve-ments in developing an open and transparent investment regime and its efforts to reduce restrictions on international investment, the 2012 report on Cross-Border Trade Facilitation and Infrastructure in the Maghreb (World Bank in liaison with Union du Maghreb Arabe) and the 2014 update to the 2012 World Bank report (Maghreb: Trade Facilitation and Logistics Policy Note, World Bank). Activities pro-posed in this application will build on the results of these reviews and on other tools for improving trade and transport facilitation as well as effective taxation. The implementation of this TA by the ISAs will be used to provide capacity building and to introduce and share international best prac-tices on trade and transport facilitation and effective taxation. The ISAs analytical tools and approaches are central to the provision of best practices in these areas. The ISAs staff and a roster of experts will implement the technical assistance to promote reform implementation using best practices. They will ensure active and consistent team presence in Morocco during execution and transfer of skills to the concerned Ministries and Authorities by providing training and capacity building. The ISA team will rely on the support of the executing agencies in both coun-tries which will strengthen local involvement and technical capacity.

ISA-Execution for Parliaments

Attach written endorsements from designated Ministry and ISA

6. Geographic Focus√ Individual country (name of country): Morocco1

1 This project was constructed as a regional project for Morocco and Tunisia. For reasons of coordination with other proposals from Tunisia, the Government of Tunisia decided to not submit the proposal during this round of the MENA Transition Fund but to

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Regional or multiple countries (list countries):

7. Amount Requested (USD) Amount Requested for direct Project Activities:(of which Amount Requested for direct ISA-Executed Project Activities):World Bank: OECD:

US$ 2,325,000US$ 1,019,000

Amount Requested for ISA Indirect Costs:2

World Bank: OECD:

US$ 165,000 US$ 68,513

Total Amount Requested: US$ 3,577,513

For information (amounts in the initially approved proposal before the reallocation of US$ 284,984 proposed by the Mo-roccan government).

Amount Requested for direct Project Activities:(of which Amount Requested for direct ISA-Executed Project Activities):World Bank: OECD:

US$ 2,150,000US$ 930,000

Amount Requested for ISA Indirect Costs:3

World Bank: OECD:

US$ 150,000 US$ 62,529

Total Amount Requested: US$ 3,292,529

8. Expected Project Start, Closing and Final Disbursement DatesStart Date: June 15, 2015 Closing Date: February 28, 2018 End Disbursement

Date:June 30, 2018

9. Pillar(s) to which Activity RespondsPillar Primary

(One only)Secondary(All that apply)

Pillar Primary(One only)

Secondary(All that apply)

Investing in Sustainable Growth. This could include such topics as innova-tion and technology policy, enhancing the business environment (including for small and medium-sized enterprises as well as for local and foreign investment promotion), competition policy, private sector development strategies, access to finance, addressing urban congestion and energy intensity.

x Enhancing Economic Governance. This could include areas such as trans-parency, anti-corruption and account-ability policies, asset recovery, public financial management and oversight, public sector audit and evaluation, in-tegrity, procurement reform, regulatory quality and administrative simplification, investor and consumer protection, access to economic data and information, man-agement of environmental and social impacts, capacity building for local gov-ernment and decentralization, support for the Open Government Partnership, creation of new and innovative govern-ment agencies related to new transitional reforms, reform of public service delivery in the social and infrastructure sectors, and sound banking systems.

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wait for the next round. The proposal in its current form still supports regional integration of the Maghreb countries.2 ISA indirect costs are for grant preparation, administration, management (implementation support/supervision) including staff time, travel, consultant costs, etc.3 ISA indirect costs are for grant preparation, administration, management (implementation support/supervision) including staff time, travel, consultant costs, etc.

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Inclusive Development and Job Creation. This could include support of policies for integrating lagging regions, skills and labor market policies, increas-ing youth employability, enhancing female labor force participation, integrat-ing people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform.

x Competitiveness and Integration. This could include such topics as logis-tics, behind-the-border regulatory con-vergence, trade strategy and negotia-tions, planning and facilitation of cross-border infrastructure, and promoting and facilitating infrastructure projects, particularly in the areas of urban infra-structure, transport, trade facilitation and private sector development.

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B. STRATEGIC CONTEXT

10. Country and Sector Issues Country Issues Morocco

Amidst the historic and tumultuous changes that have marked the region in recent years, Morocco has embarked on a promising and peaceful transition toward a more open society. The transition has come in response to the demands of the Moroccan population, notably youth, for more inclusive social and economic policies.

With an average economic growth rate of nearly 5 percent from 2001-2011, Morocco reduced poverty and boosted shared prosperity. Extreme poverty has practically been eradicated, dropping from 2 percent to 0.28 percent over the same period. Relative poverty also declined, from 15.3 percent to 6.2 percent. Still, nearly 20 percent of the country, or 6.3 million Moroccans, live in poverty or under constant threat of falling back into poverty. As weak global growth has dampened Morocco's economic performance and hindered job creation, the Government has increasingly focused on managing social pressures, and this has delayed reforms.

Morocco's economic prospects are closely tied to Europe's, and any slow-down there will undermine the macro-economic outlook through continued weak exports, tourism, remittances or FDI. A deterioration in the regional context, high fuel prices, or renewed global financial turmoil would compound these challenges. While the Govern-ment has launched a series of sector strategies to boost economic performance, absent a reorientation of the econ-omy toward the tradable sector and increased competitiveness, growth and job creation will remain weak. Unem-ployment has held at 9-10 percent since 2006.

Trade and exchange rate policies must support competitiveness and integration in global value chains. While ex-port development plans are in place and Morocco has adopted an ambitious agenda with regard to free trade agree-ments, especially vis-à-vis the EU, the implementation of comprehensive investment climate reforms, increased productivity and reduced trade and investment barriers will be required to ensure deeper integration with global markets. In recent years Morocco has invested in robust trade reforms, notably in customs, and in major and suc-cessful transshipment activities. Yet trade costs remain relatively high, mostly due to supply chain inefficiencies, in particular among Maghreb countries. Modernizing logistics services would help to better connect Morocco to global value chains.

Sector Issues Morocco

Regional economic integration in the Maghreb has long been identified as one of the solutions to challenges shared by the countries in the region, be it regarding integration in globalization or overcoming their structural weak-nesses. Unfortunately, since the creation of the Arab Maghreb Union (AMU) in 1989, the Maghreb has still not been successful in achieving regional economic integration, especially when it comes to trade integration. The Maghreb economies still operate independently and there is little facilitation of regional trade. Intra-regional trade between the countries of Central Maghreb (Algeria, Morocco and Tunisia) accounts for no more than 3 percent of their total trade.

More than the infrastructure, the proliferation of non-physical barriers (non-tariff measures, lack of trade facilita-tion) explains the high trade costs and the resulting small trade volumes. Today Maghreb countries have lower

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trade costs with Europe than with their neighbors despite the fact that the Maghreb countries are in a free trade zone. This challenge is hardly new, and the importance of Maghreb integration is not less than it used to be. Unfor-tunately, the changes happening since the “Arab Spring” in 2011 have not been conducive to a larger push on re-gional integration. Rather, policy makers face pressing and complex domestic agendas. Rising security issues at borders do not play in favor of openness. However, the benefits brought by more economic integration are even more important in this new context, when Maghreb loses in attractiveness for investment and services such as tourism.

The importance of facilitating regional trade as a means to generate growth and job opportunities has grown in the Maghreb over the past years. However, the agenda has received probably even less attention from policy makers recently than before. Tunisia and Libya underwent traumatic post-revolutionary sequences, and are focusing on their internal problems.

There has been no change to one of the biggest practical constraints to regional trade, which is the suspension of land traffic between Algeria and Morocco. Even initiatives with support from international financial institutions, such as LogisMed, have progressed slowly. The main findings of a comprehensive 2012 World Bank study on Cross-Border Trade and Infrastructure in the Maghreb and its 2014 update are still valid today:

Regional trade in the Maghreb remains much below its potential due to high trade costs. Capacities of public agencies in charge of facilitating trade have been affected in the aftermath of the revolu-

tions in Libya but also in Tunisia. Tunisia has in the past two years experienced a very high turnover, which affects decision making. This has contributed to the rapid expansion of informal or quasi-informal trade chan-nels in ports and across land borders. These activities further weaken the formal economy. Meanwhile, Mo-rocco and Algeria have been pushing trade facilitation improvements, without a strong focus on regional trade.

The most noteworthy positive trend is the rapid increase in freight flows on the Atlantic corridor linking Mo-rocco to Mauritania and West Africa. Apparently the flows between Morocco and Tunisia are also getting stronger, with a regular and sustainable shipping service.

Transport facilitation does not seem to be a major issue. The regime for the movement of trucks across borders is quite liberalized, with no quotas, license requirement and fees beyond a temporary admission procedure. However, there are many bottlenecks for the movement of goods across borders, despite the nominal liberal-ization of trade between countries. These include: Non-tariff measures (NTMs) imposed unilaterally or bilaterally (in bilateral trade treaties that complement

the UMA and Pan-Arab treaties). Implementing rules of origins on regional imports. Given that regional products are exempted from duties,

fraud on rules of origins is a major concern for the customs of the importing countries, and apparently the main single source of delays or dispute on regional trade. This constraint would be much alleviated by a system of data exchange where export data would be available to the importing countries.

Physical border facilities and processes at existing border crossing are outdated by current international standards. They would need a full overhaul to adapt to the modern transport environment of the Trans-Maghreb, to be implemented much before the route is completed (at the end of the decade approximately).

The friction in regional trade has less to do with the regional framework of the UMA and now the Pan Arab Free Trade Zone (PAFTA) than with implementation. Each country has introduced facilitating initiatives focusing mostly on imports at the main gateways (Casablanca, Tangiers, Oran, Algiers, Tunis). These initiatives do not specifically target regional trade, which is a very small part of port traffic, but rather trade with Europe or Asia. Countries are at different levels of implementation of trade facilitation. Morocco, and more recently Algeria, have improved their customs processes and the main issue is the coordination of other interventions, especially other controls. The situation in Tunisia has deteriorated considerably since the revolution: dwell time has increased by several days, fraud and informality have developed, and the quality and capacity of controls have eroded in large part due to the turnover of technical staff imposed by the governments before 2014.

