Summary:

On Thursday, 1 June 2023, Tunisian President Kais Saied proposed that increased taxation on rich Tunisians could be a means to avoid reliance upon a previously negotiated $2 billion International Monetary Fund (IMF) loan deal.

President Saied did not provide details about the nature of a plan that would increase taxes on wealthier Tunisians, but referenced an early Islamic figure, Omar Ibn Khattab to support a vision of wealth redistribution.

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While the IMF loan was negotiated by the Tunisian government in late 2022, including the necessary reforms, President Saied has since referred to the deal as being laden with “foreign diktats” that he asserts will send the country spiraling into unrest and violence. He has, on multiple occasions, referenced the winter 1983-1984 Bread Riots that led to many deaths when the Tunisian government attempted to raise the price of bread.

In a recent telephone call with French President Emmanuel Macron, President Saied reportedly compared the adoption of the reforms outlined by the IMF as lighting a match next to explosives.

President Saied, and others in his administration, have emphasized the vulnerability of poor and marginalized Tunisians, asserting that they will suffer the most if the reform program is undertaken.

Outlook:  

Any plans to increase tax on wealthy Tunisians is likely to discourage investment in Tunisia where foreign investment intentions have already been falling as perceived risk has grown.

In a context where the process for foreign investment is laden with administrative burdens, taxes, and fees in the existing system, the introduction of additional financial burdens is unlikely to encourage investment and may hinder growth in the long-term.

Tunisia has already struggled to contain the departure of wealth from Tunisia, a project that President Saied has set out to correct with limited results. Additional wealth taxes will likely encourage additional movement of wealth offshore.

It remains to be seen to what extent real policy may emerge from the President’s statements, but investors are undoubtedly taking notice.

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