Introduction
Since the fall of the Assad regime, Syria has faced major economic challenges amid declining public revenues, persistent fiscal deficits, high inflation rates, and sluggish activity across the production, trade, and investment sectors. These circumstances underscore the need for effective instruments to revitalize the economic cycle, improve citizens' standard of living, and strengthen the state's capacity to finance its public expenditures.
Taxes represent one of the most prominent tools available to the state to secure revenues, redistribute resources, and achieve greater social justice, alongside their role in stimulating economic growth. There is also an urgent need to build a fair and efficient tax policy capable of broadening the tax base and curbing tax evasion without turning into a burden that hampers investment, production, and exports.
First: Tax Evasion and Its Forms in Syria
Tax evasion takes various forms employed by taxpayers to avoid paying their tax liabilities in whole or in part. In Syria, it takes two primary forms:
1. Tax Fraud: This involves using illegal means to conceal or undervalue the tax base, constituting an explicit violation of applicable legislation. In Syria, its most prominent forms include conducting business without registering with financial directorates, concealing a portion of sales or profits, failing to issue invoices or tampering with them, submitting inaccurate financial statements, omitting employees from payroll records, and using shell importers to conceal the identity of the actual importer[1]. The General Commission for Taxes and Fees has categorized these practices—or most of them—as acts of tax evasion, and the Ministry of Finance issued a decision in July 2026 specifically aimed at combating evasion through shell importers.
2. Tax Avoidance: This involves reducing or avoiding tax liabilities by exploiting loopholes and ambiguities in the legislation without explicitly violating the letter of the law. In the Syrian context, this manifests in dividing business activities among several establishments or individuals to benefit from exemptions or lower tax brackets, or choosing a legal structure for the business that entails a lower tax burden. Transnational companies may also use transfer pricing, contractual arrangements, or residency mechanisms to prevent establishing a permanent establishment in Syria or to shift part of their profits to lower-tax jurisdictions.
Second: Tax Policies in Syria Prior to Liberation
Tax policy formulation proceeds from the premise that taxes are a fiscal and economic instrument with social dimensions and outcomes. Tax legislation serves as the formal expression of tax policy, which itself stems from the state's broader fiscal and economic policies.
In Syria, the tax system has gone through several phases that began after independence and culminated in the issuance of Law No. 85 of 1949, which defined income sources as well as imposed taxes and fees. This was followed by the State's Basic Financial Law No. 96 of 1967, which amended the corporate income tax law for public enterprises, granting them the legal status of commercial or industrial entities obligated to pay taxes to the state on par with the private sector [2] .
Between 1985 and 2000, a series of decrees were issued, most notably Expatriates Law No. 19 of 1990, which granted diverse customs exemptions to Syrian expatriates wishing to return and establish projects in Syria, and Investment Law No. 10 of 1991, which granted tax holidays to investors for five years along with a complete exemption from customs duties upon establishing a project. This was later amended in 2000 by Law No. 7, which expanded tax exemptions for investment projects and reduced the corporate income tax rate for joint-stock companies from 32% to 25%.
Although the stated objective of successive legislation was to meet the state's fiscal needs, the tax system failed to secure the financial resources required to finance public spending. While tax revenues constitute the most vital resource for governments—financing up to 90% of public spending in developed nations—tax revenues accounted for only 54% of public revenues in Syria in 2012. Based on a set of indicators, the tax system prior to the fall of the Assad regime can be assessed as follows:
1. Tax Collection: This refers to tax revenue relative to GDP, defined as mandatory fiscal levies imposed by competent authorities on activities, spending, and income.
• Tax revenues in Syria have remained low despite high tax rates. During the pre-liberation period, they averaged approximately 10.16% of GDP—a low rate attributable to a set of policies pursued by the Assad regime, including the unchecked expansion of tax exemptions, reliance on fragmented tax legislation, and a tax administration lacking integrity and expertise.
• In 2009, the Ministry of Finance estimated tax evasion at around 200 billion Syrian pounds (equivalent to $4 billion), while other estimates indicated that tax evasion ranged between 10% and 15% in that same year [3] .
• Tracking GDP growth from 2004 onward—a period of economic recovery in Syria driven by substantial capital inflows from abroad and increased exports to the Gulf states and Iraq—shows that the average annual GDP growth rate reached 15% between 2004 and 2010. Conversely, the average growth rate of the tax burden was only 9%. This indicates that tax revenues failed to keep pace with output growth, pointing to structural defects in collection mechanisms linked to private-sector tax exemptions, the expansion of the shadow economy, and rampant corruption within financial directorates[4].
• During the revolution, tax revenues as a share of GDP fell sharply from 10% in 2011 to 5% in 2019, averaging 5.74% between 2011 and 2024. This was due to numerous public and private enterprises ceasing production, declining customs revenues resulting from decreased import volumes, and the loss of transit fees following the loss of control over border crossings with neighboring countries. This was compounded by a growing public unwillingness to pay taxes and fees, including public utility bills for water and electricity, in light of the Assad regime government's lack of responsible governance in managing the crisis.
2. Tax Fairness: This means that each individual bears their share of the tax burden according to their ability to pay, ensuring an equitable distribution of the tax burden. The Syrian tax system lacked equity, as evidenced by several clear indicators, including:
• A significantly lower rate of tax evasion among taxpayers subject to payroll and wage taxes compared to those subject to real profits and lump-sum income taxes.
