Research studies


Democratic Arab Center  


TaghreedBadraldeen Mohamed Ali

Esraa Ahmed Hassan El-dawy

Yasmin Abdel-metaalTawab

Noor ElhodaGamal Mahdi

RanaAatef Mohamed Khalil


Associate Professor.Mohamed Fathy Abdel-ghany

A. Introduction

Taxes are a compulsory payment to government by the public, in exchange for the services indirectly to public by the government. Basic objective of tax systems is to finance public expenditures. Tax system also plays a vital role in achieving the other targets like equity, social and economic improvements in any economy. A well organized, efficient and effective tax system is a necessary requirement for economic growth. Taxes determine the level and speed of economic growth in countries of the globe. Countries with organized and stable taxation system grow rapidly, over the period compared, with those countries, not have such good individualities.

In strictly economic terms, developmenthas traditionally meant achieving sustainedrates of growth of income per capita to enable a nation to expand itsoutput at a rate faster than the growth rate of its population. Levels and ratesof growth of “real” per capita gross national income (GNI) (monetary growthof GNI per capita minus the rate of inflation) are then used to measure theoverall economic well-being of a population—how much of real goods andservices is available to the average citizen for consumption and investment.

Economic development cameto be redefined in terms of the reduction or elimination of poverty, inequality,and unemployment within the context of a growing economy. “Redistributionfrom growth” became a common slogan.Development must therefore be conceived of as a multidimensionalprocess involving major changes in social structures, popular attitudes, andnational institutions, as well as the acceleration of economic growth, the reductionof inequality, and the eradication of poverty.

Taxation system plays a very important role, to meet developmental and non-developmental expenditures, and ultimately to augment economic growth. Taxation affects production and growth.  Government revenue, at some time is motivated by the changes in tax base, tax policies and tax rates. Tax system of any country also interfere the allocation of resources. Tax revenue to GDP in Egypt is 12.59% which reflects a low level compared to other developed countries.

This study aims to investigate the relationship between taxes, economic growth and economic development in Egypt, and how to stimulate economic development through taxes. Furthermore, the study aims to provide a reform plan for the current tax system in Egypt. The study uses the analytical method. When studying the impact of tax revenues on economic growth, the study uses the OLS model to know the strength and the direction of the relationship. The study found that tax revenue in Egypt calculated as a percentage of GDP has no statistical effect on economic growth which means that the current tax structure in Egypt doesn’t support economic growth. The study give main recommendations including reducing the reliance on direct taxes and engaging some types of indirect taxes, reconsidering the tax base in the tax structure, reducing the tax burden on low-income groups and using tax revenue in more developmental spending.

B. Research problem:

How taxes in Egypt affect economic growth and economic development

How to reform the shortages and drawbacks in the Egyptian tax structure?

C. Research hypotheses:

  • Efficient and well-prepared tax system leads to economic development by stimulating economic growth.
  • Tax revenues encourage economic growth in Egypt.
  • Reforms in the Egyptian tax system lead to sustainable development.


D. Research objective:

The main objective of this research is to examine how the Egyptian tax system affects economic growth and economic development, to determine the most important drawbacks in the Egyptian tax system and to make effective reforms in the tax structure.

E.  Research methodology:

The research will use the analytical descriptive method to clarify the linkages between tax structure, economic growth and economic development in Egypt.

When surveying the impact of tax revenues on economic growth the researchers developed an econometric model to know the direction and strength of the relationship based on data collected from the World Bank development indicators and the ministry of finance.

F.  Literature reviews:

1.     Vedder Richard, Taxes and economic growth, Ohio University, September 2001.

This study concentrated on taxation and its impact on the economy. When government is very small, tax-financed governmental expansion likely is good from the standpoint of creating income for the citizenry: resources are used to establish and enforce laws protecting individual property rights, thieves, and foreign enemies.

The taxes needed to finance these expenditures become larger and more burdens. Thus, the original federal income tax which had rates of 1% to 7 % had little impact of human economic behavior.But when marginal tax rates grew as high as 70 or even 90 % or more, people altered their behavior to avoid an excessive tax burden.

The new government spending added less to the national output and may have even reduced it, while the taxes reduced work effort, capital formation, and innovation. Thus taxes that financed spending began to have adverse effects on the prosperity of persons.

2.     Dackehag Margareta & Hansson Asa, taxation of income and economic growth: an empirical analysis of 25 rich OECD countries, department of economics, Lund University, march 2012.

This paper analyzed how taxation of income affects economic growth. It examined how tax rates on corporate and personal income affect economic growth by using panel data from 1975 till 2010 for 25 rich OECD countries. It found that both taxation of corporate and personal income negatively affect economic growth.

The reason government expenditures are thought to influence economic growth negatively is due to the distortion effect of taxation. Some taxes are thought to be more distortion than others as different taxes has more or less stable tax bases, where various taxes have different effects on the level of economic activity.

This paper further examined the correlation between income taxation and economic growth by studying how taxation of corporate and top personal income impact economic growth in 25 rich OECD countries during the period 1975 to 2010. It used standard growth estimation ways with country and fixed year effects to determine the effect of income tax rates on GDP per capita.

3.     Gravelle G. Jane &Marples J. Donald, Tax rates and economic growth, January 2, 2014.

This study showed the evidence on the negative relationship between tax rates and economic growth which have been an issue in the debates about increasing taxes to reduce the deficit and reforming taxes by broadening the base to lowering tax rates.

It differentiates between the effects of policies aimed at short-term stimulation of an underemployed economy and long-run growth. In the short run, both spending increases and tax cuts are projected to increase employment and output in an underemployed economy. These effects do throughout the demand side of the economy. Long-run growth is a supply-side phenomenon; the availability of jobs in the long run is not an issue as an economy naturally creates jobs.

Output can grow through increases in labor participation and hours, increases in capital, and changes such as education and technological advances that enhance the productivity of these inputs.Similarly, during historical periods, slower growth periods have generally been associated with lower tax rates. Small effects arise in part because of offsetting income and substitution effects and in part because each of these individual responses appears small.

4.     W. Dale Jorgenson & Yun Kun-Young, taxation, efficiency and economic growth,  April 2, 2012.

The book presented a dynamic general equilibrium methodology for evaluating alternative proposals for tax reform. It indicated this methodology by comparing alternative plans. These plans are based on two broad approaches to reform. The first is removing discrepancies in the tax treatment of different categories of income. The second one is moving the tax base from income to consumption.

It constructed a dynamic general equilibrium model of the economy of U.S… A temporarily price system shows markets for outputs of consumption, investment goods, inputs of capital and labor services. This price system associates the past with the future throughout markets for investment goods and capital services. The government sector is dominated to the commodity markets through the tax system. We identify Efficient Taxation of Income by know what is the most effective approach to tax reform.

The tax on labor income would be replaced by a proportional tax and equity would be protected by different tax rates on capital and labor incomes. The second effective approach would be to substitute a Retail Sales Tax for the existing income tax, but this would involve a serious loss in equity.

The most substantial gains from tax reform are associated with equalizing tax burdens on all assets and all sectors and eliminating the progressive taxation of labor income. Efficient Taxation of Income produces the largest welfare gains of any proposal that we consider. Efficient taxation of Income could be enacted today and implemented tomorrow.

5.     G. William Gale & A. Andrew Samwick, effects of income tax changes on economic growth, September 2014.

This paper focused on how tax changes affect economic growth. It focused on two types of tax changes. First are reductions in individual income tax rates and second is income tax reform.The second refer to broaden the income tax base and reduce income tax rates, with maintaining the overall revenue levels and the distribution of tax burdens implied by the current income tax system. The focus is on individual income tax reform, leaving consideration of reforms to the corporate income tax and reforms that focus on consumption taxes.

The paper examined how changes to the individual income tax affect long-term economic growth.The structure and financing of a tax change are critical to achieving economic growth. The reduction in Tax rate may encourage people to work, save, and invest but that lead to budget deficit, and that will lead to reduce national saving and raise interest rates in the long term.

The results suggested that not all tax changes will have the same impact on economic growth. Reforms that improve incentives, reduce existing subsidies, avoid windfall gains and avoid deficit in financing will have more effects on the size of the economy in the long run, but may also create tradeoffs between equity and efficiency.

Finely, it showed that bothchanges in the level of revenue of taxes and changes in the structure of tax system can influence economic activity, but not all tax changes have positive effects on economic growth in the long term.

6.     Abdel-Rahman Abdel-Monem, Egypt`s general sales tax: recent developments and reforms ahead, working paper, no.22, march 1998.

This paper analyzed the Egyptian general sales tax (GST) which registered high rates over the last six years, while personal income taxes are showing decline despite its progressive rate.

The paper recommended replacing the GST with a vat to increase efficiency and revenue productivity, the GST must be reformed by broadening the aggregate base through taxation of all goods and services, generalizing the tax credit to cover tax paid earlier, adjusting the threshold to reflect the administration’s ability to cope with increased tax payers, rationalizing the rate of tax structure and replacing the positive list of specified exemptions, replacing the GST with a VAT shouldn’t increase the administrative burden, the tax burden is not expected to be adversely affected, because it is independent of the number of stages at which the VAT as a tax on income expended or rather on consumption of goods and services can be considered a norm of the ability to pay.

The study evaluated Egypt’s general sales tax (GST), which came into effect in 1991. This paper compared the structure of the general sales tax in Egypt with those of the Mediterranean countries associated with the European Union (EU) and the member countries of the association of Southeast Asian nations (ASEAN).

7.     M. Cornelius Ojong, Anthony Ogar& Felix Oka Arikpo, The Impact of Tax Revenue on Economic Growth: Evidence from Nigeria.