The 2012 World Bank analysis on trade flows and trade costs in the Maghreb found that the primary explanation for the relative small regional flows in the Maghreb are high intra-regional trade costs between pairs of countries due to trade facilitation bottlenecks, which are even higher for regional trade than for trade with the EU. The tradi-

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tional explanation for low regional trade such as the attraction of the EU or the lack of apparent complementarity between the economies cannot explain why the Maghreb regional trade is much lower than for other regional groups of countries with similar level of development.

Regarding road transport and the Trans-Maghreb road corridor in particular: While there are few regulatory con-straints to the free flow of vehicles between borders, non-tariff barriers and limited coordination in relation to trade data and border crossing are more likely to be the biggest contributor to high trade costs and reduce the po-tential for regional trade. From the perspective of regional trade, the main focus going forward should be on practi-cal trade facilitation measures. The core infrastructure is available and the missing links are being planned. Trans-port facilitation issues do not appear to be a major issue today. Some of the binding constraints described above may be addressed with few practical measures. These measures will build on the current good climate of coopera-tion between the agencies of the three central countries. The fact that they are technical in nature and do not in-volve many participants in each country (mainly a small number of customs personnel) make their implementation feasible.

Another lesson learned from previous attempts in boosting regional integration is that it is preferable to focus on measures that have co-benefits for both regional trade and trade with the EU. As trade with the EU constitutes a larger flow than trade within the region, it typically receives a stronger priority by technical agencies. The proposal for interconnecting customs data for instance equally applies to the exchange of information between Morocco and France, Morocco and Tunisia, and Tunisia and France.

Morocco’s capacity to connect and trade with other countries, investors, importers and exporters is not optimized due to a complex legal and regulatory framework that is overburdened by lengthy procedures and poorly adapted standards. Morocco and Tunisia have not been able to enter foreign markets and save and invest in the future as much as the more successful emerging economies because of an overall lack of sector competitiveness and diversi-fication. Furthermore, firms, especially small- and medium-size ones, serving export and domestic markets in all sectors cannot exploit opportunities if they are burdened by costs outside their control that make them uncompeti-tive. Increasing the number and value of products produced, the number of markets served, and the survival rate of firms is conditional on lowering such costs. This requires economy-wide policies and regulations aimed at creating the proper business environment and investment climate.

The benefits from open trade and FDI policy are greater where barriers to business entry have been relaxed, allow-ing new firms to enter the market and respond to growing export opportunities. However, firms in Morocco and Tunisia still confront a variety of obstacles to contesting new markets, including licensing restrictions, high costs of administrative transactions, and limited access to finance. Survey data show that companies experience wide varia-tion in times taken to gain construction permits, clear customs, or access other administrative services, pointing to favoritism that benefits well-connected firms. Sector level competitiveness is central to harnessing private sector growth for sustainable employment, poverty reduction, and wealth creation. To reap the benefits of market oppor-tunities, and for such opportunities to induce job creation, the regulatory environment for business should be im-proved, technological upgrading and skill availability should be fostered, and countries should boost their ability to enter new and sophisticated export markets.

The GoM’s ongoing tax system reform is important to bolster the contribution of the fiscal sector to growth and improve the region’s environment for cross border trade. Following the recommendations of their national tax conference in April 2013, in 2014 the authorities initiated reforms to make the tax system more equitable, trans -parent and better able to support competitiveness. Tax / GDP ratio averaged close to 24 percent over the past three years, but a large share of the economy is either exempt or evades taxation. According to the tax authorities, about 80 percent of corporate taxes are paid by 2 percent of all enterprises operating in the country. GoM’s recent deci-sion to join several international tax initiatives (the Multilateral Convention on Mutual Administrative Assistance in Tax Matters; the Global Forum on Transparency and Exchange of Information for Tax Purposes; the OECD’s Base Erosion and Profit Shifting Project; OECD’s Revenue Statistics Project) is indicative of a drive towards tax trans -parency, regional and international tax cooperation. These initiatives directly support regional trade and improved investment climate objectives.

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11. Alignment with Transition Fund ObjectiveThe proposed project aims to advance country-led institutional reforms and strengthens public by modernizing customs procedures, enhancing cooperation between national agencies, improving the investment climate, sector competitiveness and tax transparency. The measures previewed under this proposal, such as customs data ex-change, the setting up of a Trade Portal (uniting all regulatory information pertaining to goods import and export) and the introduction of modern mobile customs procedures, will enable greater trade volumes, higher inclusive economic growth and improved livelihoods across the Maghreb.

Competitiveness and regional integration through trade is one of the four pillars of the MENA Transition Fund. The proposed project focuses on fostering trade and regional integration in the Maghreb. Regional integration has long been seen as one of the solutions to challenges posed by the ongoing transformation in the Maghreb countries as it fosters sustainable and inclusive economic growth. It does so by helping countries overcome their structural weak-nesses and by allowing them to integrate more deeply into global trade.

Regional economic integration has not yet been achieved in the Maghreb, especially when it comes to trade integra-tion. Intra-regional trade between Morocco, Tunisia and Algeria accounts for only 3 percent of their total trade. More than infrastructure, the proliferation of non-physical barriers (non-tariff measures, lack of trade facilitation) explains the high trade costs and the resulting small trade volumes. A 2012 analysis by the World Bank among oth-ers pointed to the following weaknesses: lack of harmonization and cooperation between control agencies, few agreements on border crossing and transit agreements, and a proliferation of non-tariff barriers.

12. Alignment with Country’s National StrategyThe proposed intervention is in line with national domestic and regional integration. Given the importance of en-hancing regional trade integration for the Maghreb, Morocco and the other countries in the Maghreb committed to a comprehensive plan to boost lagging regional trade during an inter-ministerial meeting in 2012. Part of this plan includes the harmonization of customs procedures and the cross border expansion of logistics and transport ser-vices. The agreement, which came at the conclusion of a ministerial workshop on trade facilitation, seeks to obtain efficiency gains for local producers, and the creation of a regional market of more than 90 million consumers.

Morocco’s commitment to regional integration is evidenced by its recent trade liberalization policy. Morocco is a long-standing trade partner of the European Union (European Neighborhood Policy Agreements) and signatory of numerous agreements with countries of the Middle East and North Africa and the Maghreb in particular, as well as increasingly with G8 partners. Morocco is a member of the Arab Maghreb Union, signatory of the Agadir Agreement since 2004, as well a member of the Euro-Mediterranean Partnership since 2008.

This project is aligned with enhancing the progress made on the Agadir Agreement for the Establishment of a free trade zone between Arabic Mediterranean Nations. The Agadir Agreement aims to establish a free trade area be-tween Egypt, Jordan, Tunisia and Morocco in order to boost competition and economic activity, support employ-ment and increase productivity.

More specific to the country level, for Morocco, the pursuit of strong, competitive, multi-sector, diversified, wealth- and employment-generating strategies is one of the five economic development pillars to which GoM has commit-ted to achieving. To this end, GoM has defined and started implementing key sector-specific strategies under the National Pact of Industrial Emergence covering namely offshoring, automobiles, aeronautics, electronics, textile and leather, agro-industry, among others for which a more robust trade regime is necessary.

In order to boost the competitiveness of these sectors, GoM has committed to strengthening its trade and logistics policy regime, especially through the modernization of customs procedures with the Customs Authority (ADII) and the set-up of single-window platforms allowing for streamlined procedures and greater transparency with ADII and PortNet, which is necessary for Morocco to connect to global value chains, and through a more robust legal and regulatory framework for the logistics sector with AMDL that would facilitate domestic and regional trade integra-tion.

Beyond the launch of sector-specific strategies, GoM launched a strategy for logistics competitiveness development that is spearheaded by the Moroccan Agency for Logistics Development (AMDL), a transition fund recipient under

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LogisMed. One of the strategy’s main components includes the optimization of the flow of goods through customs reform. Most recently, AMDL and several public and private partners (including the Ministry of Economy and Fi-nance, representing ADII) signed a cooperation agreement to put in place an action plan covering the period 2014-2020 for import-export that seek to improve logistics competitiveness. One such action item included simplified customs procedures to optimize the flow of goods that will further enhance regional integration.

GoM’s recent decision to join several international tax initiatives will directly support regional connectivity, trade facilitation and improvements in the investment climate. These are signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC), joining the OECD’s Base Erosion and Profit Shifting Project and joining the OECD”s Revenue Statistics Project.

C. PROJECT DESCRIPTION

13. Project ObjectiveThe objective of the project is to streamline the chains of international trade between the Maghreb countries and with their major trading partners, to increase cooperation among border management agencies, to strengthen ca-pacities in economic governance, and to build effective and transparent tax systems.

14. Project ComponentsThe objective of the project will be achieved through intermediate targets. Several of these targets have been iden-tified in recent diagnostic work by the World Bank on regional integration in the Maghreb4, of which this project will implement the most critical recommendations. The first one is to improve information exchange between countries and promote cross border cooperation related to trade. This is expected to reduce non-tariff measures and facilitate transit on regional corridors. The project will also reinforce domestic capacities in making trade more efficient and exercise surveillance of commercial activities so as to limit fraud and informality.

A second target contributing to the reduction of trade transaction costs is to improve the specific regulatory frame-work of sectors critical to regional connectivity or integration in international value chains, such as logistics.

The third target of the project, to be executed by OECD, of building effective and transparent tax systems also con -tributes to improving the region’s trade and investment climate. Signing the MAC means Morocco joins Tunisia in being able to share information for tax purposes regionally and internationally, and to undertake joint audits. Mo-rocco’s recent membership of the Global Forum on Exchange of Information for Tax Purposes, together with Tunisia, ensures both countries meet the international standard for tax transparency and information exchange, and provides opportunities for mutual learning in fighting tax avoidance and evasion. Adherence to these global standards enhances GoM’s reputation and will make Morocco more attractive to investors. It will also produces a more level playing field between Morocco’s foreign investors and local businesses creating a more competitive environment for regional trade. Secondly, in 2015 Morocco and Tunisia both joined the OECD’s Base Erosion and Profit Shifting Project, designed to remove loop holes that can be exploited by companies to avoid tax. Implementa-tion of the project will enhance Morocco’s existing efforts (for example to introduce Advanced Pricing Agreements with business) to provide more certainty and predictability for business, thus improving the regional investment climate. Thirdly, both countries have joined the international effort led by the OECD to make revenue statistics available in a fully transparent manner using an internationally comparable format. This information will help GoM assess the appropriate balance between customs and other taxes to facilitate regional trade. A similar project is already being implemented in Tunisia, under the MENA Transition Fund.

