Measuring tax effort in Arab countries

Abstract EN

Many Arab countries face difficulties in generating sufficient revenues for public expenditure and may face a budget deficit.

This study makes use of pooled time- series and cross-sectional country data for the 1994-2000 time period for 16 Arab countries to examine the determinants of the tax effort.

The results suggest that in the Arab countries, the main determinants of the tax revenue share in GDP are the per capita income, the share of agriculture in GDP and the share of mining in GDP.

Other variables that are also important are the share of exports, imports and the outstanding foreign debts.

Furthermore, country-specific factors appear to be important determinants of tax share, e.

g., the political system; attitudes toward government; the quality of tax administration and other institutions of the government.

The results for the tax effort index showed that for Arab countries that are facing a budget deficit, especially those of the GCC, there is room to increase their tax revenues by reforming their tax systems.