Moroccan Finance Ministry Pushes for Tobacco Price Increases Amid Stagnant Tax Revenues

Morocco’s Ministry of Economy and Finance is exerting pressure on tobacco companies to raise cigarette prices following disappointing revenue collections from the Domestic Consumption Tax (TIC) on manufactured tobacco. Sources within the ministry indicate that these tax revenues have fallen below expectations, prompting urgent action.

An inter-ministerial committee, tasked with overseeing tobacco price adjustments, convened an extraordinary meeting last week to address the issue. The committee revealed that several tobacco firms, particularly those selling premium cigarette brands, have opted to freeze prices in order to absorb the increased tax burdens introduced under the 2022-2026 fiscal reform plan. This decision has significantly hindered the anticipated growth in tax revenue.

A subsequent meeting is scheduled for next week, where the Ministry of Economy and Finance plans to negotiate with tobacco companies on price increases. The government is seeking an agreement to hike prices by 1 to 2 dirhams per pack, set to be implemented on January 1, 2025.

During a November meeting, ministry officials expressed concerns over pricing discrepancies in the market. While budget cigarette brands have raised their prices, premium brands have held their prices steady, causing what officials described as "competitive distortions." In fact, imported premium cigarette brands are currently priced lower than some local budget brands, exacerbating the situation.

The 2025 Finance Bill, which is awaiting approval, projects a tobacco tax revenue of 13.7 billion dirhams ($1.33 billion), an increase from the 12.5 billion dirhams expected in 2024. The Moroccan government has come to rely on excise taxes as a stable revenue source to fund its budget and reduce the volatility of its tax collections.

As the country’s progressive tax program moves toward its 2026 conclusion, ministry officials emphasize the necessity of boosting tobacco tax revenues. The government’s ongoing negotiations with tobacco companies are seen as a critical step in achieving these fiscal goals. The ministry is expected to finalize its recommendations for Finance Minister Nadia Fettah following this month’s meetings.

Sources suggest that some tobacco companies have frozen prices to avoid shifting the burden of increased taxes onto consumers and to maintain their market share. This strategy, however, has contributed to heightened price competition within the industry, limiting the government’s ability to maximize tax revenues.

The Ministry of Economy and Finance’s efforts highlight the mounting tension between fiscal policy objectives and the dynamics of Morocco’s tobacco market, as both sides work toward a resolution.