Syria taxes expand, justice is missing
Enab Baladi – Jana al-Issa
During the past months, the Syrian regime’s government has clearly headed towards providing the state treasury with more funds by raising the previous taxes levied on certain sectors while imposing new taxes on other sectors.
In spite of the challenging economic and living conditions for residents of the regime-controlled areas that make most of them unable to handle the government-imposed taxes, the government is seemingly carrying on with its policy of concentrating on increasing tax collection and “reducing tax evasion,” according to its justifications, which is implemented through semi-periodic decisions that it forces upon various sectors.
In early 2021, the regime’s Ministry of Finance declared the creation of a new committee to “study the tax system, review tax legislation, and proposed legislative amendments to tax policy.”
The main aim of forming this committee was to fully re-examine the Syrian tax system, work on achieving tax justice, combat tax evasion, and collect appropriate revenue for government expenditure.
In this article, Enab Baladi attempts to cite the current and future effects of the regime’s policy on the issue of imposing more taxes and whether it is indeed capable of setting the said “tax reform,” which justifies the implementation of this policy.
Tax sector expands
Since the beginning of this year, the Ministry of Finance in the regime’s government commenced obliging a number of sectors to use the “electronic verification code” application for the invoices issued by them and coordinate with the “tax authority.”
The ministry justified this measure by seeking to determine a facility’s activity volume and to eliminate any human interference in estimating the activity volume of the facility, all with the aim of achieving “tax justice for all parties.”
On 13 February, the Ministry required private hospitals in the governorates of Damascus and its countryside and medical laboratories in Damascus governorate to use the “electronic verification” application. This decision followed another, requiring all food establishments and fast-food restaurants to use the same application.
In an interview with the local Melody FM radio station, the head of the Craftsmen’s Union in Damascus, Mohammed Salim, talked about the Ministry of Finance imposing “unimaginable” taxes on craftsmen.
At the end of December 2021, the Syrian regime’s president, Bashar al-Assad, issued a new financial law for the administrative units. This law unifies all financial laws in relation to the units’ revenues, with the aim of providing the state treasury with new revenues.
The aforementioned law also includes setting new annual and monthly fees according to certain quotas for many services, including real estate, transportation, port charges, owning private dogs, and several other services.
What is a tax?
A tax is a mandatory fee or financial charge levied by governments on activities, expenses, jobs, and the income of individuals or establishments, in order to obtain financial support for the services they provide.
A tax is a type of obligation that must be honored by people and businesses and is usually a predetermined percentage of the money.
There are types of taxes, including capital return tax, value-added tax, sales and property tax, customs duties, and income tax.
A financial resource with benefit
Al-Assad’s government resorted to imposing these new taxes and raising the old ones due to the depreciation of the Syrian pound. Old tax rates are inferior in comparison to the value of the pound, which has decreased significantly, according to the researcher in economics and doctor of financial and banking sciences, Firas Shaabo.
Shaabo told Enab Baladi that the government’s act of increasing tax collection in early 2021 was a step towards increasing its financial resources, as the deficit in the state’s general budget at that time was close to 40 percent.
This year’s budget deficit is at approximately 33 percent, which explains the government’s proceeding in imposing additional taxes on various sectors.
On 13 December 2021, the Minister of Finance, Kinan Yaghi, confirmed a “significant” improvement in current revenues since the beginning of the year, an improvement estimated at one thousand billion Syrian pounds, which he said was obtained from the collection of taxes and customs duties.
Shaabo added that the government nowadays deems taxes a basic and primary financial resource in light of the absence of the oil and financial resources that were under its control prior to the start of the Syrian revolution in 2011.
According to Shaabo, the absence of these resources, combined with high rates of corruption and mismanagement of crises, have affected the regime’s capacities to finance and collect funds.
In early November 2021, the Ministry of Finance announced that last year’s public revenues increased by 160 percent compared to the same period in 2020 due to the increase in tax and customs revenues.
The Ministry stated that collected revenues exceeded expectations due to “intensive work to reduce tax evasion, especially in the case of major evaders.” According to the ministry’s statement, public revenues were at 1.625 billion Syrian pounds during the first nine months of 2021.
People, the main victim
The policy that the regime’s government operates with in regard to tax collection will be reflected mainly on the people, who are consumers residing in the areas under its control.
According to what Shaabo affirmed, the increased rates of taxes levied on merchants in different sectors will lead to an increase in production costs, which will consequently be charged to consumers in the form of price increase.
Shaabo also added that whenever regimes lose their ability to collect money through their resources, they often resort to collecting money from the people.
In light of the tough economic and living crises that people are currently facing, Shaabo estimates that the effects of high tax rates would be calamitous as far as living conditions go, which would very possibly result in a famine.
‘Unfair’ tax system
The Finance Ministry claims that its recent decisions regarding taxes serve the purpose of improving and reforming tax policy and reducing tax evasion.
These topics are the goal for which a “specialized committee” consisting of 11 members and headed by the Minister of Finance, Kinan Yaghi, was established in early 2021. However, it seems that it is yet to achieve what it was created for.
In a report titled “A year after its creation… Has the committee for the development of our tax system and its legislation achieved its objectives” that was published by the State-run al- Baath newspaper on 3 January, financial experts (who remain unnamed) said that Syria’s tax system lacks the elements of a fair tax system, the most important of which are justice, adequacy, clarity, and economy in tax collection expenses.
The report also clarified that the current tax system is only preoccupied with the first objective of the tax, which is the financial objective, and that comes at the expense of the economic and social objectives; considerations of the treasury’s interest have been given priority over other considerations of justice and efficiency.
The aforementioned report establishes that the high-income tax rates in Syria “do not only encourage tax evasion but also serve as a disincentive to investment, thus, discouraging Arab and foreign capitals to invest.” It also emphasized that the previously imposed taxes and fees, as well as the ones that are currently levied, represent a heavy load on the shoulders of owners of medium, small, and micro-businesses.
Tax reform is a ‘propaganda’
Regarding the possibility of implementing the reform of the tax system, which the government continues to refer to, Dr. Firas Shaabo believes that this is merely “media propaganda.”
Shaabo also demonstrated that the government is utterly unable to secure basic necessities of life, such as bread, fuel, electricity, transportation, and communications. It surely does not appear that the government would be able to improve any of them; in fact, there are no indications that it is even trying to improve them, nor the issue of tax reform.
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