Component 1: Regional customs connectivity (to be implemented by the World Bank)

[No changes in activities in this component, apart from increased amounts in the revised proposal]Operational dialogue is functional between Maghreb countries when related to technical subjects for which the administrations and operators concerned can easily find constructive projects, unhindered by third parties. This is the case for customs, where the cooperation has been more intense in recent years. This connection takes place

4 “Maghreb: Trade Facilitation and Logistics: Towards an efficient Trans-Maghreb corridor”, Policy Note, The World Bank April 2014

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between the directorates-general of customs, particularly within the framework of the North Africa-Middle East committee of the WCO, chaired by Morocco. The Quadripartite dialogue initiated by the French customs with Morocco, Tunisia and Algeria has since 2012 intensified this cooperation and helped focus on common projects. Several projects are being developed in this framework. This proposal focuses on data exchange, border crossings, corridors, risk management and trade surveillance.

Adhering to the World Customs’ Organization vision of the 21st century on Globally Networked Customs (GNC), which aims to rationalize, harmonize and standardize the secure and efficient exchange of information between WCO Members, the Moroccan Customs Authority (ADII) is requesting assistance in order to link its data platform to regional customs partners, such as Tunisia, Egypt and Jordan.

Activity 1.1 Connected customs: Technical assistance support to the implementation of regional data ex-change

This subcomponent will provide Technical Assistance, with the goal of facilitating the effective implementation of a network that would include Morocco, Tunisia, Algeria, France, Spain and potentially Egypt and Jordan. Beyond IT issues, this project involves legal aspects or relationships with the private sector which are complex. The TA will support implementation which currently is at an early stage. The expected benefits are very important in terms of visibility on trade facilitation and on non-tariff barriers or value analysis.

In this concept, the export declaration (or part of it) from the exporting country customs will be transferred or made available to the customs in the importing country. Such data exchange would bring many benefits by signifi-cantly alleviating the problems of suspicion and lack of information on regional trade, thus facilitating it. For in-stance access to exporter information would help clarify the authenticity of the certificate of origin and speed the clearance of regional imports. It will provide more coherent statistics on trade between the three countries, and a more secure supply chain. It may also provide useful information to the customs and tax administrations to assist in countering trade mispricing and transfer pricing issues.

This activity supports the interactions between countries and builds additional capacities in Morocco to implement the systems and train the agents. The equipment needed for continuous data exchange is not equally advanced in all countries. Morocco’s technology is sufficient to handle continuous electronic data exchange with the other coun-tries in the region or with Europe. In Morocco, data exchange will eventually be done via the Internet (web ser-vices) or via a future Virtual Private Network (VPN), which would be secure but cumbersome. The data exchange project has been considered in the context of the quadripartite customs dialogue between France, Algeria, Morocco and Tunisia. It would also include liaison with France and potentially other EU countries.

Implementation of the congruent project in Tunisia with the DGD (customs) is not a precondition to the feasibility of this project with Morocco, as connectivity can be tested with other countries.

Activity 1.2 Border crossings and corridors: Improvement of vehicle tracing (ADII)

The forthcoming (end of the decade) completion of the Trans-Maghreb means that the establishment of efficient border control posts and the implementation of the transit regime have become priorities. The highways will place Algiers within a day’s drive from Tunis or Casablanca. It is vital for regional integration that the historic benefit of new infrastructure is not compromised by border control requirements. Also, even the nature of the corridor (the highway enables integrated traffic control on a stretch between two interchanges) allows for an approach and a control methodology entirely different from those on an ordinary road. For example, the checkpoint need not be placed at the geographical border: juxtaposed national services can be established well inside the territory, and the logistics of integration as well as inter-service delegation can be pushed much further than for a conventional border post.

Under current circumstances, the project will focus only on the existing active corridors, namely, the flow of vehicles from Morocco to the South (Mauritania, Senegal), with focus on tracing. Intervention on border crossing will be indirect through coordination on procedures and design between Maghreb countries. The Bank is preparing a project in Nouadibou, Mauritania, which may include a border crossing component.

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In accordance with Moroccan regulations currently in force, the temporary admission of means of transport be-longing to persons who have their habitual residence abroad is subject to a customs declaration to be presented by the driver at the border post input. As part of the dematerialization and simplification of this procedure, the ADII is planning to set up an automated management system for the temporary admission procedure (AT) passenger vehi-cles, which will allow considerable reduction in customs clearance time, especially during the transit operation. World Bank will provide technical assistance to design and implement a virtual platform that is linked to ADII’s existing online customs clearance platform, BADR.

Activity 1.3 Information, control and risk

In the spirit of trade facilitation measures and the implementation of the Bali agreement to improve transparency and facilitate trade through information management, World Bank will be supporting ADII and PortNet, on whose board ADII sits, in enhancing the speed of transmission of information and consolidating information into a single platform through sub-components named below. It is proposed to supplement the EU twinning project as well as EU and bilateral technical assistance with the Ministry of the Interior with a new component with the aim of com-bining the requirements of security and trade facilitation.

Customs Mobility (ADII)

Within the context of the automation of the customs clearance process, ADII is designing a mobile customs project that will allow customs agents to interact in real time with BADR upon completion of the customs control proce-dures.Since the current systems requires that customs agents enter information in BADR several hours after they com-plete their customs clearance process, the clearance and tracking time for goods is considerably delayed. The mo-bile application that WB will help support will allow customs agents to accomplish real-time control customs for-malities on BADR, thus reducing the clearance time of goods and putting in place a reliable tracking system.

World Bank will support ADII in the following areas:a) Preparing a feasibility study on relevant mobile applications b) Development of mobile applications on tablets that will be acquired by ADIIc) Training of customs agents and IT technicians on the use of the applications/ software

Big Data approach to risk management (ADII)

The implementation of a “data mining” system would allow for a more intelligent and efficient use of ADII’s data-base and increased capacity to analyze risk and predict fraud. Using this approach, ADII proposes to develop a screening tool for risky behaviors of users based on a big data approach. This pilot tool that pinpoints risks for fraud differs from the classical management approach based on fixed criteria prepared by customs (import type, type of importer). The goal is to have an adaptive tool that can help identify “abnormal” behavior and outliers in real time through a clustering approach, in order optimize inspection times. ADII has piloted this idea with two private sector companies, neither of which was able to identify events tests for customs. This confirms the hypothe-sis that the problem is more complicated than those treated with off-the-shelf business intelligence applications. WB proposes to address this issue through an R&D project implemented in partnership with science laboratories leading in data mining (e.g. INRIA in France, MIT in the US). This would also help to develop an “open source” tool that could be replicated in other countries in the region and beyond.

Component 2: Facilitating trade through upgrading the institutional and regulatory envi-ronment for businesses (to be implemented by the World Bank)

[In the new proposal increase amount goes to an additional sub-activity for the Oriental region 2-2]The benefits from open trade and FDI policy are greater where barriers to business entry have been relaxed, allow-ing new firms to enter the market and respond to growing export opportunities. However, firms in Morocco still confront a variety of obstacles to contesting new markets, including licensing restrictions, high costs of administra-tive transactions, and limited access to finance. Survey data show that companies experience wide variation in times taken to gain construction permits, clear customs, or access other administrative services, pointing to discre-tionary policies that benefit well-connected firms. Sector-level competitiveness is central to harnessing private

11

sector growth for sustainable employment, poverty reduction, and wealth creation. To reap the benefits of market opportunities, and for such opportunities to induce job creation, the regulatory environment for business should be improved, technological upgrading and skill availability should be fostered, and transparency in accessing critical trade and investment information improved through portals.

To address the issues of regulatory convergence and an improved investment climate for competitive sectors, World Bank will support (i) the simplification effort undertaken by the Moroccan Agency for Logistics Development to improve the regulatory framework for the logistics sector (activity 2.1), and (ii) the public private regional in-vestment climate committee established in the Greater Casablanca and the Oriental regions, and Port agencies (NadorWest Med) (activities 2.2 and 2.3) to improve competitiveness of key sectors, as described below. Working both at the economy-wide and local levels will allow for a better identification of specific binding constraints, in-cluding at sector level), and iii) the creation of a Trade portal (Portnet). It also allows for greater involvement of concerned stakeholders.

Activity 2.1 Upgrading the legal and regulatory environment for the logistics sector

One of the priorities of the Deauville partnership is to promote the process of institutional change through regula-tory convergence of norms and standards and other behind-the-border regulations to FDI-enhancing aspects of the regulatory environment such as the logistics landscape. In order to reap the full benefits of their greater trade and FDI integration, accelerating the convergence of regulatory frameworks in Morocco with international best prac-tices is key. Before convergence of regulatory frameworks can occur, domestic policies need to be improved. To this end, World Bank will provide technical assistance to AMDL for development of an adequate legal and regulatory framework for the logistics sector in Morocco. Specifically, World Bank will work with AMDL to undertake a regula-tory needs assessment for the logistics sector after which policy definition and design of a legal and regulatory roadmap for the short, medium and long term would occur. Upon approval of the legal and regulatory roadmap, World Bank will assist AMDL in the implementation of the policy recommendations.

Activity 2.2 Maximizing the impact of the maritime complex Nador West Med

Morocco’s Oriental region (northeast) shows delayed development compared to the national average on both eco-nomic and social levels, despite its strategic position in the Mediterranean at the crossroads of major shipping routes. Since the announcement of a 2003 Royal initiative for the development of the Oriental region, more than 40 million dirhams (4 Million USD) of public investment have been directed to the region. The industrial port complex Nador West Med is a continuation of these investments. The complex will be built in the Bay of Betoya, located within 250 miles of the Strait of Gibraltar and in front of the main east-west routes of container traffic and petro-leum products. The complex consists of:

- a new deep sea port with substantial capacity for container transshipment, the development of an energy center (processing, packaging, storage of petroleum and derivatives) and processing of bulk materials including coal;- integrated industrial platform open to renowned investors, designed to house the global businesses of Morocco and to be developed on a free zone adjoining the port;- infrastructure to connect with the hinterland.