The study examined the impact of tax revenue on the economy of Nigeria. The objectives of this study were to examine the relationship between petroleum profit tax and the economy of Nigeria, to show the impact of company income tax on the economy of Nigeria and to examine the effectiveness of none oil revenue on the economy of Nigeria.

The results showed that there is a significant relationship between petroleum profit tax and the economic growth of Nigeria. It showed that there is a significant relationship between non-oil revenue and the economic growth of Nigeria. The results also showed that there is no significant relationship between company income tax and the economic growth of Nigeria.

It was recommended that government should provide social welfare to all people in the country. Also that government should do reorganization of the tax administrative machineries in order to reduce the problems of tax avoidance and finally to board the tax base of government, employment opportunities should be created and a good environment for entrepreneurship and innovation to success made using tax proceeds.

8.     N. Grace Ofoegbu, O. David Akwu&O Oliver, empirical analysis of effect of tax revenue on economic development of Nigeria.

This study showed that the impact of tax revenue on economic development in Nigeria and to assure if there is any difference in using GDP and HDI in establishing the relationship.The approach adopted in this study was that of using annual time series data for the period 2005:2014 to estimate a linear model of tax revenue and human development index using ordinary least square (OLS) regression technique.

The result showed that there is positive relationship between tax revenue and economic development. The result also indicated that measuring the effect of tax revenue on economic development using HDI gives lower relationship than measuring the relationship with GDP thus suggesting that using gross domestic product (GDP) gives a painted picture of the relationship between tax revenue and economic development in Nigeria.

The researcher concluded that tax revenue can be an instrument of economic development in Nigeria. Development of any tax policy on tax revenue for economic development should better be based on human development index rather than GDP. This study provided a useful insight for the government, stakeholders and policy makers into the importance of tax revenue for economic development as a result income derived from tax should be used to encourage citizens to continue to pay tax.

9.     Ergete, Ferede and Bev, Dahlby, The impact of tax cuts on economic growth: evidence from the Canadian provinces.

This paper showed the effect of tax rates on economic growth rate using panel data from Canadian provinces over the period 1977: 2006. The empirical analysis indicated that a higher CIT rate is associated with lower private investment and slower economic growth.

The empirical estimates suggested that a 1 percentage point cut in the CIT rate is related to 0.1–0.2 percentage point increase in the transitional growth rate. The paper used the empirical results to assess the impacts of BC’s 2001 tax cuts on the province’s output and growth rate. The results indicate that in the long run BC’s per capita GDP with the CIT tax cut will be about 16 percent higher than in the absence of the tax cut.

The results also indicated that there are potentially large increases in growth and private investment. An important implication of these results is that Canadian provinces will see output gains if they adopt these pro-growth tax policies.

10.  Steiner, Roberto, Taxation and Economic Growth in Colombia, February 2014.

This Paper showed the impact of reducing in corporate Taxes on investment and the impact of reducing in non-wage labor costs on employment, labor formality, and growth in Colombia.  First, it estimated an investment function which depends on the user cost of capital, one of whose determinants is the corporate tax rate.

The estimations suggested that a reduction of the corporate tax rate from 33 to 23 % has very different short and long-term effects on investment in machinery and equipment. While the user cost of capital declines 0.9 percent, investment (excluding the oil and mining sector) increases on impact only 28 bps in relation to GDP, an increase that does not compensate the fiscal cost incurred while, it is likely that the significant boost in investment (of around 5 percent of GDP) makes such a policy intervention fiscally sustainable in the long term.

Second, it estimated that the reduction of the nonwage labor costs on employment approved in late 2012 lead to 0.5 % increase in overall employment and, more importantly, lead to increase about 1.4 % increase in formal sector employment. The estimations indicated that this is achieved at no fiscal cost because government revenue increases as a result of higher output and employment. 

1. Taxes

1.1. Nature of taxes

1.1.1. Definition of taxes

Taxes are compulsory payments associated with certain activities. Revenues collected from taxation are used to purchase the inputs necessary to produce government supplied goods and services or to redistribute purchasing power among citizens.[1]

Taxes redistribute resources from private sector to government sector in two steps: First, the individual’s ability to own resources are reduced, because taxes reduce income available for consumption. Second, the government revenues collected from taxes areused for resources necessary to provide government goods and services and to provide income support payments for government transfers such as social security benefits.

Tax base is the item or economic activity on which the tax is levied. The most commonly used tax bases can be grouped into three broad categories: income, consumption and wealth. These are economic bases; their values depend on decisions made by individuals. For example, individuals make daily choices that affect their income. They also can control the allocation of their income between saving and consumption. Because most individuals must save to accumulate wealth, their decisions regarding consumption also affect their wealth.[2]  Tax rate structure

The tax rate structure describes the relationship between the tax collected during a given accounting period and the tax base. In evaluating taxes on such economic bases as income, the tax rates are calculated as the ratio of taxes paid to the various values of the base.

The average tax rate (ATR) is simply the total amount of taxes collected divided by the value of taxable base:


A proportional tax rate structureis one for which the ATR, expressed as a percentage of the value of the tax base, does not vary with the value of the tax base. For example, an income tax of 20% would tax all income at 20%.

When a progressive tax rate structure is used, the ATR increases with the size of the base. The higher the tax base the higher the ATR applied. While when a regressive tax rate structure is applied, the ATR declines as a size of the tax base increases. A regressive income tax results in a lower annual ATR as income rises.

1.1.2.      Types of taxes: direct andindirect      Direct taxes:

A tax is a fee charged or levied by the government on a product, income, or activity. When it levied directly on personal or corporate income it called direct tax.[3]

Direct taxes play an important role in the economy of Egypt. Income tax revenues represent a considerable percentage of the total tax revenues.    Income Tax

It is also known as the unified income tax because individuals must report their annual income from various sources in a single income tax return. There would be a little misleading because, income arising frommobile capital revenue and salaries and wages are excluded from the annual tax return but instead subject to a special tax treatment.[4]

Personal income tax is a tax on income from individual businesses and wages. At the end of each year, individual owners of businesses lodge income tax returns for their businesses.[5]

  • Corporate Profits Tax

Corporation tax is similar to the individual income tax, only that it is levied on companies and it does not have a graduated rate structure. It also means a direct tax on business profits made by corporate bodies such as limited companies, trusts, members clubs, societies and associations, and cooperatives.[6]    Property Taxes

Is a selective tax in the sense that it is levied on only certain forms of wealth like tax on real assets (land and improvements there on).[7]

There are two types of property taxes in Egypt:

Agricultural land tax:this tax is levied on all land used for agricultural purposes and land which can be used for agricultural purposes irrespective of the method of irrigation, etc. The tax base is determined according to the rental value of the land that is estimated by the tax authority. The tax authority reviews the rental value every 10years. The landlord is responsible for the tax liability and is required to remit the estimated tax amount on an annual basis to the tax authority.
The tax rate is 14% of land rental value.

Building taxis imposed on permanent structures located in certain prescribed areas, and is not dependent on whether the building is occupied or whether any actual income is derived from the building. Buildings belonging to the government and public enterprises are exempted from this tax. The tax base is determined according to the rental value of the building and as with agricultural land.  Indirect taxes:

They are imposed on goods and services. The Immediate liability to pay is of the manufacturer, service provider and seller but its burden is transferred to the ultimate consumers of such goods and services. The burden is transferred not in form of taxes, but, as a part of the price of goods and services. For example general sales tax, values add tax, custom duty.[8]    General Sales tax (GST):

The sales tax is added on to retail purchase of goods by the retail sellers at the time the product is sold to a final user.In practice, few sales taxes are implemented in such a way as to conform to a comprehensive consumption tax base. This is attributable to both administrative problems and political constraints. For example, many retail sales taxes are levied only on the consumption of tangible goods. The consumption of professional services (medical, legal, educational) and such personal services as haircuts, entertainment, and transportation are usually exempt from the tax.[9]    Value Added Tax (VAT):

The value added tax is simply a multi stage sales tax that exempts the purchase of intermediate goods and services from the tax base. Value added is the difference between sales proceeds and purchase of intermediate goods and services over a certain period.

Different forms of VAT are used in more than 50 nations of the world. The tax was first adopted in 1954 by French national government.

Total transactions less intermediate transactions, is equal to the sum of wages, interest, rent, and other input payments in the nation, summing up to the GDP.

Value added = total transactions – intermediate transactions = final sales = GDP= wages + interest + profits + rents + depreciation[10]         (1.2)

Different types of VATS are classified according to the manner in which they apply to a firm purchase of capital goods.

One approach is known as product type VAT, a second known as income type VAT and a third known as a consumption type VAT.    Retail sales tax:

It is an ad valorem levy of a fixed percentage on the dollar value of retail purchases made by consumers. A true retail sales tax is levied only on consumption at its final stage and is collected from business establishments that make retail sales.[11]    Excise taxes:

They are selective taxes levied on certain types of consumption activities. Some excise Taxes are designed to raise revenue while other are intended to discourage particular consumption activities. Federal excise taxes are also levied on gasoline, telephone services and tires.[12]

The excise taxes targeted such kind of consumption activities which have negative externalities like some luxury goods, alcohol and cigarette consumption    Turn over taxes

They are multistage sales taxes that are levied at some fixed rate ontransactions at all levels of production.The effective tax rate on various goodsand services is conditioned by the number of stages of production. The turnovertax has been used in Germany and other European countries as a major revenuesource. Germany, however, replaced its turnover tax with a VAT in 1968.

TheTurnover tax provides an incentive to vertical integration among firms so as toreduce the number of production stages.[13]    Customs duty:

It refers to taxes levied on imported or exported goods. Duties may be various or fixed.

