Tunisia’s new Finance Law and the roots of social unrest

Tunisia’s new Finance Law and the roots of social unrest

“Fesh Nesetannew” – “What are we waiting for”? On 3 January, Tunisians took the streets under this slogan. What started out as small outbursts of anger against rising prices and social inequality quickly evolved into mass demonstrations and street battles. Seven years ago, decentralised, non-hierarchical protests ousted former president Zine El Abidine Ben Ali. This time the protests are different.  Fesh Nestannew is neither a party nor an organisation, but a collective of Marxists, members of the leftist party Front Nationale, worker unions, students and former revolutionaries from 2011. They do not follow political divisions or demand civil rights, but denounce the dire economic situation many Tunisians face.

Tunisia’s slow economic meltdown

While the Jasmine revolution brought civil and political rights previously unknown to many Tunisians, the country’s economic situation did not improve, if anything it worsened. The post-revolutionary Tunisian government hired tens of thousands of young unemployed Tunisians to take them off the streets, yet when the tourism and mining industries – the country’s main sources of foreign currency – collapsed, the young Arab democracy struggled to pay for its huge public sector. Following the Bardo museum attack on 18 March 2015 and mass shootings on 26 June 2015, income from tourism plummeted by an estimated 40%, while concurrently Tunisia’s phosphate mining fell from 8.2m tonnes in 2010 to 3.6m tonnes in 2016.

Foreign exchange reserves depleted, government income stagnated, and in 2016 the Tunisian government agreed to an IMF bailout of $2.8bn, paid in tranches in exchange for a cut in public spending. These austerity measures included a downsizing of the inflated bureaucracy, the reduction of energy subsidies and a more balanced current account.

The anticipated economic growth never kicked in, and GDP growth remained at a consistent low below 1% while the Tunisian Dinar (TND) continued to drop in value. As of December 2017, unemployment levels have not fluctuated, remaining at 15% and even 30% among university graduates, prompting hesitation by the IMF as it looks upon its next payment with caution.

The Finance Law of 2018

A new financial law came into force on 1 January 2018, voted in by 134 members of the General Assembly, Tunisia’s parliament outnumbering 21 votes against and 12 abstentions. Although the Tunisian government has refused to issue a statement on the matter, it is likely the IMF demanded these legislative reforms.

The new law aims to increase tax income through a higher tax burden among consumers and companies. Article 43 raised VAT from 6% to 7%, 12% to 13% and 18% to 19%, respectively, while article 45 introduced higher duties on alcohol, tabaco, coffee, perfume, tea and fuel. Stamp duty increased from 0,500 TND to 0,600 TND, and mobile phone duty rose from 0,100 to 0,140 TND per dinar charged. Where the average income lies around 695 TND per month and minimum wage lingers at 330 TND, the resulting price increases hit the population of Tunisia hard.

Meanwhile, the corporate tax for shopping malls, franchisers and automobile concessionaires increased to 35% according to article 29. Article 48 raised insurance tax from 5% to 6% and from 10% to 12%, and article 49 created a hotel tax of 1 TND per night in a 2-star-hotel, 2 TND per night in a 3-star-hotel and 3 TND per night in a 4 or 5-star-hotel.

While companies typically transfer tax increases to their customers, it is the population that bears the brunt of the burden imposed by these legislative changes. The Ministry of Commerce’s re-assurance that subsidised goods such as bread, vegetable oil, milk and sugar are excluded from any price hikes and that corporate tax for SMEs will be lowered from 25% to 20%, falls on deaf ears these days. Instead, Tunisians began to protest on 3 January.

The street protests

The mass movement, Fesh Nestannew, organised demonstrations across the country. Unrest rapidly spread from urban centres like Tunis, Sousse and Hammamet to the hinterlands and the situation escalated when on 8 January a demonstrator died due to police violence. Riots began, and violent protestors took over the predominantly peaceful movement. On 11 January, the police force withdrew from the town Thala and the government deployed the national guard to re-establish order.

Fearing even more violent clashes on 14 January, the anniversary of the 2011 Tunisian revolution, the government made some concessions. Prime Minister Youssef Chahed pledged to provide more assistance to poor families, step up social housing and invest in the public health system. Simultaneously, the government used this momentum to depict the protests as an anarchist campaign and arrested a few dozen party members of the Front National.

Why this time is different

For about five days the situation seemed to get out of control. Young thugs broke into supermarkets and vandalised private property, yet they did so without any Salafist, nationalist or Marxist tendencies. These acts of violence constituted outbursts of anger among impoverished segments of the population, predominantly young, male, poorly educated and without real employment prospects in the dwindling job market. The price hikes and rising social inequality of the last seven years finally reached boiling point as families could barely afford to buy enough food and their children struggle to find jobs. Neither did the protests follow any political divisions, nor did the demonstrators demand civil rights or fundamental changes in the political system. Rather, the new financial law was the last straw to break the camel’s back.

Since 2014, President Beji Caid Essebsi has been heading a coalition between the liberal Nidaa Tounes and the conservative religious Ennahda. They form a majority government consisting of the two largest political camps which leaves a deeply divided opposition of Islamists and communists. As a result, movements such as Fesh Nestannew took charge of political opposition in lieu of political parties or associations.

While the protests are not necessarily a preview of the upcoming elections – municipal in 2018, and legislative in 2109 – they certainly offer valuable insight as to what can be expected. Undoubtedly social divisions and economic growth will rank high among the election campaign priorities, likely higher than migration, security concerns, or religion. To quote Bill Clinton’s 1992 presidential campaign: It’s the economy, stupid!


About Author

Hauke Waszkewitz

Hauke Waszkewitz works as a project consultant in the events department of the German chamber of commerce in Tunisia. Prior to coming to North Africa, he worked as a research consultant for Action on Armed Violence where he analysed explosive violence and terrorism. Hauke holds a BA in Middle Eastern Studies from the University of Hamburg and an MA in Diplomacy from SOAS, University of London. His analyses focus on economic, political and security developments in North Africa.