Maximizing the social and economic impacts of Nador West Med requires the establishment of a series of measures and actions. The suggested activity includes an evaluation study of how to maximize the socio-economic impact of Nador West Med on all investments made or planned in the Oriental region, notably in terms of job creation. This activity would involve expert assessment as well as structured public private dialogue to confirm and deepen the diagnosis on priority sectors and institutional and regulatory reforms needed to maximize the impact of Nador West Med.

[Additional activity since first approval] At the request of the government a specific focus will be given in the context of this activity to the province of Jerada. Jerada is one of the provinces constituting the Oriental region, and is lesser connected than the two main economic poles in the region Nador and Oujda. A specific TA will look at the specific needs of this region, especially from the perspective of defining complementary measures that will help this lagging areas benefit from the investment in connectivity infrastructure linking the main gateway cities in the Oriental with the rest of the country and internationally.

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Activity 2.3 Improving the competitiveness of businesses and trade in Casablanca

The World Bank has assisted the Government of Morocco in establishing the “Comité National de l’Environnement des Affaires” (CNEA), a public-private Committee created in 2009 and chaired by the Head of Government, which facilitates and oversees the implementation of investment climate reforms. This has helped promote dialogue among stakeholders on policy and regulatory matters with the objective to improve Morocco’s competitiveness. Since its existence, the CNEA has managed to provide an efficient policy and operational platform for monitoring and supporting reforms that are measured by the Doing Business report of the World Bank group. Morocco has notably managed to progress from rank 129 out of 181 countries in the Doing Business 2011 to reach rank 71 out of 189 countries in the Doing Business 2015.

In December 2014, a similar committee (CREA) was created at the local level in Casablanca and works closely with the CNEA. At the local and sector level, CREA created fourteen public private working groups aiming at identifying bottlenecks to competitiveness and export in key sectors and cross-cutting regulatory areas. The Regional Invest-ment Center (CRI), which is in charge of managing the CREA, has requested WBG support and expertise to support these working groups, notably those focused on the simplification and automation of key procedures relating to trade, competitiveness of key sectors, and operating licenses. Accordingly, the project will support the CREA in establishing a structured and well-functioning public private dialogue (PPD). The project will also provide exper-tise to support the implementation of reform actions identified by the CREA working groups to improve the city competitiveness, notably through a legal and regulatory assessment of reform needs in view of simplifying and increasing the transparency of key procedures, through the setting up of IT tools for managing standardized li-censes, and through the training of stakeholders.

This activity will coordinate with the work on taxation (see component 3 below), which will also contribute to an improved business climate by assisting Morocco develop and implement an Advanced Pricing Agreement (APA) program creating a more transparent and certain investment climate for multinational enterprises doing business in Morocco.

This activity will also take stock of similar work recently launched and still ongoing in Tunisia, where the World Bank Group is supporting both sector-level and economy wide efforts aimed at simplifying business formalities, including operating licenses but also tax and customs procedures. The work in Tunisia also comprises setting a structured public private dialogue approach for sector competitiveness that have helped established a clear diagno-sis on identifying institutional and regulatory reform needs. Activities undertaken in Morocco within this compo-nent will be informed by the methodologies and approaches implemented in Tunisia, with a view to ensuring that an upgraded business environment in both Maghreb countries will contribute to improve exchanges.

Activity 2.4 Trade Portal (PortNet)

PortNet is a limited liability company in charge of developing and managing an operations management system for Moroccan Ports Communities that coordinates export and import services related to ports. Its purpose is to link all stakeholders (public and private) of the logistics value chain to facilitate access to information and documents and reduce the management costs of exporting and importing. The first phase of the project relative to the automation of the export title between the public administration and importers is operational as is the automation of the man-agement process relating to ships’ offloading. The second phase relative to the automation of transit and removal process is in a pilot phase in Casablanca prior to national expansion before the end of 2015. The paperless manage-ment of the import title is being piloted throughout Morocco with a generalization in 2015.

World Bank will be providing technical assistance to PortNet in the design and launch of a trade information portal, a virtual platform where one can obtain all the information on regulatory requirements needed to undertake inter-national trade. The implementation of a trade information portal will result in tangible benefits in terms of trade facilitation, such as: Substantial cost savings if proper guidance can be obtained without the need to seek advice in person from several locations. Conflicts would be avoided by having a single authoritative reference point, as would potential penalties for non-compliance. These savings in time and cost should cut the overall cost of doing business and reduce the time to import or export goods thus contributing to a country increasing its overall standing in terms of transparency and ease of doing business.

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Component 3: Fiscal connectivity, effective tax systems and improved transparency (to be implemented by the OECD)

[No changes in activities in this component, apart from increased amounts in the revised proposal, increase is going entirely to the activity 3-2 targeting “Base Erosion”.]]This component aims at assisting Morocco to build effective and transparent tax systems that also contribute to improving the region’s trade and investment climate. This overall objective will be achieved by promoting changes in tax policy and tax administration in Morocco in selected areas that introduce global standards and best practice to tackle tax evasion and avoidance, attract investment and facilitate cross border trade. This project will consist of the following three main subcomponents:

Subcomponent 3.1: Assisting with the implementation of international tax standards on tax transparency and information exchangeIn recognition that exchange of information between tax administrations is the most effective way of combating international tax avoidance and evasion, Morocco joined the Global Forum on Transparency and Exchange of Infor-mation (GFTEI) in 2011. The Phase 1 peer review of Morocco which examines its legal and regulatory framework is currently underway. Morocco has also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) in 2013. The MAC is the most powerful global instrument available to counteract international tax evasion and avoidance as over 80 jurisdictions are participating to it including G20 countries. Besides exchange on request, the MAC also covers a broad range of other administrative co-operation tools, including automatic ex -change of information which has now emerged as a new global standard, assistance in the recovery of tax claims and opens the possibility of using tax information received for tax purposes to fight other financial crimes like money laundering and corruption. The Convention can be used for regional tax cooperation as it has been signed by both Morocco and Tunisia. Adherence to these international standards will enhance GoM’s reputation with in-vestors.

Activity 3.1.1: Reviewing the current exchange of information framework and practices, making recommen-dations and assisting with legislative and process changesActivity 3.1.2: Enhancing the effectiveness of Exchange of Information Unit Activity 3.1.3: Exploiting the Multilateral Convention on Mutual Administrative Assistance in Tax Matters Activity 3.1.4: Automatic Exchange of Information [AEOI] pilotActivity 3.1.5: Capacity building through staff assignment and participation at multilateral events(See Annex for details)

Subcomponent 3.2: Addressing Base Erosion and Profit Shifting [BEPS]Morocco has identified multinational enterprises tax planning strategies that exploit gaps and mismatches in tax rules to make profits ‘disappear’ for tax purposes as a major risk. The result can be that profits are shifted to loca-tions where there is little or no real activity but the taxes are low resulting in little or no overall corporate tax being paid. These tax avoidance strategies take advantage of a combination of features of home and host countries’ tax systems. When taxpayers (including ordinary individuals) see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers. Morocco has joined the OECD project to put an end to BEPS, together with many other developing countries and countries in transition. This subcomponent will enable Morocco to benefit from the solutions developed to address BEPS and provide Morocco with a voice in the decision making process. It will also assist Morocco to introduce a tax regime aligned to international best practice, provid-ing investors with a more transparent and stable business environment

Activity 3.2.1: Assistance in participating in the BEPS project rule setting and implementing appropriate mea-sures in Morocco Activity 3.2.2: Assistance to develop and implement a strategy on implementing an effective regime to address Transfer Pricing and other BEPS risks (OECD executed)Activity 3.2.3: Assistance to develop and implement an Advanced Pricing Agreement (APA) programActivity 3.2.4: Capacity building through participation at multilateral events (See Annex for details)

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Subcomponent 3.3: Revenue StatisticsAccurate, complete, current, consistent and reliable data are crucial to enhancing the effectiveness and efficiency of tax policy. The lack of sufficient and well-organized data limits the ability of the Moroccan authorities to quantify both the performance of the existing tax and customs system and the implications of introducing new policies. As a result, Morocco has expressed interest in participating in the new project that OECD and other partners are launch -ing with other countries in the region to produce standardized indicators on government revenues. This will result in GoM being better able to inform their tax and customs policy decisions and to improve their ability to mobilize domestic resources to support sustainable economic growth, facilitate regional trade and address inequality. More precisely, this information allows avoiding competition between these countries from a tax and non-tax perspec -tives (true for tariffs as for domestic taxation) ; harmonizing investment framework / climate ; improving consis -tency / between custom and tax legislations ; improving cooperation between customs and tax administrations The project involves the publication of Morocco’s government revenues in accordance with the methodology used for OECD countries.

Activity 3.3.1: Developing internationally comparable Revenue Statistics data, including customs data(See Annex for details)

Subcomponent 3.4: Project management and monitoringA Moroccan project coordinator and an OECD counterpart will jointly ensure all project activities and tasks are executed, coordination among all actors involved in project implementation, fulfilling and monitoring procurement and fiduciary requirements and audits, and monitoring and evaluation of project outcomes and intermediary re-sults.

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15. Key Indicators Linked to Objectives The following indicators are retained by components or subcomponents in view of the objectives above

Component 1: Regional customs connectivity (to be implemented by the World Bank)

Activity 1.1 Connected customs Operational customs data exchange channel between Morocco, France and one other Maghreb country functional

Customs agents and IT technicians trained on the use of mobile customs applications/ software

Activity 1.2 Border crossings and corridors Availability of temporary admission tracing tools in Morocco established.

Activity 1.3 Information, control and risk Outputs expected by ADII submitted.

Component 2: Facilitating trade through upgrading the institutional and regulatory environment for businesses (to be implemented by the World Bank)

Legal and regulatory review for the simplification and automation of operating procedures carried out

Government bodies and institutions supported (AMDL)

Trainings

Action plans to address binding constraints to the competitiveness of selected sectors in Nador adopted

Outputs expected by Portnet submitted

Component 3: Fiscal connectivity, effective tax sys-tems and improved transparency (to be implemented by the OECD)

Subcomponent 3.1: Assisting with the implementation of international tax standards on tax transparency and information exchange

Tax transparency and international tax co-operation as measured against international standards

Subcomponent 3.2: Addressing Base Erosion and Profit Shifting

Base Erosion and Profit Shifting addressed to a) in-crease corporate income tax and b) provide certainty for business

Subcomponent 3.3: Revenue Statistics Transparent revenue statistics available in interna-tionally comparable format

D. IMPLEMENTATION

16. Partnership Arrangements (if applicable)This proposal is based on a comprehensive 2012 World Bank report on infrastructure and trade facilitation in the

16

Maghreb. This diagnosis and set of proposals have been established with the Arab Maghreb Union (AMU) countries in connection with other development partners, namely the European Investment Bank, African Development Bank, Islamic Development Bank and the International Monetary Fund.

