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AGRICULTURE, TRADE, AND POVERTY IN TUNISIA 105


tion, no instrument of support for farmers is applied. This policy, intended to control inflation, has heavily affected farm incomes during the past few years. Small farmers producing vegetables are the most affected by the policy.


Taxation


In addition to tariffs, supplementary taxes are levied on the consumption of a whole range of food products, in particular maize and soybean cake, preserved food, fruits and vegetables, and fish. The taxes are earmarked for the Fund for the Development of Competitiveness in the Agriculture and Fishing Sectors. These taxes are applied to locally produced goods, as well as to imports. The tax code is used to encourage agricultural development. More specifi- cally, the investment incentives code includes the following provisions: • deduction of amounts invested from taxable profits, • exemption from customs duties and the suspension of the value-added tax and consumption tax due on imports of capital goods for which there are no locally manufactured equivalents,


• the suspension of the value-added tax on locally manufactured capital goods, and


• the exemption of investments from income tax for 10 years.


Financial benefits include an (investment) subsidy of 7 percent of the cost of the investment (maximum TND 300,000, or US$33,500) and another subsidy of 1 percent of the total cost of investment, with a ceiling of TND 5,000, as the state’s contribution to project design costs. In 2002, Tunisia spent TND 91 million (US$8.2 million) through its development programs to encourage investment in agriculture by subsidizing the cost of private investment in selected activities.


Consumer Food Subsidies


The consumer price for each product for which the producer price is subject to administrative control is also controlled. This is particularly true for grains and milk. By means of the General Compensation Fund (Caisse Générale de Compensation), the Tunisian government has subsidized the consumption of basic foodstuffs since 1970. The subsidies have been applied uniformly to whoever chooses to buy subsidized products in whatever quantity. The sub- sidies of the fund have been introduced to satisfy a somewhat contradictory host of objectives: (1) stabilization of fluctuating prices for basic products, (2) preservation of the purchasing power of underprivileged households, and (3) the redistribution of incomes in favor of low-income groups. Since 2000, the products covered by the subsidies of the fund are grains and products derived from them, vegetable oil, and milk. Although the size of


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