لخّصلي

Tax legislation is tax law issued by the legislative authority (people’s
council) according to the institutional rule: the right of establishing, adjusting and
canceling taxes is a pure right for the legislative council of the community. This
legislative authority should be an independent authority in the society. The
separation between legislative and executive authorities is a guarantee against
the misuse of the authority by the government (executive authority) in increasing
the tax burden on people; whenever this authority needs more funds for wasteful
public expenditure. Increasing the tax burden of the community creates negative
effects in all aspects of life for societies: economic, social, and political. For
example, one of the main reasons of the French revolution in the eighteenth
century was the heavy burden of taxation imposed by the king at that time.
Tax incentives: They are those special exclusions, exemptions, or
deductions that provide special credits, preferential tax rates or deferral of tax
liability. Tax incentives can take the form of tax holidays for a limited duration,
current deductibility for certain types of expenditures, or reduced import tariffs or
customs duties. In addition, a country that provides a relatively low corporate tax
rate for income from manufacturing can be seen as a special tax incentive
(restricted to manufacturing) in the context of the entire tax system.
The incentives are used for direct investors to real investment in productive
activities rather than investment in financial assets, and are often directed to
foreign investors on the grounds that there is insufficient domestic capital for the
desired level of economic development and that international investment brings
with it modern technology and management techniques. Tax incentives may also
be used to help correct market failures and to encourage investments that
generate positive market externalities.
Almost all countries use tax incentives. In developed countries, tax incentives
often take the form of investment tax credits, accelerated depreciation, and
favorable tax treatment for expenditures on research and development. In the
post-WTO world, developed countries also adopt tax regimes that favor export
activities and seek to afford their resident corporations a competitive advantage
in the global marketplace. Tax incentives in the developing countries are used to
encourage domestic industries and to attract foreign investment. They mainly
take forms of tax holidays, regional investment incentives, special enterprise
zones, and reinvestment incentives.
Tax incentives can be considered as a lure provided by a fisherman to attract
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big fish to his fishing rod, the fisherman believes that his catch will be more than
enough to compensate his costs (materials, effort and time). Now if Tax
incentives are successful in encouraging more investors, then tax revenues will
automatically be increased as a result of the increase in the gross domestic
product and this will compensate the decrease of tax revenues because of the
provided tax incentives.
Since our fisherman may not be successful in catching fish, the reasons may
be that our fisherman does not provide the relevant lure to the kind of fish existed
in the area or because big fish’s places are far away from his catching place (e.g.
he needs a boat instead of a fishing rod) which means that his current resources
are not sufficient). Governments, as well, may not be successful in attracting
local and foreign investments through tax incentives, and this result may be
explained by the limited tax incentives, or because international investors have
other good places to invest, or may be because of some unsuitable international
economic and political circumstances.