17. Coordination with Country-led Mechanism/Donor Implemented Activities In order to ensure coordination with other donor-implemented activities, consultations with Trade Facilitation experts at the European Union Delegation and USAID in Tunis took place in March 2015 to ensure complementarity of the respective projects. Complementarity is also ensured regarding the TransMaghreb project by the Union de la Mediterranée and the LogisMed project financed by the European Investment Bank.

The project proposed in this application complements the following current World Bank and OECD engagements in the region:

Economic Competitiveness Support Program (Development Policy Loan), supporting policy reform in the areas of trade logistics, economic governance, trade policy and investment climate (Morocco)

Morocco Urban Logistics, a technical assistance project with the objectives to (1) strengthen the knowl-edge capacity of the Moroccan Agency for the Development of Logistics and identify priority areas in Urban Logistics; (2) developing a roadmap for urban logistics in Morocco with a focus on the Casablanca area; (3) developing a toolkit for Urban Logistics, geared to developing regions

Morocco Education for Arab Youth Employment in the Logistics sector, a technical assistance project with AMDL with the objectives of improving the employability of Moroccan youth through the design and imple-mentation of a labor market information system that improves access to information for youth, govern-ment, private sector and education providers in the logistics sector, allowing for greater decision making power. This project is implemented in complementarity with the LogisMed observatory component exe-cuted by EIB.

Domestic resource mobilization project with Tunisia supported by OECD which has similar transparency and effectiveness objectives as component 3 of this proposal for Morocco, providing the basis for mutual learning and exchange of good practice.

18. Institutional and Implementation ArrangementsMaghreb Connectivity is a project with a regional dimension that will include both national and regional activities. Nevertheless, it needs to be coordinated by a single entity. In light of the regional dimension of the project coupled with this need for coordination, it was decided that the project should not be executed independently by each beneficiary country, and should be ISA-executed. Given the World Bank’s heavy involvement in the region in topics relevant to each of the activities to be financed, as described in Section 17, the Project will be ISA-executed with the OECD.

As the ISAs, the WBG and OECD will be in charge of the overall day-to-day implementation of the project. In particular, all procurement activities, financial management, disbursement monitoring and evaluation will be executed by the World Bank and OECD for their respective activities and according to their own procedures and guidelines. This is in line with the two institutions’ practices for regional approaches and TA projects with regional dimension. The country will be responsible for local coordination. The World Bank will ensure coordination of the regional dimension. The recipient country (Morocco) agrees with this procedure. The local coordination in Morocco will be undertaken at two levels: i) project Steering Committee; and ii) Operational Teams responsible for the execution of each sub-component of the local program.

The project Steering Committee will convene once per trimester. This advisory Committee will provide support to the ISAs in addressing important matters affecting the progress of the local program. It will comprise key public and private-sector stakeholders and will assure local appropriation, enable regular monitoring and accountability checks throughout project implementation.

The detailed composition of the Steering Committee for Morocco coordination is as follows: World Bank OECD Moroccan Customs Authority (ADII); Moroccan Tax Authority (DGI) Moroccan Agency for Development of Logistics (AMDL)

17

PortNet Ministry of Interior (Regional Investment Centers of Casablanca and Oriental Regions) Regional Development Agencies Nador West Med CREA National Confederation of Moroccan Enterprises/ Private sector federations

Regional coordination will be ensured by a consortium led by the World Bank, composed of the executing agencies, ADII and DGD, MoF and Tunisian Ministry of Investment and International Cooperation5, Portnet, AMDL and Re-gional Investment Centers (CRI) for Casablanca and Nador, Nador West Med and CREA. This consortium will meet twice a year to ensure project implementation is in line with Project Development Objectives as they relate to re-gional integration.

Operational Teams: Each subcomponent will be implemented in coordination with an operational team, led by the most relevant stakeholder and composed of all parties that have a role as laid out in each sub-component in the project description section of the proposal. Each activity of the component or subcomponents, will be commis-sioned according to ISA rules as typically one single assignment. The Operational Teams will work with the ISA for the scheduling of activities, drafting terms of reference, monitoring the work progress and performance of con-sultants and address any day-to-day operational issues as they arise in the implementation of the project. Opera-tional Teams will regularly inform the Steering Committee.

Component 1: Regional customs connectivity (World Bank-executed)

Operational Team Members

Activity 1.1 Connected customs World Bank, ADIIActivity 1.2 Border crossings and corridors World Bank, ADIIActivity 1.3 Information, control and risk World Bank, ADIIComponent 2: Facilitating trade through upgrading the institutional and regulatory environment for businesses (World Bank-executed)


Activity 2.1 Upgrading the legal and regulatory environment for the logistics sector

World Bank, ADII, AMDL, Min. of Transport and Equipment, Transport and Logistics Federation, CGEM

Activity 2.2 Maximizing the impact of the maritime Complex Nador West Med

World Bank, ADII, Agence Nador West Med, Regional Investment Center (CRI) Nador, Agence de l’Orientale, CGEM, Private sector federations

Activity 2.3 Improving the competitiveness of businesses and trade in Casablanca

World Bank, ADII, Agence Nador West Med, Regional Investment Center (CRI) Casablanca, Agence de l’Orientale, CGEM, Private sector federations

Component 3: Effective Tax System Design (OECD-executed)


All subcomponents OECD, World Bank, MoF/ DGI

The following risks are to be addressed in the implementation:

Risk Rating Relevance for which activity

Mitigation Measure

Cross-country coordina-tion of recipient entities

Substantial Activity 1.1.1 (Con-nected customs/TA

The project will mitigate the risk by relying on strong engagement with partners inside the

5 When the congruent project in Tunisia is approved.

18

as well as affected agen-cies in neighboring coun-tries.

support to regional data exchange imple-mentation)

project countries as well as external partners (EU).

Overlap with other inter-national agencies in im-plementing the project.

Moderate All activities The project will coordinate with relevant im-plementing agencies, so as to identify areas of complementarities. The projects will also li-aise with the donor coordination mechanism at the Ministry of Planning and International Cooperation.

19. Monitoring and Evaluation of ResultsRegular and in-depth monitoring of progress and evaluation of results and outcomes is essential for the success of the project. The ISAs will be responsible for the overall monitoring and evaluation of the project with the support of the technical experts and the Steering Committee.

E. PROJECT BUDGETING AND FINANCING20. Project Financing (including ISA Direct Costs6)

Cost by Component Transition Fund(USD)

Country Co-Financing

(USD)

Other Co-Financing

(USD)

Total(USD)

Component 1: Regional customs connectivity (to be implemented by the World Bank)(a) Activity 1.1: Connected customs

(b) Activity 1.2: Border crossings and corridors

(c) Activity 1.3: Information, control and risk

225,000

225,000

375,000

0

800,000 (parallel)7

400,000(parallel)

0

0

0

225,000

1,025,000

775,000

Component 2: Facilitating trade through upgrading the institutional and regulatory environment for busi-nesses (to be implemented by the World Bank)(a) Activity 2.1: Upgrading the legal and regulatory

environment for the logistics sector (b) Activity 2.2: Maximizing the impact of the mar-

itime complex Nador West Med (c) Activity 2.3: Improving the competitiveness of

businesses and trade in Casablanca(d) Activity 2.4: Trade Portal (PortNet)

150,000

500,000

650,000

200,000

0

0

0

200,000

0

0

0

0

150,000

500,000

650,000

400,000Component 3: Fiscal connectivity (to be implemented by the OECD)(a) Sub-component 3.1: Assisting with the imple-

mentation of international tax standards on tax transparency and information exchange

(b) Sub-component 3.2: Addressing base erosion and profit shifting

(c) Sub-component 3.3: Revenue statistics(d) Sub-component 3.4: Project management and

monitoring

300,000

309,000

130,000280,000

0

0

00

0

0

00

300,000

309,000

130,000280,000

Total Project Cost 3,344,000 1,400,000 0 4,744,000

6 ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project. Also see Paragraph 47 of the Operations Manual.7 These items constitute parallel financing provided by the beneficiary agency (ADII), and are scheduled in its approved investment plan. They do not include estimates of in-kind financing such as staff made available to support or participate in the activities.

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For information (proposal adopted in first instance).Cost by Component Transition

Fund(USD)

TF up-date

Country Co-Financ-ing (USD)

Other Co-Financing

(USD)

Total(USD)

Component 1: Regional customs connectivity (to be implemented by the World Bank)(d) Activity 1.1: Connected customs

(e) Activity 1.2: Border crossings and corri-dors

(f) Activity 1.3: Information, control and risk

200,000

200,000

350,000

+25,000

+25,000

+25,000

0

800,000 (parallel)400,000(parallel)

0

0

0

225,000

1,025,000

775,000

Component 2: Facilitating trade through upgrading the institutional and regulatory environment for businesses (to be imple-mented by the World Bank)(e) Activity 2.1: Upgrading the legal and

regulatory environment for the logistics sector

(f) Activity 2.2: Maximizing the impact of the maritime complex Nador West Med

(g) Activity 2.3: Improving the competitive-ness of businesses and trade in Casablanca

(h) Activity 2.4: Trade Portal (PortNet)

150,000

400,000

650,000

200,000

+100,000 *

0

0

0

200,000

0

0

0

0

150,000

500,000

650,000

400,000

Component 3: Fiscal connectivity (to be im-plemented by the OECD)(e) Sub-component 3.1: Assisting with the

implementation of international tax standards on tax transparency and in-formation exchange

(f) Sub-component 3.2: Addressing base erosion and profit shifting

(g) Sub-component 3.3: Revenue statistics(h) Sub-component 3.4: Project manage-

ment and monitoring

300,000

220,000

130,000280,000

+89000

0

0

00

0

0

00

300,000

309,000

130,000280,000

Total Project Cost 3,080,000 264,000 1,400,000 0 4,744,000* the additional resource will focus on the specific needs of the Jerada within the context of the improvement of the connectivity of the Oriental region and the impact of port investment at Nador West Med.