  • A various duty is a fixed percentage of the value of the goods
  • A specific duty is a duty of a specific amount of one that doesn’t vary with the price of goods but with its weight, volume, etc    Stamp duty:

Stamp duty is levied to law of 1980, and in general imposed on the following:

Documents: a wide range of documents including certificates and judicial documents, commercial advertisements, utility bills, commercial invoices,etc.All types of contracts.

Transactions: such as banking transactions “loans, deposits, accounts and documents”, insurance premiums, transportation services, etc.

There are two types of stamp duty rates .the first is a fixed amount that imposed on documents , contracts , etc. it is varies according to the document in question. The second is proportionate rate and this is generally applies to transactions. It is calculated as a percentage of the amount being transacted.[14]

1.2      Theoretical background

1.2.1.Economic tax theories:

The economists have put forward many theories of taxation at different times to guide the state as to how equity in taxation can be achieved, the main theories are:  Benefit theory

The benefit principle means that the financing of the government of goods and services should be linked to the benefit that citizens receive from government. From the point of view, fees and charges are ideal forms of government finance. Charges like prices distribute the costs of goods and services among those who consume them.

A major advantage of the benefit approach is that, it links the cost per unit of government provided services with the marginal benefits of those services, most government provided goods and services result in collectively consumed benefits that are difficult to assign to individuals. The only way to determine such benefit would be to ask individual citizens how much extra units of the good and services are worth to them.

In some cases, the benefit from government provided services can be correlated with a particular economic activity, which is taxed which is taxed so that the amount paid Varies according to benefits received by taxpayers. For example, the linking of gasoline taxes and road construction can be thought of as an attempt to apply the benefit principle by earmarking a particular tax for a particular usethis theory has been faced to several critics such as:

If the state maintains a certain connection between the benefits conferred and the benefit derived, it will be against the basic principle of the tax. Most of the expenditures happened by the state is for the general benefit of its citizens. It is not to estimate the benefit enjoyed by a particular individual every year.

If we apply this theory, the poor people will pay heaviest taxes, because they benefit more from the services of the state, if we get more from the poor it is against the principal of equity.[15]  Ability to pay theory

The ability to pay principle maintains that taxes should be distributed according to the capacity of tax payers to pay them. The Citizens with greater ability to earn income, for example, should be taxed more heavily than those with less capacity to earn. Using this approach, the problem of distributing tax shares is viewed as independent ofindividual marginal benefit received from government activities.

 The implementation of a tax system based on the ability to pay requires some collective agreement concerning an equitable distribution of the taxes among citizens. Individual evaluations of the ability to pay are likely to differ among citizens whose preferences differ.

Related to the ability-to-pay principle are the notions of horizontal equity and vertical equity. Horizontal equityis achieved when individuals pay the same amount of taxes per year. Vertical equity is accomplished when individuals of differing economic ability pay annual tax bills that differ according to some collectively chosen notion of fairness. The principle of horizontal equity requires agreement on some measure of equality between individuals, Vertical equity is even more difficult to establish than horizontal equity.

Even if a tax system is generally agreed to have satisfied criteria for horizontal equity, say, because people with equal income pay equal amounts in taxes, it might not satisfy everyone’s ideal of how people of different economic capacity pay different amounts in taxes. The main viewpoints advanced in this connection are as follows:

Ownership of property: some economists are of the opinion that ownership of property is a very good basis of measuring individual`s ability to pay. On the ground, this idea is out rightly rejected, if the person earns a large income but doesn’t spend on buying any property, he will then escape taxation. On other hand, another person earning income buys property, he will be subjected to taxation, and then there is no equity in taxation.

Tax on the basis of expenditure: it is also asserted by some economists that ability to pay tax should be judged by the expenditure which a person does. The greater the expenditure the higher should be the tax and vice versa.

The point of view seems unfair in every situation, for example, a person having a large family to support has to spend more than a person having small family, so that the first person will have to pay more taxes than the second, and then this is not fair.

Income as the basics: most of the economists are of the opinion that income should be the basis of measuring an individual`s ability to pay. It appears very fair, for example, if the income of a person is greater than another person, the first should be asked to pay more towards the support of the government than the second.[16]  The sacrifice theory

This theory attempts to indicate the burden that lay upon an individual in virtue of his payment of taxes and how much of his or her income remains for his survive.

According to this theory payment of tax is a sacrifice that an individual makes towards the support of the government. The measure of such sacrifice is found in the giving up a portion of individuals’ income of consumption. Practically the sacrifice theory demands that individuals should only pay tax on that portion of income that is spent on luxuries, the sacrifice should only be in respect of individuals’ income over and above subsistence.      The cost of service theory

If the state charges actual cost of the service from the individuals, it will satisfy the idea of equity in taxation. The cost of services theory can no doubt be applied to some extent in those cases where the services are rendered out of prices and are o bit east to determine, such as, railway services and supply of electricity.

 However, most of the expenditure happened by the state cannot be fixed for each individual as it can’t be exactly be determined. Also, the theory is rejected because it is not achieved the equity.  Proportionate theory

J.S.Mill and some other classical economists have suggested the theory of proportionate in income In order to satisfy the idea of equity in taxation. These economists were of the opinion that if taxes are imposed in proportionate to the incomes of the individuals, it will extract equal sacrifice.

But, the modern economists assure that when income increases, the marginal utility of income decreases. The equality of sacrifice can only be achieved if the persons with high incomes are taxes at higher ratesand those with low income at lower rates. They favor progressive system of taxation in all modern tax systems.

1.2.2.Economics of taxation

Taxes affect the decisions of buying and selling products and inputs. Taxes change the prices of goods and services by shifting their market supply and demand curves, thus, influencing the pattern of resources use.

However, the effects of taxes on prices are often misunderstood. For example, many motorists line up at the gas pump to fill up their tanks before a new gasoline tax increase goes into effect.

A good understanding of the economics of taxation would tell these people that it is unlikely that a gasoline tax increase would increase the price of gasoline by the full amount of the tax. Some of the tax would be absorbed by sellers as a reduction in the net price received after paying the tax.

Taxes can result in efficiency losses in private use of income and resources. When taxes influence the prices of goods and services in competitive markets with no externalities, losses in efficiency happen, because prices that are distorted by taxes no longer reflect the marginal social costs and benefits of goods and services.No person enjoys paying taxes. But taxes provide revenues to finance government expenditure on goods and services which benefit taxpayers.  Lump-sum taxes vs. price distorting taxes:

A lump-sum taxis a fixed sum that a person would pay per year, independent of that person’s income, consumption of goods and services, or wealth. The fixed annual payments by people to government authorities do not depend on any controllable variable. Lump-sum taxes do not prevent prices from equaling the marginal social cost and benefit of any goods and services. Imposition of these taxes would reduce the ability of consumers to purchase market goods and services and to save.

While a price distorting taxis one that causes the net prices received by sellers of goods or services to diverge from the gross price paid by buyers.[17]  A Unit Excise Tax: Impact on Market Equilibrium

Suppose a good such as gasoline is traded in a competitive market and that no externalities are associated with market exchange of gasoline. Under these conditions, market exchange of gasoline results in the efficient output of this good. This is illustrated in figure (1.4), with a market price of gasoline at $1 per gallon. The demand curve, D, reflects the marginal social benefit of the good, while the supply curve, S, reflects its marginal social cost. The market equilibrium at point B corresponds to the efficient amount of gasoline per year. At the output Q*, the marginal social benefit of gasoline is equal to its marginal social cost. The $1 price of gasoline equals both the marginal social cost and marginal social benefit of gasoline (P=MSB=MSC).

A unit taxis a levy of a fixed amount per unit of a good exchanged in a market. Suppose that a unit excise tax of 25 cents per gallon of gasoline is levied on the sellers of gasoline. This fixed tax due on each gallon sold is independent of the price of gasoline. If the price of gasoline were to rise, the tax would not collect any more revenue per gallon.

When the tax is imposed, the marginal cost of selling gasoline increases by 25 cents per gallon because of the tax. In addition to covering all other variable costs of production, sellers also must cover the tax to avoid losses when selling gasoline. This shifts the supply curve (which is the marginal cost curve under perfect competition) upward, from S= MSC to ST= MSC +25 cents at each level of annual output.

The effect of the tax is equivalent to an increase in the marginal cost to sellers that decreases the market supply of gasoline. The decrease in supply results in a new post tax equilibrium at C, implying that the quantity sold decreases to Q1 and that the equilibrium price rises to PG $1.15. The price PG is the new market price paid by consumers of gasoline. This is the gross price received by sellers. The sellers, however, must pay 25 cents of the gross price received as a tax. Their net price, PN, is only 90 cents per gallon after payment of the tax. In general, if T is the unit tax, the relationship between the gross price and the net price, PN, received by sellers is:

PN= PG – T                  (1.3)

The amount of revenue collected from the tax by the government is the amount of gasoline sold after the tax multiplied by the tax per unit, TQ1. This is represented by the rectangle PNPGCA in Figure (1.4). The total revenue of producers is simply PNQ1.  Excess Burden of a Unit Tax

When the excise tax of $0.25 is imposed, buyers and sellers then base their decisions on their differing views of the price of gasoline. Buyers decide how much to buy by comparing PG, the gross price, with their marginal benefit. Sellers, however, decide how much to sell by comparing their net price, PN, with their marginal cost. In the absence of any externality, the marginal cost and benefit reflect marginal social cost and benefit.

The tax prevents market interaction among buyers and sellers from automatically equating marginal social cost and marginal social benefit, as is required to attain efficiency. Because PG PN after the tax, it follows that MSB MSC at Q1, as shown in Figure (1.4.). As a result of the tax, less than the efficient annual output, Q*, of gasoline will be sold in the market.

