Tunisia's parliament rejects tax reforms in blow to deficit-cutting drive

Tunisia's parliament has voted against two articles in next year's budget imposing taxes on lawyers and pharmacists, in a blow to government efforts to cut the deficit and implement economic reforms. The vote late on Thursday came a day after the government backtracked on plans to freeze public sector wages in 2017 following a deal with the powerful UGTT union.
These reversals raise questions about Prime Minister Youssef Chahed's promises to impose economic changes to revive the battered economy. They could also deepen the country's financial difficulties in 2017. Finance Minister Lamia Zribi said Tunisia would need $3.7 billion in foreign loans in 2017, $1 billion more than anticipated two months ago.
The agreement signed on Wednesday with the UGTT will cost the government about $418 million next year alone. Lawyers had campaigned against the planned taxes and held three nation-wide strikes in a month and demonstrations in front of parliament and the prime minister's office. The UGTT had threatened a public sector general strike but called it off after the compromise deal. In a tense session in parliament, lawmakers from the governing coalition - many of them attorneys by trade - refused to back the proposed taxes for lawyers, which would have imposed a charge ranging from $8 to $25 for each file presented in court. Despite holding a comfortable majority in parliament, the government also failed to push through a tax on imported drugs, a measure over which pharmacists had threatened to strike on December 14.
A measure requiring liberal professions including lawyers to include their tax code on official papers was introduced, but analysts were skeptical about whether it would help reduce tax evasion. Zribi said about half of Tunisia's 8,000 lawyers do not declare their income. Tunisia has won praise for its democratic transition following an 2011 uprising. But successive governments have failed to create jobs or cut the public deficit.
Chahed was brought in as prime minister by President Beji Caid Essebsi in the summer to speed up economic reforms demanded by international lenders. Economic analyst Moez Joudi said the country's financial position could worsen next year after the backtracking on budget measures. "It was the wrong message to send to tax evaders, to all Tunisians seeking tax justice and also to international lenders after the ruling coalition parties had announced their support for reforms," he told Reuters.