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21. Budget Breakdown of Indirect Costs Requested (USD) Description Amount (USD)

For grant preparation, administration and implementation support:World Bank 165,000OECD* 68,513

Total Indirect Costs 233,513

* Indirect cost for OECD is a charge applicable to all voluntary contributions accepted by the Organisation since 1 March 2005 further to a Council Resolution. A new cost recovery policy was adopted by Council in November 2009. The rate applicable to this voluntary contribution is 6.3%.

For information (proposal adopted in first instance).

Description Amount (USD)For grant preparation, administration and implementation support:

World Bank 150,000OECD* 62,529

Total Indirect Costs 212,529

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F. Results Framework and MonitoringAll monitoring and evaluation will be executed by the World Bank and OECD for their respective activities and according to their own procedures and guidelines.

Project Development Objective (PDO: The objective of the project is to streamline the chains of international trade between the Maghreb countries and with their major trading partners, to increase cooperation among border management agencies, to strengthen capacities in economic governance, and to build effective and transparent tax systems.

PDO Level Results Indicators*

Unit of Measure Baseline

Cumulative Target Values**

Frequency

Data Source/

Methodol-ogy

Responsibility for Data Col-

lection

Description (indicator

definition etc.)YR 1 YR 2 YR3

YR 4

YR5

Component 1 (World Bank)Indicator 1.1: Opera-tional customs data exchange channel be-tween Morocco and Tunisia functional

Binary No No Yes One time ProjectReports

ISAs

Indicator 1.2: Customs agents and IT techni-cians trained on the use of mobile cus-toms applications/ software

Quantitative 0 50 50 One time Project Re-ports

ISAs

Indicator 1.3: Tempo-rary admission tracing tools in Morocco avail-able


ISAs

Component 2 (World Bank)Indicator 2.1: Outputs expected by ADII and Portnet submitted


ISAs

Indicator 2.2: Regula-tory reviews carried out


ISAs

Indicator 2.3: Govern-ment bodies and insti-tutions supported (AMDL)

Binary No No Yes One time Project Re-ports

ISAs AMDL to re-ceive support services aimed at increasing

22

their capacity to carry out regulatory and legal reviews of the business environment for the logistics sector.

Indicator 2.4: Action plans to address bind-ing constraints to the competitiveness of selected sectors in Nador adopted


ISAs

Indicator 2.5: Reform roadmap formally launched for modifying key regulations and procedures identified as main bottlenecks for enhancing the competi-tiveness of Casablanca economy


ISAs

Indicator 2.6: Output expected by Portnet submitted


ISAs

Component 3 (OECD)

Indicator 3.1: Tax transparency and inter-national tax co-opera-tion as measured against international standards

Qualitative and quantitative

In 2015 Phase 1 Peer Review of Global Forum will be com-pleted

N/A N/A Inter-na-tional stan-dards on tax trans-parency met

Annually Global Forum on Trans-parency and Exchange of Information for Tax Pur-poses Re-ports

Global Forum and DGI

www.oecd.org/tax/trans-parency/

International standards as measured by Phase 1 and Phase 2 peer review of the Global Forum

Indicator 3.2: Tax transparency and inter-

Quantitative Corpora-tion tax

N/A a) Corpo-

a) Cor-

Annually DGI corpo-rate income

DGI a) Corporation tax increases as

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national tax co-opera-tion as measured against international standards

yield (approxi-mately 17% of total tax revenues)

Zero unilateral Advanced Pricing Agree-ments (APA) in place

b) 1 APA opera-tional

rate income tax in-creased and broad-ened (Base-line plus 10%)

b) 2 APAs opera-tional (cumu-lative)

po-rate in-come tax in-creased and broadened (Base-line plus 10% cumu-lative)

c) 3 APA oper-a-tional (cu-mula-tive)

tax data profit shifting risks are ad-dressed

b) Unilateral APA’s provide certainty for business

Indicator 3.3: Trans-parent revenue statis-tics published in inter-nationally comparable format

Qualitative Statistics not pub-lished in interna-tionally compara-ble for-mat

Revenue statistics published according to interna-tionally compara-ble criteria

Repeat of 2016

Re-peat of 2017

Annually Revenue Statistics publications

OECD/DGI Publication of statistics is measure of transparency and interna-tional compara-bility

INTERMEDIATE RESULTS (Component 2)

Intermediate Result (Component Two):Note: No intermediate results previewed for components one due to the short duration of the project.

Intermediate Result indicator 2.1: Legal and regulatory roadmap for the logistics sector is endorsed by the AMDL.

Binary

No Yes Yes One timeProjectReports

ISAs

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Intermediate Result indicator 2.2: Assess-ment and prioritization of binding constraints to competitiveness in Nador carried out.

Binary

No No Yes One timeProjectReports

ISAs

Intermediate Result indicator 2.3: Number of workshops and focus groups organized with the CREA and carried out for identifying and assessing binding con-straints to competitive-ness

Numerical

One timeProjectReport

ISAs

Intermediate Result indicator 2.: Assess-ment report on simplifi-cation of key operating procedures endorsed by the CREA

Binary

No No No Yes One timeProjectReport

ISAs

INTERMEDIATE RESULTS (COMPONENT 3)

Sub Component 3.1: Assisting with the implementation of international tax standards on tax transparency and information exchange

PDO Level Re-sults Indica-

tors*

Unit of Measure

Base-line

Cumulative Target Values Frequency

Data Source/

Methodol-ogy

Responsibility for Data Col-

lection

Description (indicator definition etc.)

2016 2017 2018

(a) Activity 3. 1.1: Reviewing the current framework and practices, mak-ing recommen-dations and assisting with legislative and process changes

Qualita-tive

Global Forum Phase 1 peer review 2015

Proceed to Global Forum Phase 2 peer review

n/a Legal and institu-tional reforms are adopted

According to Global Forum timetable

Project Implemen-tation Reports

Global Forum/DGI

Progress to Global Forum Phase 2 indi-cates Morocco has met international stan-dard on EOI.

25

(b) Activity 3.1.2: Enhancing the effectiveness of Exchange of Information (EOI) Unit

Quanti-tative and Qualita-tive

Zero EOI re-quests initi-ated

10 EOI requests initiated

10 EOI re-quests initi-ated(cumu-lative)

10 EOI requests initiated (cumula-tive)


DGI/Global Forum Reports

EOI requests and tax reassessments based on foreign source information are indica-tive of effective EOI operations

(c) Activity 3.1.3: Exploiting the Multilateral Convention on Mutual Adminis-trative Assis-tance in Tax Matters (OECD executed)

quanti-tative and qualita-tive

Con-vention signed in 2013 but not yet ratified

MAC ratified by par-liament

N/A N/A Assessed annu-ally


DGI MAC ratification will allow broader coop-eration with all jurisdictions covered by the Convention and serve as a basis for Automatic exchange. (http://www.oecd.org/ctp/exchange-of-tax-infor-mation/conventiononmutualadministra-tiveassistanceintaxmatters.htm)

(d) Activity 3.1.4: Automatic Exchange of Information Pilot

quanti-tative

No infor-mation shared auto-mati-cally

Signa-ture of the Mul-tilateral Compe-tent Author-ity Agree-ment for AEOI of Financial Account Informa-tion http://www.oecd.org/tax/ex-change-of-tax-in-forma-tion/multilat-eral-compe-tent-au-thority-

Legisla-tion in place to permit auto-matic ex-change

Informa-tion ex-change takes place on automatic basis

Assessed annu-ally



Success criterion is information exchange of financial account information com-pleted on an automatic basis and tax re-assessment of unreported income

26

http://www.oecd.org/tax/exchange-of-tax-information/multilateral-competent-authority-agreement.htm


http://www.oecd.org/ctp/exchange-of-tax-information/conventiononmutualadministrativeassistanceintaxmatters.htm



agree-men-t.htm

(e) Activity 3.1.5: Capacity building through staff assignment and participa-tion at multilat-eral events

quanti-tative

N/a 2X offi-cials trained and knowl-edge opera-tional-ized on 2 X cour-ses to be deter-mined

2X officials trained on 2 X courses to be deter-mined

2X offi-cials trained on 2 X cour-ses to be deter-mined

Assessed annu-ally



Skills acquired support other sub compo-nents

Sub Component 3.2:Addressing Base Erosion and Profit Shifting

(a) Activity 3.2.1: Assistance in participating in the BEPS project rule setting and implementing appropriate measures in Morocco

quanti-tative

BEPS actions to be final-ized end 2015

DGI adopts 1 key BEPS priority action (tbc)

DGI adopts 2 key BEPS priority actions(tbc) cumu-lative

DGI adopts 3 key BEPS priority actions (tbc)

cumula-tive

Assessed annu-ally


DGI Participation in BEPS project leads to adoption of key actions for DGI.

(b) Activity 3.2.2: Assistance to develop and implement a strategy on implementing an effective regime to address Transfer Pricing and other BEPS risks (OECD executed)

qualita-tive

Risk assess-ment of profit shifting in 2015, base-line tbc

10 % increase in audits on BEPS issues.

10 % in-crease in au-dits on BEPS issues, cumu-lative

10 % increase in audits on BEPS issues, cumula-tive.

Assessed annu-ally


DGI Audits lead to adjustments and thus in-creased revenues

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(c) Activity 3.2.3: Assistance to develop and implement an Advanced Pric-ing Agreement (APA) program

(see also above PDO level 1 indicator)

quanti-tative

Legisla-tion and rules not yet fully in place

Legisla-tion and regula-tion in place to facilitate APA program

N/A N/A Assessed annu-ally


DGI APAs between DGI and companies

(d) Activity3.2.4: Capacity build-ing through participation at multilateral events

quanti-tative

2 x offi-cials in 2 X cour-ses tbc

2 x officials in 2 X courses tbc

2 x offi-cials in 2 X courses tbc

Assessed annu-ally


DGI Skills/knowledge acquired support other sub components

Sub Component 3.3: Revenue Statistics

(a) Activity 3.3.1: Capacity to develop interna-tionally compa-rable Revenue Statistics data, including cus-toms data.

