Friday 26 August 2011

ARAB WORLD: The absent debate on progressive taxation - latimes.com

With the revolts in many Arab countries, the subject of taxation in the Arab world should be urgently tackled. Taxation is not a financial issue in advanced democracies but rather a socio-political matter with various implications. Those same implications apply to the future economies and societies of Arab countries undergoing political revolutions.


In developed countries, taxation shapes the contours of the social contract that governs the relationship between the state on the one hand and all components of society on the other, whether individual citizens, businesses or social interest groups. As a result, it is a fundamental pillar of democracy and accountability. Taxation determines the size of state revenue, and thus its ability to spend on vital matters—that is, the basis of states’ competency, legitimacy and its ability to achieve.


In the Arab world, there are two groups of states. The first group, the Gulf states—which take in oil revenues—redistribute part of these revenues to citizens and do not impose taxes. The second group, the non-oil Arab states—which have much lower per-capita incomes, depend on foreign markets or some foreign sources of income such as aid and workers’ remittances (Tunisia, Lebanon and Jordan, for example) or a mixture of aid and rent sources, such as in Egypt, which contains natural sources and the Suez Canal.

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