The total excess burden of a taxis an additional cost to society over and above the amount of dollars that citizens pay in a tax. The excess burden measures the loss in net benefits from private use of resources that results when a price-distorting tax prevents markets for taxed goods and services from attaining efficient output levels.

1.3.     Taxes in Egypt:

1.3.1.Historical background (development of taxes)

Figure (1.5): tax revenues and tax rates 2004-2016

Source: researchers work

The graph shows how total tax revenues change in line with changes in personal income, general sales and corporate tax rates from 2004 to 2016. In 2004, the collected tax revenues increased by 12.7% compared to previous year[18]. The collected taxes of income increase as well as taxes of customs. In 2005, taxes on income increased by 27% compared to previous year while customs duties decreased by 30% due to customs reforms adopted in this field[19]. In 2006, collected revenues from income taxes increased dramatically by 51% compared to previous year as a result of lowering the tax rate from 35% to 20% which widened the tax base[20]. The total tax revenues remained almost the same till 2011. In 2012, tax revenues decreased with increasing the corporate tax rate. In 2013, tax revenues increased with increasing the income tax rate. Revenues from personal income tax accounted to 60.7% of total tax revenues[21]. In 2014, tax revenues increased in absolute value with an increase in most of tax components but as a percentage of GDP it reflected some decreases. In 2015, tax revenues remained at almost the same level. Finally in 2016, personal income tax rate was decreased while corporate tax rate was increased and general sales tax was replaced by a higher-rate of value added tax which is expected to increases the tax revenues in 2016 and 2017.

  • Tax structure in Egypt:

The Tax System in Egypt is operated by the Ministry of Finance. The Egyptian taxation framework is statutory based and tax administrators are given few discretionary powers. Courts are primarily responsible for the interpretation of statutes. Taxes in Egypt may be divided into two categories. These are Direct taxation of individuals and legal entities on their income or profit Indirect taxation of goods and services

  • Direct taxation:
    • Personal income taxes

Income tax is imposed on the worldwide income of Egyptian residents. Non-residents are subject to tax on income earned or realized in Egypt. Income tax is assessed each year on the aggregate of the net amounts from each category of income realized during the preceding year. There are four recognized categories of income, namely: Employment income, Business income (which includes income from commercial and industrial activities), Non-commercial income and Income from real estate assets.

Graduated rates apply with effect from 1 July 2005 to the aggregate of the four categories of income, as follows:

Table (1.1): annual income tax rate

Income (EGP) Rate
Up to 5,000 0%
5,001 to 30,000 10%
30,001 to 45,000 15%
45,001 to 250,000 20%
250,000 to 1,000,000 25%
Above EGP 1,000,000 A Temporary change of 5% applies for 3 years effective from 2014
On amounts received by resident employees from entities other than their original employers 10%


Source: researchers work

  • Corporate income and gains tax:

Egyptian corporations are subject to corporate profits tax on their profits derived from Egypt, as well as on profits derived from abroad, unless the foreign activities are performed through a permanent establishment located abroad. Foreign companies resident in Egypt are subject to tax only on their profits derived from Egypt.

Table (1.2): corporate income tax rate

Corporate income tax Tax rate
Corporate Income Tax 25%
Tax on the profits of Suez Canal Company, Egyptian General Petroleum Company and the Central Bank of Egypt 40%
Tax on the profits of oil prospecting and production companies 40.55%

Source: researchers work

Dividends paid by corporations or partnerships, including companies established under the special economic zone system, to resident juridical persons, nonresident persons, or nonresident juridical persons that have a permanent established in Egypt is subject to tax on dividends. Tax on dividends is imposed at a standard rate of 10% without any deductions or exemptions. However, this rate can be reduced to 5% if both of the following conditions are fulfilled:

The recipient holds more than 25% of the distributing company’s capital or voting rights.The recipient holds the shares or commits to hold the shares for a period of not less than two years.

Under the law, foreign branches’ profits in Egypt are considered distributed profits within 60 days after the financial year-end. As a result, a branch must pay the dividend tax on its annual profits within 60 days after the financial year-end.

  • Capital gains

Capital gains derived from the sales of securities realized by nonresident juridical persons are subject to tax at a rate of 10 -20 % (suspended for listed securities for two years, effective from 15 July 2015).

  • Indirect taxation


  • VAT (value added tax)

Value-added tax (VAT) applies to most goods and certain types of services, mainly tourism, telecommunications and entertainment services VAT rate standard 13% until 30 June 2017 (14% effective 1 July 2017)Reduced 5% on machinery and equipment,Other 0% on Exported goods and services.VAT returns and payments:

VAT returns are generally submitted monthly.A monthly tax return for the VAT should be filed within two months, from the month end. The April tax return should be filed before 15 June.A VAT return, should be filed even if no taxable sales of goods or services are achieved during the tax period.

Non-submission of the VAT return within the due dates entitles the tax authority to make a deemed assessment. The tax authority will be liable to provide the basis of this deemed assessment.

  • Stamp tax

Stamp duty is a state- and territory-based tax that is usually imposed on specified transactions but, in general, is very minor. Most classes of documents, contracts, checks, receipts, bills, letters of guaranty, various banking transactions, transfer of unlisted securities, leases and many other instruments require payment of stamp duties or taxes. The concession agreement provides an exemption from stamp duty tax to oil and gas exploration and production companies.

1.3.3.Drawbacks of tax system in Egypt

  • Absence of social justice and inequality[22]:

Citizens abide to pay a percentage on income, profit and consumption to the state. In returns all citizens are received rights, services, and insurance that guarantee raise the standard of living for them. But unfortunately this equation doesn’t occur in Egypt, as it suffer from great imbalance.

As on one hand Egyptian government can’t collect tax revenue sufficiently, and on the other hand, citizens can’t enjoy their economic and social rights and services they deserve.  Although, Egypt remain focusing on collecting more tax revenues and fail to achieve their justice towards the citizens who afford the tax burden. In addition, Egypt is also unable to reform the tax system in a manner that expands the tax base.

  • Limited capacity of tax administration:

Egypt has inefficiency in determining who should afford the burden of taxation, is it individuals or companies or both. And who really should be exempts from the tax policies the poor or investors or both. So Egypt can’t control tax policies which achieve development and social justice or lead to opposite.  And although the latest tax reforms, it failed to fix the most crucial flaws in tax system, which prevents the efficiency of collecting tax revenues.

The latest reforms were relieved high – income earners from sharing tax burden relative to their income. And it exempts companies from higher share of taxes although the mean corporate tax in Egypt is less than the world average.

Table (1.3): tax percentages on the budget 2012/2013

STATE GENERAL BUDGET (total taxes 2012-2013) 100%
Total taxes on income, profit and capital gains 45.58%
Taxes on income 11.21%
Taxes on capital gains 0.04%
Taxes on petroleum authority and Suez canal profits 25.79%
Taxes on other companies profits 12.805
Other miscellaneous taxes 0.71%
Total taxes on property 7.27%
Periodical property taxes 0.38%
Taxes on financial, commercial and capital transactions 5.83%
Total taxes on goods and services 37.73%
Total taxes on international trade 7.78%
Total other commercial taxes 1.64%

Source: researchers work

It shows that taxes on individual income contribute around 11% of total tax revenues while sales tax contribute 37.7% , corporate income tax contribute to 12.8% and taxes on capital gains contribute 0.04% of total tax revenue. According to these ratios, we can conclude that:

  • Individual income taxes provide small percentage of total tax revenues. Their share is small and less than quarter of total tax revenue.
  • Although companies are assumed to pay higher share compared to individual income, they are equal and their share is low.
  • Capital gains taxes are extremely low.
  • The evasion of taxation remains high

A large number of businesses in SMEs sector evade from taxes, not registered and continued to operate in informal sector which lead to high loss of revenue each year. The tax law from 2005 did a broaden tax base, but evasion remains widespread. The majority of Egypt’s SMEs continue to escape tax collection as the administration is not providing any incentives to SMEs, such as improving service.

The head of tax authority, in special remarks for (Elyoum 7) says that the volume of cases of tax evasion, during the months of July, august and September 2016, the first quarter of the current fiscal year 2016/2017, amounted to 435 cases of tax evasion in the sales tax about 700 million pounds, and dealing in the prosecution of tax evasion amounted to 244 cases of about 200 million pounds, tax evasion in the income tax amounted to about 60 million pound during the same period.

1.4.     Taxes in the world:

  • World trends of taxation

When surveying the tax revenues across the world, calculated as a percentage of GDP, figure (1.6) shows the highest five countries in in the world in 2013 and 2014. Denmark was the highest country in 2013 while New-Zealand was the highest in 2014.

Figure (1.6): highest countries in tax revenues

Source: The Researches work.

The most common type in taxation is income tax. Countries around the world differ in the rate of income tax imposed. Figure (1.7) shows then top five countries in income tax rate in 2013 and 2014. The highest rate was in Aruba in 2013 and 2014.

Figure (1.7): highest countries in income tax rate

Source: researchers work

The corporate tax is very common across the world. Countries impose different rates of corporate tax corresponding to their economic structure. Figure (1.8) shows the top five countries in corporate tax rate in 2013 and 2014. UA emirates were the highest country in the rate of corporate tax in 2013 and 2014 with a tax rate of almost 50%.

Figure (1.8): highest countries in corporate tax rate

Source: researchers work

Turning to the indirect taxation around the world, we found that countries all over the world differ in the rate of imposed indirect taxes. Figure (1.9) shows the top five countries in indirect tax rate in 2013 and 2014. Hungary was the highest country in the world in the rate of indirect taxes in 2013 and 2014 while Iceland was the second.