Qualita-tive/

Quanti-tative

N/A 2 X offi-cials on place-

ment in OECD

(rev stats teams)

Com-pletion of sta-tistics from

1990 to 2016

Expansion of cover-

age to include

local authori-ties taxa-

tion

Annually Project Implemen-

tation Reports

DGI Skills and knowledge required to publish revenue statistics.

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Annex: Detailed project description, Component 3: Fiscal connectivity, effective tax systems and improved transparency (to be implemented by the OECD)Sub Component 3.1: Assisting with the implementation of international tax standards on tax transpar-

ency and information exchange

In recognition that exchange of information between tax administrations is the most effective way of combat-ing international tax avoidance and evasion, Morocco joined the Global Forum on Transparency and Exchange of Information (GFTEI) in 2011. The Phase 1 peer review of Morocco which examines its legal and regulatory framework is currently underway. In the event there is no serious legal impediment that can prevent Mo-rocco from moving to the next step of the peer review process, the Phase 2 review, which assesses the practi -cal ability of a country to exchange information (EoI) will be launched in 2015.

Morocco has also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) in 2013. The MAC is the most powerful global instrument available to counteract international tax evasion and avoidance. Besides exchange on request, the MAC also covers a broad range of other administra -tive co-operation tools, including automatic exchange of information which has now emerged as a new global standard, assistance in the recovery of tax claims and opening the possibility of using tax information re -ceived to fight other financial crimes like money laundering and corruption.

Furthermore, Morocco has asked to participate in a pilot project on Automatic Exchange of Information (AEOI) and the Global Forum will support this process to build the country’s readiness for AEOI and to assist it in implementing AEOI. This is a three year process designed to enable Morocco to build the legal and tech -nical infrastructure needed to benefit from the new international standard on AEOI.

The OECD will assist Morocco with the implementation of the international tax transparency and information exchange standards including preparation for the Global Forum Phase 2 review, and assistance to maximize the benefits of effective implementation of the MAC in the areas of exchange of information, assistance in tax collection, exchange of tax intelligence, bilateral/multilateral simultaneous tax examinations and joint audits covering both direct and indirect taxes etc. It will also explore under what conditions the information re -ceived may be shared with law enforcement and judicial authorities to fight money laundering and corrup -tion. Support will also be provided to Morocco through the AEOI pilot project and a developed country pilot partner.

The EOI component of the project will support the following activities:

Activity 3 1.1: Reviewing the current framework and practices, making recommendations and assisting with legislative and process changes

The Global Forum’s phase 1 peer review of Morocco (legal and regulatory framework) is underway and the report will be published in May 2015. Subject to the conclusion of the phase 1 report, the phase 2 peer review focussing on the practical implementation of the EoI standard is due to be launched in the second quarter 2015. Morocco has been offered pre-phase 2 technical assistance from the Global Forum, consisting of assess -ing the practice of exchange of information in Morocco in advance of the phase 2 peer review to identify any areas that need to be strengthened. The phase 2 peer review assesses the implementation of international tax standards on tax transparency and information exchange in practice. The aim is to see how the information keeping requirements as well as the access powers of the competent authority apply in practice to an effect-ive exchange of information. An on-site visit would be undertaken to

1) Discuss the recommendations, if any, of the phase 1 peer review report and steps to be taken to fully comply with the standard;

2) Meet with relevant government agencies which are obliged to maintain and to provide the information to the competent authority upon request; and

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3) Meet with the tax administration to discuss the use of its access powers to gather information in practice and the handling of EoI requests received from treaty partners during the review period.

A report will be sent to Morocco to provide an overview of the issues identified during the pre-Phase 2 onsite visit and suggestions to be considered in advance to Moroccan Phase 2 peer review

Activity 3.1.2: enhancing the effectiveness of Exchange of Information Unit

This activity will help the Moroccan authorities enhance the Exchange of Information (EoI) Unit and design its operating model.

EoI can only take place between competent authorities of the governments concerned or their authorized representatives. This ensures that the rules applicable to EoI (and in particular the confidentiality of informa-tion received or exchanged) are respected and consistently applied. The competent authority acts as a central contact point for the competent authorities of treaty partners for EoI purposes. The EoI Unit implements and manages the EoI provisions of the tax treaties in support of the competent authority. Information subject to EoI ranges from a simple registered address of a taxpayer to actual examination or audit of taxpayers with complex legal structures. To respond to a foreign request for information, the EoI Unit will request the assist-ance of the Revenue District Offices (RDO – Centre des impôts) to obtain information about a taxpayer or his/her transactions. Since most EoI requests are made pursuant to an on-going examination of cross-border transactions, information sought by a foreign tax authority may not already be in the possession of the Unit or the RDO concerned thereby requiring the RDO to conduct an audit or examination of the domestic taxpayer.

Morocco will also want to use EoI instruments to request information from foreign competent authorities when information that is foreseeably relevant to a particular audit is located in a foreign country. The Moroc -can examiner may request this information from a foreign competent authority by channelling such requests through the EoI Unit. An effective EoI unit will enable Morocco’s tax authorities to obtain the needed informa-tion in a timely and efficient manner.

All information exchanged by the EoI unit must be subject to strict controls and safeguards to ensure that the information is used only in an authorized manner, consistent with national provisions on privacy and data protection. At a minimum, exchanged information must be treated as protected by the same confidentiality provisions as apply to similar information from domestic sources obtained by the receiving Unit.

Given the complexity and sensitivity of EoI related issues and the longstanding expertise accumulated by the Global Forum on tax transparency and information exchange, the OECD will assist GoM through:

• Identifying the most suitable type of delegation of competent authority in the Moroccan context; • Providing advice on how to set-up an EoI Unit based on the various existing models, including advice

on: o Training staff working in the EoI Unit;o End-to-end processing of incoming and outgoing requests (i.e. how to make a request for

information and respond to a request);o Checklists and model templates for an efficient EoI programme; o Best practices to ensure the confidentiality of exchange of information (exchange on paper

or electronic exchange); o Training on how to raise the awareness of tax examiners about the potential of exchange of

information to improve their audits;o Setting-up a monitoring system of EoI;o Building Statistics on EoI and evaluation reports.

Activity 3.1.3: Exploiting the Multilateral Convention on Mutual Administrative Assistance in Tax Matters

A jurisdiction cannot exchange information for tax purposes unless it has an international agreement for do -ing so. This agreement must be aligned with the international standard and in force. Morocco has signed the

30

Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) in 2013. With more than 80 participating jurisdictions, the MAC is the most global instrument available to exchange information for tax purposes. It provides Morocco with opportunities for all possible forms of administrative co-operation between the Parties in the assessment and collection of all taxes, in particular with a view to combating tax avoidance and evasion. This co-operation ranges from exchange of information, including on request, spon-taneous and automatic exchanges, to the assistance in the recovery of tax claims.

The Convention also provides for the possibility of sharing of information obtained for tax purposes by tax authorities with law enforcement and judicial authorities if certain conditions are met. It will allow fighting tax crimes and other financial crimes more effectively by allowing tax and law enforcement agencies to co -operate more closely as recommended in the OECD “Oslo Dialogue”, in which Morocco participates, to pro -mote a whole of government approach to tackling financial crimes and illicit flows.

Assistance would be provided to Morocco to maximize the benefits of an effective implementation of the MAC. This activity includes 2 workshops. The first will be held in the first year to raise the awareness of the bene-fits of the MAC to fight tax avoidance and evasion, get assistance for the collection of tax claims and identify potential legislative changes required to fully take advantage of the Convention. The second will be held in the third year to discuss more in-depth simultaneous tax examinations and joints audits. Case studies will illus-trate how exchange of information can be used to detect tax avoidance and evasion. Best country practices to protect the tax confidentiality of information exchanged will be shared.

Activity 3 1.4: AEOI pilot

During the Global Forum plenary meeting of October 2014 in Berlin, Morocco expressed its wish to particip-ate in a pilot project of AEOI. AEOI is the next stage of the global move towards greater tax transparency. The Global Forum has been mandated by the G20 to monitor the implementation of the newly agreed global standard on AEOI and ensure, with other international organisations, that developing countries can overcome obstacles to participation in the emerging new standard. One of the actions being taken to help developing countries implement the standard is to conduct pilot projects in a number of these countries on a voluntary basis. These pilot projects are collaborative efforts between the Global Forum and other organisations such as the World Bank Group, the Pilot country and a developed country that has agreed to partner with the Pilot country.

For a jurisdiction to effectively engage in AEOI on financial information, it must have in place, as a minimum, four essential components: (i) a legal basis for exchange; (ii) rules that require financial institutions to report information and follow due diligence procedures consistent with the Standard; (iii) administrative and IT infrastructure to collect and exchange information under the Standard and (iv) confidentiality and data safe-guards. Each component is critical; therefore all four must be in place. The extent and scale of assistance needed under each heading varies from country to country depending on the extent to which these compon-ents (e.g. legislation, IT capacity, and specialised staff) are already in place and the size and composition of its financial sector.

It is intended that a pilot project be undertaken in Morocco during the period 2015-2017. The pilot project will employ a step-by-step approach to implementation. It will be a partnership between the Global Forum, the World Bank Group, Morocco and a Developed country. France has indicated its interest in participating. The intention is that over time, Morocco would reach full implementation in accordance with the Standard and start exchanging information on financial accounts on an automatic basis. Therefore, this activity will consist of series of training seminars in Morocco, advice on legislation and IT requirements as well as on the effective use of information received.

An initial questionnaire would be prepared to assess Moroccan current legal framework, personnel capability and IT infrastructure in order to understand and to identify the capacity building steps required to reach full implementation of the Standard. Following the initial questionnaire, a more detailed study of the country would be undertaken in order to give in depth consideration to which areas of capacity building in the tax

31

administration must be addressed in order to fully implement the Standard. The study will examine the legal framework governing the availability and access to information by the tax administration; the nature and sophistication of the financial industry; the availability of information held by financial institutions through anti-money laundering obligations or other law; the existence of current reporting by financial institutions to the tax administration; the legal framework and practice governing confidentiality and data safeguards; the existing information technology capacity in the tax administration; and the experience of tax administration with schema and secure transmission methods. The most effective way to conduct this study will be to under -take on-site visit to Morocco by the Global Forum Secretariat and the World Bank Group. Following the on-site visit detailed terms of reference for the project setting out the responsibilities of the participants will be developed and milestones describing concrete actions to be completed within specified periods will be agreed.

