Tax Revenues In Syria In View Of The Laffer Hypothesis An Applied Study During The Period (1990- 2019)

Abstract

Tax revenues are the most important financial resources needed to fund public spending; those revenues are always determined by the tax rate approved by the government's fiscal policy, studying the relationship between the tax rate and tax proceeds helps decision makers to reach the optimal tax rate that achieves the highest possible outcome. The study seeks to test Laffer's hypothesis in Syria during the period (1990-2019) based on the Threshold Regression model in view of Hansen's method, And checking whether the tax burden rate is less or more than the optimal rate that maximizes tax revenues, as well as determining the optimal rate of the tax burden to achieve the financial and social objective of the tax policy. The results showed that the optimal tax burden rate is between 7% and 11%, and when it exceeds this limit, it causes a decline in tax revenues. Despite the low tax burden in Syria compared to other developing countries, the problem lies in the weak tax collection mechanism, the high rate of evasion and the prevalence of corruption. The study recommends, in light of the reform of the tax system, to keep the tax rates low, to automate the tax collection process, also to expand the tax base.