Algeria aims to reform tax system, targets informal market

ALGIERS (Reuters) - Algeria, seeking new funding sources to offset a drop in energy export revenues, will reform its tax system and try to attract money from the informal market, Prime Minister Abdelaziz Djerad said on Monday.

The plan is part of wider reforms by the OPEC member country aimed at diversifying the economy away from oil and gas, which account for 60% of the state budget and 93% of total export earnings.

The North African nation of 45 million people has been under financial pressure due to lower crude oil prices, prompting the government to cut public spending and planned investment projects for this year.

"Our reforms should be based on the digitalization of all operations to combat tax evasion and fraud," Djerad told a conference in Algiers attended by experts to discuss the modernization of the tax system.

"These reforms are part of a comprehensive plan to review the financial and banking system and revive the economy."

The government has said it is considering a "social and economic revival plan" to boost its underdeveloped non-energy sector. It said details would be announced next month.

The plan includes launching Islamic finance services to try to attract money from the informal market. Many Algerians distrust state banks and prefer to save money at home.

Djerad said tax reforms would also help to integrate the informal market after previous attempts failed.

"People in the informal market do not make any tax contribution," he said. "This phenomenon may also reduce the effectiveness of public policies aimed at encouraging and promoting investment."

(Reporting by Hamid Ould Ahmed; Editing by Mark Potter)