Syria - Politics, government, and taxation



Syria is a socialist republic ruled by the Ba'ath Socialist Party dictatorship. According to the Syrian Constitution of 1973, the president governs with the assistance of an appointed Council of Ministers, headed by a prime minister. The president also functions as commander-in-chief of the armed forces and secretary-general of the Syrian Ba'ath Party. Since 1970, Syria has been under the patrimonial rule of the Assad family. During the reign of Hafez Assad, the Ba'ath Party became the major instrument in implementing economic and fiscal policies . Assad's takeover in 1970 gave new momentum to the Syrian economy. He relaxed many socialist restrictions and measures by previous Ba'ath leaders and adopted a moderate foreign policy toward the conservative oil-rich Arab states to accumulate their oil money in Syria.

A second phase of economic reform in 1986 and 1987 added to Assad's economic reform and relaxation policies of the early 1970s. In this second phase, the government largely surrendered its control over foreign exchange to the market. The state-owned banking sector, instead of being an instrument of control over private exports and imports, was gradually reduced to the role of an intermediary. It passed a new investment law in May 1991 (Investment Law #10), lengthening the list of goods that the private sector can either produce or import. Apart from foreign trade and currency regulations, this second phase involved a substantial liberalization of Syria's agricultural economy (pricing, production, and marketing of fruits and vegetables have been placed in private hands by the government). Although these limited liberalization schemes served their purposes well, they were not enough for a complete transformation from a socialist to a market economy. Throughout the 1990s, Syria's economy suffered from instability, recession , unemployment, rising external debts, and capital shortages.

Thanks to the liberalization schemes of the 1970s and the 1980s, by 2001 Syria developed a mixed economy based on agriculture, trade, mining, and manufacturing. The government controls the most vital sectors of the country's economy and regulates private businesses. The economy, where the public and private sectors have an almost equal share, is managed through a central planning system. The public sector (composed of enterprises wholly or partly owned by the state and controlled through a public authority which does focus entirely on commercial profit) is dominant in oil, banking, construction, electricity, chemicals, and much of the textile and food processing industries. The private sector (com-posed of enterprises owned by individuals in pursuit of profit) is dominant in agriculture, tourism, domestic trade, and certain light industries. State control in commerce is restricted to foreign exchange operations.

The Syrian government depends heavily on oil revenue, foreign aid, remittances from Syrian workers abroad, tourism, and tax revenues. In 1997, tax revenue constituted 16.4 percent of the GDP. For the same year, taxes levied on goods and services made up 20.72 percent of the current government revenue whereas income taxes and taxes levied on international trade accounted for 30.15 percent and 10.58 percent, respectively. Income taxes are levied on 3 main categories of income: 1) profits from an industrial, commercial, or noncommercial activity; 2) wages; and 3) income derived from moveable capital assets. All businesses are charged a "profits tax" based on net profits derived from professional, industrial, commercial, and non-commercial activities. The business profit tax is applied in progressive rates (between 10 percent and 45 percent) depending on the amount of taxable income. Shareholding companies and industrial limited liability companies are taxed at a flat rate of 32 percent and 42 percent, respectively. An individual is liable for the same taxes as a company on his business income, income from movable capital, and real property. Individuals are also subject to a wage and salary tax; the rate varies from 5 percent to 12.5 percent. Tax on movable capital incomes, which is levied at a flat rate of 7.5 percent, applies to interest, royalties, and foreign source dividends.

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