Figure (1.9): Highest countries in indirect tax rate

Source: researchers work

Tax preparation time is the time in hours per year, it takes to prepare, files, and pay (or withhold) three major types of taxes: the corporate income tax, the value added or sales tax and labor taxes, including payroll taxes and social security contributions.[23] Figure (1.10) shows the top five countries in tax preparation time all over the world in 2013 and 2014. Brazil was the highest country in both 2013 and 2014.

Figure (1.10): Highest countries in tax preparation time

Source: researchers work

1.4.2.Trends of tax revenues during 2000-2013

Figure (1.11) show a comparison between the average value of total tax revenues of countries all over the world and the country that holds the highest value of tax revenues from 2000 to 2013. In 2000 the average value was around 17.5% of GDP and the highest value belonged to El Salvador with tax revenue of 95.17% of GDP. In 2013 the world average value was 17.7% of GDP and the highest value was in Denmark with 34.8% of GDP.

Figure (1.11): average and highest values of tax revenue from 2000-2013

Source: researchers work

Figure (1.12) shows the tax revenue in Egypt as a percentage of GDP VS the world average value of tax revenue from 2002 to 2012. The figure shows that Egypt didn’t exceed the average value all over the period.

Figure (1.12): Egypt vs. world average value in tax revenues

Source: The Researchers work

2.          Economic Development

2.1. Nature of economic development

  • Economic growth and economic development:-

Both of these concepts “Economic Growth” and “Economic Development” are working together to express a very special concept which is “Economic Advancement”. But the term economic development is more advanced and more comprehensive in its scope. So the following is interpreting both of these concepts:   Economic Growth

Economic growth is a steady process by which the productive capacity of the economy is increased over time to bring about rising levels of national output and income”.

Economic growth is said to be a necessary but not sufficient condition to eradicate absolute poverty and reduce inequality according to Micheal P. Todaro.[24]And according to Simon Kuznets: “Economic growth may be defined as a long term process wherein the substantial and sustained rise in real national income, total population and real per capita income takes place”. [25]

Economic growth is always linked with large increase in productive ability of the economy. Economic growth is connected with the fair distribution of income and wealth. Economic growth is attached with the reduction in poverty and unemployment as it is strongly related to the economic development which is defined as following:   Economic Development:

Simply it can be defined as the process whereby the total supply of goods and services of the society increases leading towards improved living standard to get rid of the poverty in the whole society.

Development must be considered as a multi-dimensional process involving major change in social structures, popular attitudes and national institutions as well as the acceleration of eco-growth, the end of poverty and reduction of inequality of wealth. So Economic Development is a process of structural change.[26]      Structural Changes of Economic Development:

Economic development represents following structural changes in various sectors of the country:

  1. There is a change in the occupational structure. In economic development there is decrease in the share of labor force in primary sector (farming, fishing and mining etc.) and increase in the share of labor force in secondary sector (industry).
  2. There is a change in the structure of national output. The contribution of primary sector in the national output falls and the share of secondary and third sector slowly go up.
  3. There is a change in the structure of industrial production. There is an increase in the production of capital goods and decrease in the production of consumer goods.
  4. There is a change in the structure of foreign trade. The share of primary goods in exports decreases and the share of capital goods in imports increase. Accordingly, in economic development there is an increase in exports of manufactured and final goods. Similarly, there is decrease in the imports of consumer items.
  5. There is a change in the structure of technology. In the economic development modern and advanced techniques are used in all the sectors of economy.
  6. There is a change in the social and institutional sector. Due to economic development there is an increase in the self-esteem and living standard of the population.

So here we include that the economic growth help to stimulate the economic development and in where high rate of economic growth there is a high rate of economic development as when there is high level of GDP and increase in per capita income there would be high level of standers and less poverty which achieving economic development so as following we can see that:

Economic Growth= Annual increase in per capita income[27]     (2.1)


Economic Development= Economic Growth + Structural Changes [28]   (2.2)      How the Economic Growth stimulate the Economic Development:[29]

Poverty has come down most when inequality has fallen and there is high economic growth. Initial low levels of inequality are associated with more negative elasticity of poverty reduction with respect to growth. Higher initial inequality results in less effect on poverty with increase in economic growth. Rate

The marginal savings rate changes with decreasing or increasing income. The marginal savings rate is the fractional decrease in saving that result from a decrease in income.

So when there is high economic growth there would be higher income then higher rate of saving rate which means higher level of investment which stimulate the economic development. Economy

Governments pursue poor policies (redistribution policies) trying to reduce inequality which actually results in high inflation, high deficit and lower when achieving economic growth and these policies become successful there would be low level of poverty and then led to high level of economic development. Market Constrains

The poor can’t get loans. So, when achieving economic growth and redistribution policies, there would be less poverty and then they would have loans which led to simulation in the economic development.

So, here there are two effects simulating the economic development: Economic Growth Effect states that positive growth of people’s income which means increase in economic growth stimulate the economic development, and in opposite no change in income leads to a decrease in the poverty level. And Redistribution Effect states that If there is a rise in inequality and mean income remains constant, then poverty will rise and that would affect the economic development.

2.2. Theoreticalbackground

2.2.1.Economic development theories:

Three versions of economic development  Traditional economic measures of economic development

In traditional terms, development means “achieving sustained rates of growth of income per capita to enable a nation to expand its output at a rate faster than the growth rate of its population”[30]

So we use growth rate of real per capita gross national income (GNI) to measure the population economic well-being. The planned alteration of production and employment structure was expressing economic development as agriculture’s share declines and manufacturing and services industries increases. So development used to focus on industrialization, usually, at the expense of agriculture and rural development. The emphasis in terms of economic development was on increased output measured by gross domestic product (GDP).  The new economic view of development

Experience showed that many developing nations reached their economic growth targets but the levels of living of the largest percentage of the population was kept almost unchanged proving that there was something wrong in the narrow definition of economic development.

So, during the 1970s, economic development came to be redefined in terms of reduction of poverty, inequality and unemployment in the growing economy.

Development recently was seen as a multidimensional-process containing major changes in social structures, popular attitudes and national institutions as well as the acceleration of economic growth, the reduction of inequality and poverty. In this theory, tax systems seem to have a critical role in stimulating economic development. Tax structure that depends on progressive taxes reduces the burden on lower-income population, reducing inequality and achieving income redistribution.  Classic theories for economic development: four approaches

The economic development classic literature on post-world war II focused on four major approaches:    The linear-stages-of growth model

The process of development was viewed as a series of stages of economic growth. In such theory, the right quantity and mixture of saving, investment and foreign aids were necessary to make developing nations proceed along an economic growth path. So, development focuses on rapid and aggregate economic growth.    Theories and patterns of structural change

Used modern statistical analysis and economic theory in attempts to draw the internal process of structural change that a developing country must follow to generate and sustain rapid growth.    The international-dependence revolution

This aspect was more political and radical. Underdevelopment was viewed in terms of international and domestic power relationships, institutional and structural economic strength and resulting generation of duel economies and duel societies within and among the nations of the world.    The neoclassical, free-market counterrevolutions

This approach prevailed through the 1980s and 1990s, emphasizing the beneficial role of free markets, open economies and inefficient public enterprises privatization. Failure to development here is due to too much government intervention and regulations of the economy.

2.2.2.Economic development in Egypt  Dimensions of economic development in Egypt:

Egypt has three dimensions to achieve economic development sustainability and each dimension has different axes illustrated as the following:

  • The Economic dimension [31]:

The economic planning aim to create a balanced and diversified economic competition based on innovation and knowledge and it has four axes which are:

  • First axis is (the Economic development):the vision of this axis that the Egyptian economy should be characterized by stable macroeconomic conditions and able to achieve sustainable,competitive, and diversified knowledge based on growth. And active player in the global economy able to adapt with global changes, maximize value added and GDP is high in middle and low income countries.
  • Second axis is (the energy): The vision of this axis is characterized by this sector become able to respond to all requirements of national sustainable development and maximize the benefit of its different sources (renewable and traditional), which lead to efficient contribution in promoting economic growth and national competition and maintain the environment protection. Energy sector has ability to innovate, predict and adaption with local, regional and global changes in the energy field to achieve the international goals of sustainable development.
  • Third axis is (knowledge, innovation and scientific research):The axis’s vision is the society become creative and productive for science, technology and knowledge characterized by linking knowledge applications and innovation outputs to national goals and challenges.
  • Fourth axis is (the efficiency governmental institution): The vision is that the administrative system becomes effective and efficient, improves the management of state resources, improves the management of state resources, flexible, and satisfied with citizens, interaction and response.    The Social dimension:

Social planning aim to establish the state based on justice, social integration and participation and is based on four axes:

  • First axes are (the Social justice): Social justice aim to build society characterized by equality of rights and economic, social and political opportunities and high level of social integration. a society is able to guarantee the rights to citizens to participate and equitable distribution and provides life-risk protection mechanism
  • Second axes is (the education and training ): The vision of this axes is to provide education and training for all with high quality without restrictions , through efficient , fair , sustainable and flexible institutional system . It should base on learner and trainee who is able to and be technically and technology able to build the integrated personality and build citizen that is creative, responsible and can build their future and able to deal competitively with regional and global entities.
  • Third axes is ( the culture ) : The vision of the culture axes is to build positive cultural values system in the Egyptian society that respects diversified which in turn enable the Egyptian citizens to gain knowledge and opening horizons for him to interact with the world . the positive elements in culture must be source of strength for development and added value to national economy and a basis for Egypt’s power
  • Fourth axes is (thehealth): the vision of this axes that all Egyptians have the right to a safe and healthy life through the implementation of integrated health system characterized by availability, quality and able to improve health indicators by achieving comprehensive health and preventive coverage and achieve the satisfaction of citizens and workers in the health sector to achieve prosperity and happiness, social and economic development to be a leading in the field of healthy.    The environmental dimension

An environmental planning aim to reach an environment with balanced and diverse ecosystem that invests in the human being and it is based on two axes:

  • First axes is ( the environment ) : This vision has a central focus on all development and economic sectors in a manner that achieve the security of natural resources and supports the equitable use , optimal utilization and investment of these resources and diversifying sources of production and economic activities . And providing a clean, healthy and safe environment for the Egyptians citizens.
  • Second axes is ( the urban development ) : The aim of this axes is that Egypt with its area of land , civilization is able to absorb its population and resources and meet the aspiration of Egyptians and raise the quality of their lives.  Economic development sustainability strategy 2030[32] :

In September 2015 a historic united nations witnessed the launch of 2030 strategy for sustainable development and adoption of 17 sustainable development goals by word leaders .Egypt has adopted an approach that characterized by a high level of ambition , firm commitment and dynamic innovation .

