Analyzing and Reforming Tunisia's Tax System

Analyzing and Reforming Tunisia's Tax System

James Alm (Tulane University, USA)
DOI: 10.4018/978-1-5225-0053-7.ch016


Tunisia's tax system has undergone significant structural reforms over the last several decades. Even so, its structure exhibits some major flaws, shortcomings that spill over to and affect the performance of the overall Tunisian economy. Further, the tax system continues to underperform in some fundamental ways, ways that also affect the rest of the economy. Finally, the structure of the Tunisian tax system has some notable shortcomings. This paper discusses these issues. It presents details of the main taxes, it analyzes several main features of this tax system, and it suggests various specific tax reforms that can be introduced both in the short term and in the longer term.
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Background: The Tax System In Tunisia

The Tunisian tax system can be divided into two major categories: direct taxes (including the corporate income tax, the personal income tax, and payroll taxes) and indirect taxes (e.g., the value added tax and consumption duties). The tax system includes the following taxes:

  • Customs Taxes.

  • Value Added Tax.

  • Consumption Duties.

  • Personal Income Tax.

  • Corporate Income Tax.

  • Registration Taxes and Stamp Duties.

  • Various Taxes on Certain Products, Transportation, Insurance, Hotels, and the Like.

Even aside from the individual income tax, the government imposes a variety of taxes on the wages of workers. Some of these taxes are more properly viewed as “contributions” because individuals are entitled to benefits, the size of which varies with their contributions. Some may also be seen as a way to force people to save for old age or for insurance against health problems and occupational injury. Several have all the features of a tax, but nevertheless do not go into the general revenues of the government and instead are used to finance government and non-government provision of social insurance. In total, these various payroll taxes (or “Social Security contributions”) constitute a significant additional burden on labor.

Key Terms in this Chapter

Vertical Equity: A principle of fairness in taxation, which holds that individuals with greater ability to pay taxes should pay more in taxes.

Marginal Effective Tax Rate: A measure of the impact of taxes on the marginal (or incremental) decision by economic agents to invest in capital, defined as the additional tax paid by a firm when it decides to invest in one more unit of capital.

Tax Evasion: Intentional and illegal actions taken by agents by which they fail to pay their legally due tax liabilities.

Computable General Equilibrium Model: A type of modeling in economics, which starts with a system of equations to represent an economy and then uses actual economic data to estimate how the economy reacts to changes in policies.

Tax Incidence: The effects of a tax on the distribution of income.

Tax Effort: An index of how effectively a country uses its available tax instruments in collecting taxes, relative to what the country could be reasonably expected to collect from these tax instruments.

Horizontal Equity: A principle of fairness in taxation, which holds that individuals with the same ability to pay taxes should pay the same in taxes.

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