Tunisia

The COVID-19 crisis is hitting the economy hard, with adverse consequences on activity, jobs and incomes. Lower revenues from tourism and worker remittances and collapsing export demand are adding to the impact of strict containment measures on domestic demand and activity. The large fiscal package aimed at protecting people and jobs, coupled with emergency funding from multilateral institutions, the formation of a new government which reduces political uncertainty, the fall in oil prices and the start of the Nawara gas field all support growth and reduce social costs. In the double-hit scenario, which assumes a second virus outbreak later in the year, GDP is projected to fall by 8.2% in 2020. In the more benign single-hit scenario, where a renewed outbreak is avoided, GDP would fall by 6%.

Tunisia has 55 tax agreements in force, as reported in its response to the Peer Review questionnaire, including the Arab Maghreb Union Income Agreement concluded with four treaty partners. In total, Tunisia identified 58 "agreements" in its List of Tax agreements: 54 bilateral agreements and the Arab Maghreb Union Income Tax Agreement concluded with four of its treaty partners.

This peer review covers Tunisia’s implementation of the BEPS Action 5 transparency framework for the year 2018. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

This report if Tunisia’s first annual peer review report. Consistent with the agreed methodology this first annual peer review covers: (i) the domestic legal and administrative framework, (ii) certain aspects of the exchange of information framework, as well as (iii) certain aspects of the appropriate use of CbC reports. The first filing obligation for a CbC report in Tunisia commences in respect of periods commencing on or after 1 January 2017.

Aware of the importance of participatory decision making, the Tunisian Government has undertaken efforts to engage with citizens and businesses to promote exchanges with different sectors of society. The spirit of consensus helped Tunisia through its democratic transition and overcoming major crises that have recently occurred.

Tunisia is an upper middle-income economy, with a GDP per capita of USD 4 213 and a population of 10.7 million in 2012 (World Bank 2014). Being a net importer of oil and with fewer natural resources than its neighbours, the Tunisian economy is more diversified and integrated through international trade. This led to strong economic growth during recent decades. The integration of the Tunisian economy into the global economy through new trade agreements, in particular with the European Union, which is Tunisia’s leading economic partner, has contributed to the country’s economic growth.

Tunisia’s economy rebounded in 2012, growing by 3.3%. A good agricultural season and the relative recovery in tourism, foreign direct investment (FDI) and hydrocarbon and phosphate production, which almost stagnated in 2011, contributed to the economic recovery. However, the European crisis and the decline in external demand had a negative impact on exports, particularly of textiles and machinery and electricity. Overall, production benefited from a more stable social climate in 2011 and continued domestic demand, but the economy as a whole is not improving as fast as was expected. Unemployment remains high, as do the current-account and budget deficits, because of the lack of structural reforms and the failure of the country’s main economic partner, Europe, to achieve a strong economic recovery. The greatest risks are ideological tensions, protests and possible pre-election populist policies, which could lead to overspending.

2011 saw the revolution of 14 January in Tunisia and its repercussion throughout the Arab world. On 23 October 2011, Tunisia held its first democratic election since independence. The election of the Constituent Assembly allowed the country to move on to a transition phase. This involves the drafting of a new Constitution, laying the foundations for a multi-party democracy based on respect for human rights. The following stage remains delicate, because of the challenge of maintaining social harmony, public security and achieving economic recovery. The political future and economic recovery are closely linked. There can be no economic recovery without stability, and no successful transition to democracy without recovery, providing a tangible response to young people’s aspirations.

When a young man died after setting fire to himself in the town of Sidi Bouzid, 265 kilometers from Tunis, in mid-December, students, young people and others took to the streets to protest against unemployment and the high cost of living. Unrest and clashes with police and troops spread to other parts of Tunisia, including Jendouba, Kasserine, Le Kef and Gafsa, and then to big cities and the capital. President Zine El Abidine Ben Ali and his aides fled into exile in Saudi Arabia on 14 January 2011, ending his 23-year rule. The shock-wave of the revolution was felt in neighbouring countries. It also shook Tunisia's economic, social and political stability and sharply changed prospects for the future.

Thus far, Tunisia has managed the consequences of the recent global crisis relatively well. Although real gross domestic product (GDP) growth fell significantly to 3.1% in 2009 (from 6.3% in 2007 and 4.6% in 2008), this was partly offset by a good cereal harvest and strong activity in the mining-industry and energy sectors.

Tunisia is a unique example of successful gender equality-related reform in an Arab and Muslim country. Within a few months in 1956, the government changed the former family code and accelerated the enrolment of girls in primary and secondary schools. By the 1980s, enrolment rates for both girls and boys were very high. The 1956 reform, led by President Habib Bourguiba, banned polygamy and repudiation, promoted consensual marriage and introduced equal divorce proceedings. However, there remains a gap between laws and their enforcement, particularly in rural areas.

THE RECENT DOWNWARD REVISION of the gross domestic product (GDP) growth estimates for 2008 and 2009 suggests that the Tunisian economy will feel the negative effects of the economic crisis that is affecting developed countries, particularly in Europe. The real GDP growth rate fell considerably, from 6.3 per cent in 2007 to an estimated 5.1 per cent in 2008; it is expected to fall again in 2009 (4.1 per cent) and rebound slightly in 2010 (4.2 per cent). In spite of the fall-off in growth, the economy weathered the shocks resulting from rising oil and food prices in 2008. The consumer price index rose by only 5 per cent, mainly as a result of continued subsidies for basic food commodities and fuel.

TUNISIA SEEMS TO HAVE SUCCEEDED in meeting the 1 January 2008 deadline, the day the Free Trade Zone Agreement with the European Union (EU) became effective, with a competitive, up-to-scratch economy, well-directed macroeconomic aggregates, and sound, cautious policies.