Activity 3. 1.5: Capacity building through staff assignment and participation at multilateral events

This activity will provide GoM with the resources needed to facilitate the participation of two Moroccan offi-cials per year to the following multilateral events:

Foundation and advanced course on AEOI; Assessor training and competent authority meetings.

This activity will also enable the GoM to propose a Moroccan official to be assigned as “Staff on loan” to the Secretariat of the Global Forum for 6 months. The Staff on loan will assist in preparing a tailored “Train the Trainer Pilot” course to raise the awareness of Moroccan tax officials and train tax auditors on the benefits of all forms of EoI for both direct and indirect tax purposes.

Sub Component 3.2: Addressing Base Erosion and Profit Shifting

Base erosion and profit shifting (BEPS) refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ‘disappear’ for tax purposes or to shift profits to locations where there is little or no real activity but the taxes are low resulting in little or no overall corporate tax being paid. BEPS strategies take advantage of a combination of features of home and host countries’ tax systems. Corporation tax is levied at a domestic level. The interaction of domestic tax systems means that an item of income can be taxed by more than one jurisdiction, thus resulting in double taxation. The interaction can also leave gaps, which result in income not being taxed anywhere. Some of the schemes used are illegal and tax administrations are fight-ing them.

These strategies distort competition: businesses that operate cross-border may profit from BEPS opportunit-ies, giving them a competitive advantage over enterprises that operate at the domestic level. They lead to inefficient allocation of resources by distorting investment decisions towards activities that have lower pre-tax rates of return, but higher after-tax returns. Finally, there is an issue of fairness: when taxpayers (includ -ing ordinary individuals) see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers.

The OECD has launched a project to put an end to BEPS, which is strongly supported by the G8 and G20. This component will enable Morocco to benefit from the solutions developed to address BEPS and provide Mo-rocco with a voice in the decision making process.

Activity 3. 2.1: Assistance in participating in the BEPS project rule setting and implementing appropriate measures in Morocco

The overall aim is to identify where changes could be made, consistent with the BEPS Action Plan, to improve Morocco’s ability to address base erosion and profit shifting. OECD experts will examine common techniques used by multinational enterprises in Morocco to reduce their tax burden, with a particular emphasis on tax avoidance in international transactions, and how the different techniques to erode the taxable base and/or to shift profits to where they are subject to a more favourable treatment can be combined. They will focus on

32

common planning techniques used in relation to financing activities, holding activities and supply chain man -agement.

This activity will strengthen the tax authority’s capacity to protect the tax base against aggressive tax plan -ning of multinationals as well as profit shifting through transfer pricing or other means, while avoiding double taxation that would be detrimental to the overall business climate.

Morocco has recognised this as a major concern and is undertaking a review of risks. As recognition of these concerns, Morocco has agreed to participate directly in the OECD/G20 BEPS project. This will entail attending meetings of the Committee on Fiscal Affairs (CFA, the key decision-making body of the BEPS Project) and of its subsidiary bodies (the working groups responsible for carrying out the technical work).

Through this direct participation, Morocco will be able to provide input at the working and decision-making levels of the BEPS Project, and to ensure that the specific concerns and context of Morocco are taken into account in the development of solutions to counter BEPS. Not only will Morocco be able to directly input and gain an improved understanding of the BEPS process, but OECD members and BEPS Associates will also be exposed first-hand to accounts of the specific perspectives of, and challenges faced by, developing countries such as Morocco.

The OECD will provide technical support to Morocco on the technical issues being addressed under the BEPS Project and also financial support with travel costs of attending the OECD CFA and Working Party meetings in Paris.

In addition regionally-based networks of tax policy and administration officials are being set up by the OECD for an ongoing and more structured dialogue process with a broader group of developing countries on the BEPS Project. A CREDAF technical working group is taking forward this work for French speaking countries and the OECD will provide financial assistance to Morocco to ensure its effective participation in this working group. Countries that are directly participating in the BEPS project, such as Morocco, will play a key role in these networks acting as a direct conduit to the BEPS Project on the issues and comments raised by their colleagues through the regional networks.

Activity3. 2.2: Assistance to develop and implement a strategy on implementing an effective regime to ad-

dress Transfer Pricing and other BEPS risks

At the request of several governments (such as Colombia, Ghana, Kenya, Rwanda, Tunisia and Vietnam), the OECD, together with the World Bank Group, has provided assistance in the application of the OECD’s norms and standards, primarily in the area of transfer pricing but also in other BEPS issues. Similar assistance will be provided to Morocco and as with the assistance provided to other countries the design of the programme will be demand led. Specifically, the OECD will assist Morocco with the policy and administrative issues that the government faces in increasing their transfer pricing audit capacity. The OECD will also help Morocco to develop and implement a strategy from an administrative perspective – where to start from and how to build the administrative capacity on transfer pricing issues effectively, especially with scarce resources.

The OECD will assist with building the capacity of tax officials on the most significant legal and practical is -sues to be taken into account when auditing multinationals including those related to the creation and legal significance of a multinational enterprise (MNE), the tax principles underlying the operation of an MNE, tax avoidance and anti-avoidance strategies, the operation of tax treaties, an introduction to transfer pricing and thin capitalisation issues, the relevant administrative provisions, information requirements and the audit process itself in order to facilitate the work of tax examiners who may have only limited expertise. It will fa -miliarise government officials with the “best practice” audit approaches that are adopted to deal with these entities and to discuss strategies for auditing the international aspects of MNE, with a particular focus on transfer pricing. It will also provide government officials with knowledge on the value chain of the key busi -ness sectors in Morocco as understanding these value chains is critical for identifying and effectively address -ing transfer pricing risks in Morocco.

OECD support will feature:

33

• Adoption of a risk and needs assessment approach to diagnose Morocco’s capacity-building needs and its capacity to adopt an effective transfer pricing regime. This is supported by a “Transfer Pricing Needs Assessment Tool”;

• Assistance and advice on policy, regulatory and administrative issues i.e. introducing transfer pricing simplification measures (such as safe harbours for low value transactions) and measures designed to assist taxpayers comply with transfer pricing rules;

• Assistance in support of transfer pricing capacity building built on the extensive training material that has been developed, based on practical case-studies on issues of particular relevance to develop-ing countries;

• Assistance in building the tax administration’s knowledge on the value chains of key business sectors in Morocco through training delivered by industry experts.

• In-house training strengthened by a “Train the Trainer” programme.

Activity 3. 2.3: Assistance to develop and implement an Advanced Pricing Agreement (APA) programme

Morocco wishes to introduce an APA programme, a method to provide a more certain and predictable invest-ment climate for business. This will be one of the first substantive APA programmes in the region. The OECD and World Bank Group are providing assistance in the introduction of APA programmes in other countries and the lessons learned will assist Morocco with the policy and administrative challenges in introducing APA procedures.

OECD will provide assistance and advice on regulatory and administrative issues to implement Morocco’s APA legislation including:

1) Drafting APA guidelines and procedures 2) Advice on the creation of an APA staffing structure within the tax administration

Activity 3. 2.4: Capacity building through participation at multilateral events

The OECD will fund the participation of two Moroccan Ministry of Economy and Finance officials at two OECD Global Relations events per year. This activity will enable Morocco to facilitate the participation of officials yearly to Transfer Pricing and other BEPS related events concerning International Tax Avoidance; Auditing Multinational Enterprises; Tax Treaties; Transfer Pricing and Customs Valuation.

Sub Component 3.3 Revenue Statistics

Accurate, complete, current, consistent and reliable data are crucial to enhancing the effectiveness and effi-ciency of tax policy. The lack of sufficient and well organized data limits the ability of the Moroccan authori -ties to quantify both the performance of the existing tax system and the implications of introducing new poli -cies. Analytical complexities, coupled with limited institutional and human capacity to undertake advanced analysis, limit the government in assessing the consequences of changes in the tax system. Clear understand-ing and assessment of the impact of various tax design scenarios is especially critical at the present time.

Activity 3.3.1: Developing internationally comparable Revenue Statistics data

As a result, Morocco has expressed interest in participating in the new project that OECD and other partners are launching with African countries aimed at providing countries in the region with the same statistical indi-cators on government revenues that are available to OECD tax policy makers. This will result in Morocco be -ing better able to inform their tax policy decisions and to improve their ability to mobilize domestic resources to support sustainable economic growth and address inequality. The project involves the publication of Mo-rocco’s government revenues in accordance with the methodology used for OECD countries. This will enable comparison between African countries participating in the project, as well as with all OECD countries, and those countries included in the OECD’s Latin American and Caribbean Revenue Statistics and Asian Revenue Statistics publications. The objective is to provide these statistics in a regional publication and database, as the OECD has already done for these other regions.

34

These statistics will enable Morocco to identify and compare the relative importance of various sources of government tax revenue and provide a basis for tax policy analysis. One of the main advantages of the OECD Revenue Statistics methodology is that it has been developed by and for tax policymakers, which makes it a tailor-made tool for decisions on tax policy. The international data comparisons in the database will provide a detailed information base for Morocco’s fiscal performance from both a static and a dynamic (over time) per-spective. As a result, they will provide tax policy officials with a foundation for informed dialogue about better policy making in respect of the overall size of the tax burden, the share of different taxes in the tax mix, set -ting tax rates and thresholds for individual taxes, and the attribution of taxes by level of government.

The Revenue Statistics database will contain comparative statistics identifying the following indicators:• Overall tax burdens as measured by tax to GDP ratios;• The tax mix; i.e. the distribution of the total tax take by the main types of tax – e.g. income taxes, so -

cial security contributions, taxes on general and specific consumption, property taxes and tax rev-enues related to natural resources;

• The share of tax revenues attributed to the different levels of government i.e. federal or central, state, local and social security.

Morocco will i) facilitate the collection of tax and other government revenue data for the period beginning in 1990 in accordance with the OECD classification and with the support of the OECD Secretariat; ii) co-operate in the resolution of classification problems; iii) verify and validate the final data before the publication of the database. Following completion of the provision of the data for this period, future efforts will focus on main -taining this database.

As part of the project, the GoM will assign two Moroccan officials to the OECD as “staff on loan” for three months each (or alternatively one person for six months) to work on developing the revenue statistics data-base. This activity will also enable the GoM to facilitate the participation of two Moroccan officials per year at two annual Statistical events. Missions of OECD experts will allow statisticians to receive help locally.

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