According to the sustainable development strategy : Egypt vision 2030 : ( Egypt will achieve a competitive , balanced , diversified and knowledge –based economy , characterized by justice , social integration and participation , with a balanced diversified ecosystem , benefiting from its strategic location and human capital to achieve sustainable development for a better life for all Egyptians . the strategy also states that by 2030 Egypt will be among the top 30 countries in terms of the size , quality of life , anticorruption of the economy ,market competitiveness and  human development .

  • The main goals of sustainable economic development:
  • Economy
  • happy citizen
  • Competitive market
  • human capital
  • Anticorruption
  • Economic development sustainable axes:

The trends of economic development include 12 axes which are Education, Knowledge, innovation and scientific research, Heath,Economic development, Culture, Social justice,Foreign policy and national security, Transparency and efficiency of governmental institutions, energy, environment and domestic policy.Examples of key performance indicators as the following:

  • Economic key performance indicators : (2013/2014 -2030 )[33] :

GDP growth rate is 2%, the vision by 2030 to reach 12 %Investment rate is 14%, the vision by 2030 to reach 30 %, Contribution of services to GDP is 46%,and the vision by 2030 to reach 70 %, Unemployment rate is 13%, the vision by 2030 to reach 5%.

Goal is to sustain per capita economic growth in accordance with national circumstances and in particular at least 7% per annum GDP growth in the least developed countries.

2.2.3.Countries experience in economic development.  Afghanistan:

Almost all state institutions had been distorted in Afghanistan in 2001. This included the tax system. But with the re-establishing of the ministry of finance, and starting working by new tax legislative framework started in 2003, the Government of the Islamic Republic of Afghanistan (GIROA) launched measures to build the domestic tax system.The MOF established a Fiscal Policy Unit, which is mostly focused on macroeconomic programs and medium-term budgeting.

In 2009, The GIROA has drafted a new VAT law which was enacted in the first quarter of 2015 with a start date of December 2016.

Given the low base that it started from, the GIROA has been quite successful in its efforts to establish a more modern tax system. Tax offices are open around the country, the number of active taxpayers has increased, normal income taxes have been established, and tax revenue rose drastically from 2.5% of GDP in 2003 to 8.0% in 2012.[34]

By 2011, Afghanistan had made considerable progress in mobilizing domestic resources for the government budget. To meet targets of fiscal sustainability by 2028, the IMF projects the country will need to raise its tax ratio by about another 70%, to about 18% of GDP.[35]

Economic growth estimated at 1.5 percent in 2015, slightly up from 1.3 percent in 2014. The fiscal position improved significantly over the year, with domestic revenues increasing to 10.4 percent of GDP in 2015, up from 8.7 percent in 2014. Growth is projected to gradually increase from 1.9 percent in 2016 to 3.6 percent in 2018, if the political situation stabilizes and planned reforms are successfully implemented.[36]

So, the Afghanistan Development Update noted a number of positive developments. As a result of reforms to both revenue collection and expenditure, the fiscal position improved significantly over the year. Domestic revenues increased to 10.4 percent of GDP in 2015, significantly higher than the figure of 8.7 percent recorded in 2014.[37]  Rwanda:

Rwanda is a small landlocked country in East Africa. In 1997, the Rwanda Revenue Authority (RRA) was created, In 2001, the country instituted a VAT. In 2005, a new income tax law was enacted with three tax rates; 0%, 20%, and 30% as a result of this from 2001 to 2013, total tax revenues as a share of GDP rose by about half. This overall increase in tax revenues came from the decrease of both import duties and trade taxes from about 12% of tax revenues in 2007 to 6.8%, in 2013.[38]

This rise in the tax ratio has played an important part in increasing domestic resource mobilization for development purposes, especially health and education as per capita health spending doubled from Ṩ 32 to Ṩ 70. Government spending on health rose from 3.2% of GDP to 6.5% and also government education spending rose from 4.4% of GDP in 2007 to 5.0% in 2013.[39]

Over the last decade Rwanda achieved economic development including high growth, rapid poverty reduction and, since 2005, reduced inequality and between 2001and 2015, real GDP growth averaged at about 8% per year. The economy grew 7% in 2014 and 7.5% in 2015, up from 4.7% in 2013.[40]

Rwanda’s long-term development goals depend on a strategy seeks to transform the country from a low-income agriculture-based economy to a knowledge-based, service-oriented economy with a middle-income country status by 2020.

In order to achieve these long-term development goals, the Government of Rwanda has formulated a medium-term strategy. The second Economic Development and Poverty Reduction Strategy (EDPRS 2) outline an overarching goal of growth acceleration and poverty reduction through: economic transformation, rural development, productivity and youth employment. The EDPRS 2 aims to achieve the following goals by 2018: raise gross domestic product (GDP) per capita to $1,000; have less than 30% of the population below the poverty line; and have less than 9% of the population living in extreme poverty to sustain its economic development.[41]  China

China’s economic development started from the end of 1970. Set forth the basic necessity for the 1994 tax reform. However these forms were unable to resolve the fundamental problems in china’s tax system. As for example: china’s tax system was too complex, having as way as 37 types of taxes in 1992 and china’s tax to GDP ratio in 1992 was only 12.05%, which was about one third of brazils and the average of the OECD countries.

Any tax reform should, on one hand, increase the amount of tax revenue in relation to GDP in order to finance china’s public expenditure and support its economic development , and on the other hand: any reform should also ensure the distribution of income and macroeconomic stabilization.

The main lines of the 1994 tax reform followed trends in other countries. The Chinese policy learnt from the expenses of these other countries, and adapted tem to Chinese environment.

  • Simplifying tax structure, but at the same time increasing the tax to GDP ratio.
  • Up to the 1970s, tax policy was viewed as an instrument to raise revenue and to achieve redistribution on income. China reduced its taxes from 37 to 23 in the 1994 tax reform, which was timely changed.

And these two charts that both of china’s tax revenue and its tax to GDP that both of china’s tax revenue and its tax to GDP ratio increased since its implementation of 1994 tax reform.

Figure (2.1): Chinas tax to GDP ratio from 1992:2012

Source: The Researchers work.

  • Establishing a new indirect tax system, with VAT as the primary tax and also supplemented with business tax and exercise for certain specific services and product.
  • Shifting from direct tax to indirect taxes has been a trend in the past two decades in the OECD countries as well as in other part of the world .the results were china’s strong economic growth in exports sector in the last decade which led to containing increase of its indirect tax revenue.
  • Establishing an unformed individual income tax applicable to all china’s residents.
  • The 1994 reform establishing an unformed individual income tax instead of previous agriculture tax applicable to formers income, was timely change following china’s economic and labor policy
  • Separating the state administrative of taxation from the ministry of finance.
  • Recentralization of tax revenue was one of the major aims of the 1994 fiscal reform. In order to ensure an efficient collection and administration of tax revenues, the Chinese government decided to separate the state administration of taxation from the ministry of finance. Changing the state administration of taxation into an independent tax administration agency improved the efficiency of tax administration, strengthens the power of Chinese central government and also helped the central government to better central tax revenues.[42]

2.2.4.The effects of the taxation on the economic Development

 The optimum design of a tax system depends on numerous factors and differs from country to another. The taxes have positive and negative impacts on both economic growth and economic development, so knowing that the tax is that revenues collected directly and indirectly from firms, individuals, producers and investors , so when these taxes (revenues ) immediately being spend on the public expenditure like medical care, infrastructures reforms, educational improvement , technological improvements, housing public expenditure, social insurance and so on … so that would affect positively on the both economic growth and economic development only when these action are carried out according to the terms of efficiency and sufficiency.

In the context that the economic development would be achieved by lowering the proportion of the poor, raising the level stander of the people, and then achieving welfare in the whole country, then the country which targeting the economic development would use the taxes as a tool to use it in the income redistribution, where the progressive personal income taxes and corporate income taxes reduce income inequality, in which collecting taxes from higher income classes and use it to compensate the poor by following procedures subsidizing and guaranteeing their rights. Thus, for example, agricultural interests can be expected to support programs for subsidizing food consumption by the poor.

And to achieve positive externalities of taxes through tax incentives, which mean the reduction of tax burden of any party like the poor in order to induce them to save and invest in particular projects or sectors, thus for example reduce tax rate on profits, reduced tariffs on imported equipment, component, and row materials.

Only when the country followed these progressive measures the tax would affect positively on the economic growth and also economic development, but what about if these revenues spent on financing the budget deficit?

