Taxes and the new era of Arab governance

Ibrahim Saif of the Carnegie Endowment has a great article out now about the future of taxation in Arab countries. “Taxation is not a financial issue in advanced democracies but rather a socio-political matter with various implications,” Saif argues. “Those same implications apply to the future economies and societies of Arab countries undergoing political revolutions.” Saif explains the connection between legitimate governance and taxation with amiable brevity. Even if you’re familiar with the logic it’s worth a refresher:

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

Tax regimes in Arab countries today fall into two categories. Oil-rich states do not collect taxes because they rely on oil revenues instead. That money is then redistributed in such a way that the social contract between government and citizen is abbreviated, as the regime invests in education, healthcare, and other sectors that ensure civil security and political quiescence. Those governments lacking oil tax there citizens indirectly, as Saif explains.

Given recent turmoil, taxation is not the sexiest topic among analysts nor is it high on any revolutionary’s priority list. But Saif deserves serious credit for drawing attention to it. As countries re-imagine what it means to be a citizen and populations draw nearer to democracy, taxes should factor into the debate precisely because–to some degree–they ensure a measure of accountability. How soon this debate gathers momentum is an open question. Most likely it depends on how soon governments emerging from revolutions can rebuild economies and create the political capital it will take to institute a more thorough taxation model.

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