Fair Taxation in the Middle East and North Africa

Staff Discussion Notes, September 2, 2015

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Fairness in taxation is central to economic and social debate globally and has been at the core of recent political transitions in MENA.
The Staff Discussion Note (SDN) explores how tax systems—which are a critical interface between the state and citizens—can help meet demands for greater economic fairness in MENA countries.
Across the region, effective communication, transparency, and constructive dialogue between the State and citizens are critical to the success of reforms.

Reforms should focus on:
- simplifying tax structures;
- introducing more progressivity of personal income taxes;
- broadening tax bases;
- better designing and enforcing property taxes.
Tax administration should be more efficient and user-friendly.
Simplifying tax regimes will reduce the scope for arbitrary implementation.

Begin with a “starter pack” that includes:
- introduction of low-rate value-added taxes;
- corporate income taxes;
- excises;
- property taxes.
Build up administrative capacity and taxation expertise.
Develop plans for introducing a personal income tax.

Tax administration improvements: efficiency, user-friendliness, and strengthened enforcement.
Base broadening and progressivity: combine base-broadening measures with greater progressivity in personal income taxation.
Property taxation: improved design and enforcement to contribute to fairness and revenue.
Communication and transparency: essential for legitimacy and support of reforms; constructive dialogue between State and citizens is emphasized.