If the country uses these revenues of the taxes to finance the budget deficit, that would affect negatively on the economic development.

And there is also negative impact of taxes on some classes of people like the poor where it would form a burden on their income, and that would affect the patterns of their consumptions and that would affect directly on the economic growth and also on the economic development.

3. Theimpact of Taxes on economic growth

3.1.    The economic theory:

3.1.1. The classical growth theory

It is based on the belief that economic growth ends when a population increases. Those who support this theory believe that an increase in the gross domestic product causes the population to increase. This population increase has an adverse effect on the economy as resources become limited due to higher demand. As resources become limited, the gross domestic product decreases and parts of the population also decrease.

Destruction of capital, for example, through a war, works in the opposite way. The marginal product of labor falls, GDP per capita falls and the population decreases. This will again lead to an increase in the marginal product of labor and GDP per capita return to the “survival rate”.

The main point of the model is that population growth will always eliminate the positive effects of technological development and GDP per capita will always return to the survival level. This very “dismal” growth theory was prominent in the early 1800s, and economics to this day is sometimes called the “dismal science”.

Today we know that the predictions of the model where incorrect. During the rest of the 1800s Europe experienced a growth in GDP per capita. Although the population growth was high, it was not nearly sufficient to eliminate the positive effects of technological development.[43]

  • The Marxian model of economic growth:

 We shall just discuss the economic aspects, ignoring social and institutional aspects[44].

Marx model is based upon following dynamic laws:

Law of Capitalistic Accumulation: According to this law the prime desire of the capitalist class is to accumulate more and more capital.

Law of Falling Tendency of Rate of Profit: According to Marx the profits have a tendency to come down and it plays an important role in the breakdown of the capitalistic economy.

Law of Concentration of Capital: Marx says that in a capitalistic economy the capital is concentrated and centralized in a few hands. In other words, with the growth of capitalism the cut-throat competition will develop amongst the capitalists. As results, the big firms will throw away the small firms, monopolies will grow and power will be concentrated into few hands.

Law of Increasing Pauperization: According to this law as the capitalism grows the miseries and agonies of laboring class increase. It is because of the reason that the labor are given subsistence wages, and the number of unemployed which Marx calls ‘Industrial Reserve Army of Labor’ increase when the technical changes occur and capital is substituted for labor.

According to Marx, because of simultaneous inter-play of these laws such circumstances will rise whereby the class conflict between capitalists and workers or between ‘have’ and have-nots’ will sharpen eventually, the capitalism will face a violent death in the final confrontation when the expropriators will be expropriated. Hence, Marx gave the clarion call: Workers of the world unite, as they have nothing to lose excepting their ‘Chains’.

Now we describe the law of falling tendency of rate of profit. This law plays an important role in the whole process of change

3.1.3. The neoclassical growth theory:

Was introduced by Ramsey (1928) but it was Solow (1956) who put forth its most popular model. Assuming exogenous technological change, constant returns to scale, substitutability between capital and labor and diminishing marginal productivity of capital, the neoclassical growth models have made three important claims. First, increase in the capital-to-labor ratio (i.e. investment and savings ratio) is the key source of economic growth.

Second, economies will eventually reach a state at which no new increase in capital will create economic growth (steady state), unless there are technological improvements to enable production with fewer resources. Third, for the same amount of capital available, the less advanced economies would grow faster than the more advanced ones until steady state is reached, and as such economic convergence is to be achieved[45]

3.1.4. Endogenous growth theory:

New growth theory was developed in the 1980s by Paul Romer and others. In the neo-classical model, technological progress is an exogenous variable. The neo-classical growth model makes no attempt to explain how, when and why technological progress takes place.

The main objective of the endogenous growth theory is to make the technological progress an endogenous variable to be explained within the model, hence the name endogenous growth theory.

3.2.     Research methodology

3.2.1.Data sources and variables

Data collected from the world Bank development indicators and the ministry of finance in a time series basis from 1991 to 2014. The dependent variable is GDP growth rate, the independent variables are the rate of capital accumulation as an approximation for fiscal capital, the inflation rate and the unemployment rate as an approximation of the economic policy efficiency which reflects the quality of institutions, the FDI as a percentage of GDP, the exports as a percentage of GDP and finally the total tax revenues as a percentage of GDP.

3.2.2.Model specification

The researchers use the Ordinary least square OLS technique to discover the impact of tax revenues on the economic growth. The regression equation is:


GDP%= GDP growth rate

Cap= the rate of capital formation

CPI= consumer price index

FDI= foreign direct investment as a percentage of GDP

Exp= exports as a percentage of GDP

Employ= employment rate

Tax= tax revenues as a percentage of GDP

€= error term

3.2.3.Results and analysis

The model was processed using the least square analysis and by the E-views package and the output obtained is as following:

From the results we found that the value of F-statistics is significant which means that the model is significant and well-specified. The coefficient of determination R2 is almost 0.6 which meant that the independent variables explain almost 60% of the total variations in the dependent variables. There are only two variables which are statistically significant: the unemployment rate, the coefficient of which is -0.63 which means each unit increase in the unemployment rate reduce the growth rate by 63% of change. The coefficient of the FDI is 0.45 which mean that when the FDI changes by 1 percent, the economic growth changes by 45 percent. The tax revenues are statistically insignificant which means that the total tax revenues have no clear effect on the economic growth rate. The capital formation, CPI and exports are also insignificant.

From the results we can conclude thattax revenues don’t affect economic growth thus it’s not necessary to stimulate economic growth in Egypt. The tax structure in Egypt doesn’t favor economic growth, so reforms are crucially needed.

4.          Policy recommendations

4.1. Reform plan for tax structure in Egypt

4.1.1.IMF recommendations

The IMF has provided input into the design of tax reforms in many transition and developing countries, and generally recommended that tax systems have the following characteristic:[46]

  1. Heavy reliance on a broadly based sales taxes, such as VAT, preferably with a single rate and minimal exemptions, and exercise taxes levied on petroleum products, alcohol, tobacco and a few items that are considered luxuries.
  2. No reliance on exports duties, which inhibit international competition, or on small nuisance taxes, administration of which is not effective.
  3. Import taxation at as low levels as possible, with a limited dispersion of rates to minimize effective rates of protection.
  4. An administratively simple form of personal income tax, with limited deductions, a moderate top marginal rate, an exemption limit large enough to exclude persons with modest incomes, and a substantial reliance on withholding.[47]
  5. A corporate income tax levied at only one moderate to low rate aligned with the top personal income tax rate, with depreciation and other non-cash expenditure provisions uniform across sectors and minimal resources to sectors or activity specific incentive schemes.

The effectiveness of tax systems depends not only on the design of tax policies but also on the effectiveness of tax administration. Once governments have their tax policies appropriately designed, the tax administration plays the main role by securing the effective implementation of these policies for achieving the objectives.

4.1.2.Egypt’s current reform plan

Egypt has already put an Egyptian tax reform plan 2017 to improve tax system and it includes the following:

The tax reform is one of the most important economic reforms; therefor the government assigned special priority to the project through the appointment of a deputy finance minister for tax policies.

The government also approved the passage of tax legislation, including the application of the Value Added Tax (VAT) Law and the Law to End Tax Disputes, in recent months.

This is in addition to drafting amendments to the Income Tax Law, in order to postpone applying the tax on capital gains for three years, after the Supreme Council for Investment approved the postponement decision and added tax incentives to the Investment Law, which were approved by the cabinet

The ministry of finance during 2017 working on many aspects such as drafting tax incentives for the new investment draft law and plans to include it in the Income Tax Law. This comes beside the completion of drafting tax discount rates appropriate for lower-income groups, in order to protect these segments of society from economic reform decisions.

The ministry is currently in the stage of determining the financial impact, according to different scenarios for the discount rates to be applied to all people—employees and non-employees.

The ministry is targeting to establish a unified law for tax measures that seeks the equality of proceedings among income, value-added, and real estate taxes, while these tax laws should include processors in accordance with international norms. It is also working to complete a new customs law that fights smuggling, promotes and protects the national industry, and tightens sanctions.

The ministry formed a central unit for real estate inventory to count real estate transactions especially as its value is estimated at EGP 500m, and already started in pilot areas, such as Nasr City and Maadi, with computerized programs to activate and increase their rates.

The tax rate is 2.5% without any reduction on the total value of the transaction of the built-up real estate area. This is also imposed on lands for building real estate, except for villages, regardless of whether or not any buildings have been erected on it.

Inheritance properties are exempted from this tax, as well as providing in-kind property as a share in the capital of joint companies, provided they do not dispose the corresponding shares in a period of five years.

The ministry agrees with the House of Representatives to reduce the financial burden on lower-income groups and we will consider other alternatives to tax exemptions, such as tax rebate or credits, which will be applied to segments of society according to their incomes.

The ministry is working on establishing a central unit for freelancers within the public tax authority, in order to ensure the collection of the tax fairly. Self-employed people and freelancers are not committed to tax payment and their tax evasion percentage is high.

The ministry studying supply contracts for units of electronic connection between the authority and a number of commercial activities, in which buying and selling processes will be registered directly in the public tax authority. If the probation succeeds, it will be applied on the level of the republic.

