From February to April 2022, the increase in fuel prices at the pump reached 46% in Morocco. Consequently, ICT and VAT revenues are increasing, suggesting the need for a return to the provisions of Law 104.12 to mitigate the effects of this surge on consumers.
The economist, Kamal Mesbahi, explains to Yabiladi the importance for the government to take a political decision in this direction.
You recommend the application of article 4 of law 104.12. What does it provide and why is it essential to put it into effect today?
Law 104.12 was promulgated on June 30, 2014. It relates to the freedom of prices and competition. It is the basis of everything that may concern market analysis, the risk of collusion, price-fixing, and competition. Among the products and commodities, there is oil and fuels. It is therefore a general law in relation to the functioning of the market.
The idea is simple. Every law has its scope. Since this is about competition, it can be as much about freedom of pricing as it is about market control, hence we have a Competition Council, whose role is to protect social welfare – citizens’ standard of living – by trying to prevent cooperative agreements. Article 4 of this law says that there could be, on a particular market – it could be oil – a price dysfunction. In this case, the legislator gives a prerogative to the head of government to take temporary measures. These backup decisions are made against significant ups or downs that can kill a market.
Rising fuel prices are proving to be a global trend. How can the Moroccan government intervene at the national level?
Before balancing on the economic level, there is a requirement of the right, on the legal level. The government must be able to consult the Competition Council in this regard. It is required by law to seek advice from these institutions with respect to these provisions, but may disregard the observations made. The executive can go so far as to ignore the advice of the council, if the latter is slow to respond. The law also says that if the government manages to close the fall or rise in prices, it can only do so for a period that does not exceed six months and that can only be extended once by the administration. . It is a political decision.
Insofar as the price paid at the pump is composite, with five elements: the international purchase price, transport and related insurance, domestic consumption taxes, value-added tax, and profit margin. We are in a competitive economy. In the event of an excessive rise in the price of oil, the government can only regulate the price at the pump on the basis of taxes.
By what economic process can this regulation of fuel prices be achieved?
If there is an effort to be made, in my opinion, it must be done on the control of a possible agreement and the functioning of the market, as well as by a significant reduction in taxes which are part of the definition of the price. This process can be carried out, insofar as the Finance Law for the year is established on the basis of a certain number of foreseeable receipts. Once this law is passed, it is on the basis of the value of revenue, including that of fuel.
Today, it is proven that the realized oil taxes will be significantly higher than expected. The State can make an effort by announcing that it will only be held to the amount of taxes provided for and anything beyond this value can be part of a support for a lower price at the pump.
