Determinants of Tax Effort and Tax Capacity in Jordan During the Period (2000-2017)

Abstract

The main objective of this study was to measure the tax capacity and tax effort in Jordan by using cross-sectional time series data for 59 countries during the period (2000-2017), where the modal was estimated by the least squares method and the normal results of the study, (OLS), the result of the study showed a positive relationship between the tax burden and the share of exports of GDP, while the relationship was inverse with the value added of the manufacturing sector, per capita income and the share of the services sector of GDP. As for the estimated tax effort, the results showed that the data of Jordan were compensated in the estimated standard model where the tax capacity in Jordan in 2017 was about 16.1%, this means that Jordan is close to the upper limits of the tax capacity; in 2017 the tax burden has reached about 15.7%. Taking into account the impact of the procedures that the government has taken since the begging of 2018, especially the sales tax and the special taxes on oil, this means that Jordan is close to the limits of tax exhaustion. The results of the study also showed that the tax effort in Jordan is high, thus means that the category that pays taxes pays more than its capacity taxes, and these counts as an exhaustion on the productive sectors, which negatively affects the competitiveness. The study recommended the importance of the effective utilizing of tax capacity for individuals and for the economy and maintains acceptable levels of tax effort and not to exceed these levels.