The merger of the informal economy is a simplified system for small and medium-sized enterprises (SMEs), and activation of cashless transactions through the National Council for Payments to promote the culture of dealing via a billing system.[48]

4.1.3.Lessons from different case studies

According to successful tax reform cases in developing and developed countries, there are some steps that can be applied in Egypt:[49]

  1. Tax policy reform and tax administration reform should be considered as mutually reinforcing measures that help increase tax revenues. In many countries, tax policy reform and tax administration reform have complemented each other. Combining moderate tax rates with better administration has led to a substantial increase in tax revenues. Bosnia and Herzegovina, Georgia, Paraguay, and Rwanda are good examples of countries that effectively combined the two reform streams.
  1. Broadening the tax base is effective and efficient. Whether by reducing exemptions and exonerations, or by improved audit and enforcement, a broader tax base has been successful in raising revenues without imposing a greater tax burden on business and society.
  1. Registering tax-payers is crucial to increase tax revenues. In each country study, taxpayer registries were initially in poor shape, with many people simply outside the system.
  1. Simplification of tax procedures can deliver important gains in efficiency.Simplifying tax procedures can make paying taxes easier and less costly, The modernization and simplification of the Ghana Revenue Authority (GRA) has been a key tax administration reform. It implied integrating the Internal Revenue Service with the Value Added Tax (VAT) Service and Customs Operations into one comprehensive organization. It also segmented tax offices into large, medium and small taxpayer offices, covering all regions and both the income tax and VAT. Five years of reforms established a new organizational structure with integrated tax offices; amended reporting lines and new job functions. All staff in the designated offices have been trained in auditing, taxpayer services, enforcement procedures and other skills.
  1. From a taxpayer’s perspective, e.g. a rural retailer, combining both income tax and VAT payments into a single regional office has made paying taxes easier and less costly, while being subject to only one comprehensive audit for both tax types. Subsequently, between 2009 and 2012 corporate taxpayers increased by 51.7% from 22,915 to 34,773, while self-employed taxpayers increased by 18.4% from 22,915 to 34,773. From the perspective of revenue administration, the simplification has lowered transaction costs. Collection costs also decreased from 2010 to 2014 leading to cumulative savings of 70.5 million credits (GHS). The number of registered taxpayers has increased from 1.52 million in 2009 to 1,66 million in 2014. With 63.6% of taxpayers perceiving customer service as either very good or good in 2014 customer satisfaction has improved.
  1. Modern information technology (IT) is a core component of any overall tax modernization effort.IT systems are expensive, and donors and developing countries have often made mistakes in design, procurement, and implementation. IT systems need careful planning, and among the most critical challenges to be addressed are a lack of coordination among donors and resistance to change in the developing country’s agency.
  1. Fighting corruption is an important tool for supporting tax reforms and tax collection. Corruption is a challenge in many tax and customs systems around the world. Reducing corruption helps to increase a government’s tax revenue. It is also beneficial to the taxpayer who is less exposed to the unscrupulous actions of officials and unfair competition created by those willing to “pay to play”. There are indications of reduced corruption in the tax systems of Bangladesh Bosnia and Herzegovina, Paraguay, and Georgia. In addition, the case of El Salvador below shows how national authorities’ drive to implement anti-corruption measures be translated into new institutional measures.

Finally, maintaining tax reform requires time as well as the commitment of the country’s government, which will have to use up some of its political capital inorder to bring about changes in the system. In this situation, when the benefits from the tax reform are widespread, while the costs are concentrated among specific groups that can get organized and oppose it. There is always a cost and a risk for a government engaging in tax reform. The costs of the reform are always immediate, while the benefits often are spread over the future.[50]

4.1.4.Recommendations to the Egyptian case

For improving the Egyptian tax system, government should put in consideration the following:

  1. Increased efficiency of the tax administration by Reducing losses through corruption and tax evasion.
  1. Average and marginal effective tax rates should be reduced by broadening tax bases through the elimination of ineffective tax preferences while level ling the rates. Such improvements may take a long time to achieve but has positive impact on economic growth.
  1. Simplification of the tax system and improving tax structure should provide a positive contribution towards a better tax system.
  1. export taxes should be discouraged.
  2. Extending the present property tax to rural councils.
  1. Imposing a commercial land tax in local authorities.

These recommendations must be translated into tax laws, changes in administrative procedures, preparation of lists of taxpayers with relevant addresses, redesigning tax forms, modification of penalties, new audit concepts, new training of administrative personnel, taxpayer education.

4.2.     Policy recommendations

  • Taxes should be reconsidered, direct taxes should be reduced and the burden on low income groups should be removed.
  • Revenues from taxes, both direct and indirect, should be used in productive and developmental spending, as the most proportion of tax revenues goes directly to finance budget deficit.
  • Taxes on exports should be reduced to encourage the production of export products which encourage economic growth.
  • Government should facilitate tax payment by getting rid of bureaucracy to limit tax evasion in different sectors and to reduce costs of collecting tax revenues.
  • Taxes should support equality in income distribution in order to improve the well-being of individuals in the society and achieve structural change in the economy to achieve economic development.
  • Tax should be made as transparent as possible. Where possible, the legal incidence of tax should lie with those who bear the economic incidence. Where this is not possible, those who bear the economic burden should be kept informed.
  • A good tax system should retain as few exemptions and rates as possible to achieve transparency, neutrality and low marginal rates rules. While tax exemptions or targeted cuts are not the same as spending measures, they often have substantially equivalent effects on incentives, distortions and outcomes.
  • A formal tax strategy that expresses the government’s medium- and long-term intentions should be published to provide tax­payers and policymakers with a framework for the overall dir­ection for any future changes in the system. This should reduce uncertainty and improve the coordination of decision-making.


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[1] Hyman N. David, public finance: a contemporary application of theory to policy, tenth edition, p,414.

[2]Hyman N. David, Back reference, p.415.

[3]Worlu, ChristianN, koro, Emeka, Tax Revenue and Economic Development in Nigeria: A Macroeconomic Approach, Academic Journal of Interdisciplinary Studies, Nov 2012, p.211.

[4]Abdellatif, Mahmoud M, Kitamura,Yokinobu,The Egyptian Tax System and Investment Tax Incentives, p.6.

[5]Masika, N Josephine, Direct tax and economic growth in Kenya, October, 2014, p.10.

[6]Masika, N. Josephine, back reference, p.10.

[7] Hyman N. David, back reference, p.483.

[8] The Institute of Cost Accountants of India (ICAI), Indirect taxation, January,  2013, p.1.1.

[9]  Hyman N. David, back references, p.644, 657.

[10] Hyman N. David, back references, p.666.

[11] Hyman N. David, back references, p.658.

[12] Hyman N. David, back references, p660.

[13] Hyman N. David, back references, p.664.

[14]Mahmoud,  M. AbdEllatif and Yokinobu, Kitamura,The Egyptian tax system and investment tax incentives, page35.

[15] Hyman N. David, public finance:A contemporary application of theory to policy, 10th edition, p.421, 422.

[16] Hyman N. David, back references, p.422, 423.

[17] Hyman, David N, back reference, p.447.

[18] Central bank annual report 2003/2004, consolidated fiscal operations of the general government, page64.

[19] Central bank annual report 2004/2005,consolidated fiscal operations of the general government, page79.

[20] Central bank annual report 2005/2006, consolidated fiscal operations of the general government, page68.

[21] Central bank annual report 2012/2013, consolidated fiscal operations of the general government, page69.زpage68eport 2005/2006nues.unted sing the income tax rateate.

lt of lowering the tax rate from 35% to 20% which widened the tax

[22] Khalil, Heba, Egyptian tax system and absence of social justice: the tax system and its latest emendations, the Egyptian Center for economic & social rights, January 2013.

[23] World bank,

[24]Micheal P. Todaro, economic development, 11th edition, New York university,2008,p258 .

[25]Kuznet, Simon, Economic Growth and income inequity, The American Economic Review, March,1955.

[26]Micheal, P.Todaro, Economic development,11th edition, New York university,2008, p515 .

[27]Khan, Ahsan, The difference between Economic Growth and Economic Development, December, 2011.

[28] Khan, Ahsan, back reference.

[29]Khan, Ahsan, Economic Growth, Oct2007,

[30]Todaro and Smith, Economic Development, back reference, 2011,P.14.


[32]Sustainable development goals , July 2016 , issued from ministry of international cooperation , page 9 .

[33]El-Megharbel, Nihal, Sustainable Development Strategy: Egypt’s vision 2030 And Planning Reform,may27, 2,4,5

[34]Examples of Successful DRM Reforms and the Role of International Co-operation Discussion, Paper,OECD, July 2015,  P.9.

[35]IMF (2014), Afghanistan Article IV Consultation.

[36] World bank,

[37] World bank, back reference.

[38] Examples of Successful DRM Reforms and the Role of International Co-operation Discussion Paper, OECD, July 2015,  P.24.

[39] Examples of Successful DRM Reforms and the Role of International Co-operation Discussion Paper, OECD, July 2015,  P.25.

[40]The World Bank (2017),

[41]World Bank (2017).

[42] Owners, Jeffrey, aligning china’s economic and tax systems: the role of china’s 1994 tax reform, 2007.



[45]Discussion Paper Series, 15(1): 1-22 Determinants of economic growth: the view of theexpertsPaschalisArvanitidis, Sotiris Pavleas,George Petrakos,  Department of Economics, University of Thessaly.

[46]parthasarathi, shome, Tax policy handbook, IMF,1995.

[47]Vahram, stepanyan, reforming tax systems: experience of the Baltics, Russia, and other countries of the former Soviet Union,IMF working paper, September 2003.

[48]Farahat,  Ahmed, tax reform plan of 2017,Finance Ministry, February 9, 2017,

[49] Examples of Successful DRM Reforms and the Role of International Co-operation, Discussion Paper, OECD and ITC, July 2015

[50]Helge, Fjeldstad and LiseRakner, Taxation and tax reforms in developing countries: Illustrations from sub-Saharan Africa,Michelsen Institute Development Studies and Human Rights, 2003, Chr.

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