Complementary Finance Law 2009

March 18th, 2010

Increase in expenditure and new measures for investment and employment

The 2010 Finance Bill, adopted by the Council of Ministers, provides for an increase in budgetary expenditure and puts in place new measures mainly favoring the creation of jobs, investments and improved purchasing power through the revision of the minimum wage.

Despite the current fall in revenue in the wake of the fall in world oil prices, the State intends to keep to the same pace in its efforts to support its social policy, to fight against unemployment and to achieve stronger growth.

The guiding elements of this bill rely on a provisional growth rate of GDP of 4% (5.5% excluding hydrocarbons), an average price per barrel of oil kept at 37 dollars, inflation rate of 3.5% and imports of close to 37 billion dollars. The pre-budget is presented with expenditure of 5,860 billion dinars (compared to 5,428 billion dinars in the Complementary Finance Law 2009) and income of 3,081 billion dinars (compared to 3,178 billion dinars in the Complementary Finance Law 2009). The nominal budgetary deficit expected will be covered by the cash from the Revenue Regulation Fund whose stock is currently at over 4,000 billion dinars. This bill provides for an operating budget up by 6% since it increases to 2,838 billion dinars compared to 2,593 billion dinars in the Complementary Finance Law 2009.

As for equipment and investment expenditure, they total an amount of 3,332 billion dinars of programme authorisation (up by over 7%), with payment credits of an amount of 3,023 billion dinars.

The operating budget provides close to 1,600 billion dinars for the operating of the State’s departments, 925 billion dinars of which for salary costs, 230 billion dinars for the impacts of the revision of the minimum guaranteed wage and the implementation of the new civil servant compensation system, the rest being assigned in particular to the operating of the services and subsidies to communes through the Common Local Authority Fund. This budget is also based around the State’s social policy which will be covered by a package of almost 1,000 billion dinars.

This amount will be broken down by virtue of subsidies to hospital institutions, the annual contribution to the Pension Reserve Fund, payments of retirement pensions and small pensions, support for the prices of cereals, milk, water, carriage of goods, as well as services for the population through the public establishments and in favor of the school-aged children of disadvantaged families, as well as increases in grants for students and trainees as of the academic year starting 2009 and for compensation for victims of terrorism and national tragedy. The operating budget also covers financing of over 100 billion dinars designed to fight unemployment (financing of fixed unemployment benefits and creation of interim jobs, Professional Integration Support Mechanism (DAIP) and Social Security Funds, in consideration of exemptions for employers of social security contributions, within the framework of measures to encourage the creation of jobs by companies).

With regards the equipment and investment budget, this is likely to provide financing of over 1,150 billion dinars for the development of infrastructures (roads, railway network, ports and administrative infrastructures) and close to 1,000 billion dinars for improving the living conditions of the population (health infrastructures, housing and town planning, water supply and sanitation, gas and electricity supply, improvement of urban transport, youth and sports, culture and information, and forests, environment and communal development).

In addition to a budget of 190 billion dinars for the development of training infrastructures as well as scientific research, the equipment and investment budget will provide financing of 250 billion dinars allocated to encouraging the employment of young people as well as economic investment (creation of jobs by the young, support in agricultural investment and support in industrial investment through the provision of capital from the National Investment Fund, support for industrial competitiveness and reduction of bank interest).

Whilst awaiting the finalisation of the drafting of the five-year programme for the period 2010-2014, the operations included in the equipment and investment budget for 2010 (3,300 billion dinars) already represent the equivalent of over 45 billion dollars. In its legislative and fiscal part, the finance law for the next year provides facilitations related to the payment of tax on total income (IRG) and introduces the new financial accounting system as well as provisions in favour of investment and the protection of the environment.

These tax measures allow for the five-year extension of the exemption from value added tax (VAT) on fertilisers and agricultural phytosanitary products and the extension of the exemption period in terms of corporation tax (IBS) in favour of young entrepreneurs, when they commit to create at least five permanent jobs. To reinforce the current mechanism in terms of investments, the bill extends the scope of the Fund for the Promotion of Industrial competition to tangible and intangible investments in upgrading and renovating industrial activity zones.

On the other hand, the finance law 2010 stipulates the creation, respectively, of a fund for the development of the cinematographic industry, an interest rate reduction fund for the purchase or building of housing, as well as property developers within the framework of the programmes developed by the State.