• Manifestations of tax inequity embedded in the text of Legislative Decree No. 51 of 2006, where Article 11(d) granted major taxpayers the right to deduct personal expenses from their gross profits, while denying this right to small taxpayers.
• The absence of a comprehensive view of the taxpayer's personal and family circumstances and burdens. The system adopted a schedular tax system, which is fundamentally contrary to tax fairness; it is supposed to distinguish between income derived from labor, income derived from capital, and income derived from both, by applying lower tax rates to labor income compared to capital income[5].
• The lack of fundamental fair-tax principles in tax assessment procedures: taxpayers' rights of objection were compromised due to the lack of independence of appeals bodies from the tax directorates, the absence of time limits for commencing audit procedures, and the lack of binding deadlines for tax officials to respond to objections and submit them to appeals committees.
• Indirect taxes accounted for 53.35% of total tax revenue. The burden of this type of tax falls entirely on the consumer purchasing the good or service, regardless of their income level or personal financial situation.
3. Simplicity of Laws: Syrians suffered from a complex and fragmented tax system that relied for decades on a 1949 law and the 2003 Income Tax Law, characterized by excessive complexity and inconsistency due to several factors, most notably:
• Frequent legislative amendments to the tax system, with decrees issued periodically to adjust a tax or alter its base, particularly regarding customs duties. The period between 2010 and 2024 saw the issuance of numerous decrees, such as Legislative Decrees No. 60 of 2011, No. 41 of 2018, and No. 30 of 2023, which modified tax brackets and rates, creating widespread confusion among taxpayers.
• Inefficiency of the tax administration, which placed undue pressure on taxpayers. Ambiguity in tax estimation and reliance on assessment and estimation committees to determine actual profits often opened the door to subjective evaluations and discretion rather than fixed, objective rules.
• Multiplicity of surcharges: the overlapping of primary taxes with additional surcharges—such as national defense surcharges, school fees, and municipal shares—made calculating the total tax burden indirect and highly convoluted.
4. Contribution to Supporting Economic Growth: Tax policy is designed to achieve economic growth, as reflected in its impact on formal economic expansion, export and investment growth, and the state budget. In this regard, the following points emerge:
• Ratio of the Shadow Economy to the Formal Economy: The misalignment of the tax burden with income levels contributed to the spread of tax evasion by driving the informal economy in Syria to exceed 70% of total economic activity between 2011 and 2024, up from around 50% previously. This caused massive losses to the state treasury, as the informal economy remained outside the tax net[6].
• State Budget Deficit: With respect to Syria's public budget, tax evasion was the primary driver behind the decline in public revenues, alongside the drop in other revenue streams. This compelled successive governments to rely on seigniorage (money printing) to finance the public budget, driving inflation to levels of approximately 89.62% in 2013, when the fiscal deficit surged to 745 billion Syrian pounds[7].
• Investment Growth: The period between 1985 and 2000 was characterized by investment tax exemptions enacted through a series of laws and regulations. However, the stated goals of these exemptions were not realized: foreign investment did not flow into Syria, and the economy entered a state of stagnation. Examining the effect of taxation on public investment growth reveals that despite a 27.7% increase in tax revenue growth over 2007, public investment growth was negative at -11.2%, indicating that tax revenues had no positive impact on financing investment in that year [8] .
• Foreign Remittances: Tax rates were reduced for private banks and money exchange companies, which were permitted to operate starting in 2006. This reduction contributed to the flourishing of the exchange and remittance sector through formal channels such as Western Union and licensed exchange houses, making 2010 record the highest levels of external inflows through official channels.
Third: Economic and Social Causes of Tax Evasion in Syria
1. Economic Causes:
• High Tax Burden and Pressure: A heavy tax burden is a major driver of tax evasion, as high rates incentivize companies and individuals to develop evasion schemes. Liberal economists frequently use this argument to persuade governments that lowering tax rates can increase total tax revenues by improving compliance. However, international experience demonstrates that tax evasion can remain minimal under high tax rates, and vice versa. Political governance—reflected in taxpayers' perception of the government's legitimacy and how it spends tax revenues—is a fundamental determinant of tax compliance behavior. In Syria, a core problem in the tax structure is that it treats diverse economic activities equally; the same tax rate is applied to essential productive activities that should be nurtured and encouraged, and to luxury activities that should naturally incur higher taxes, creating undue pressure on domestic industries.
• Growth of the Shadow Economy: The existence of a substantial volume of unlicensed, hidden, and untaxed commercial activity creates unfair competition between the shadow economy and the formal sector, allowing the former to attract more resources. The rapid growth of the shadow economy leads to the failure of macroeconomic stabilization policies and distorts related economic indicators [9] .
• Macroeconomic Volatility and Conditions: Macroeconomic conditions play a major role in tax evasion. The Syrian economy suffered prolonged periods of contraction and recession, which prompted the imposition of new taxes that further burdened taxpayers. Amid taxpayers' diminished capacity to pay their tax liabilities due to difficult broader economic conditions, they resorted to tax evasion [10] .
2. Social Causes:
• Inefficiency of Tax Administration: This is evident in ambiguous and incomprehensible laws that rely on bureaucratic discretion, prompting taxpayers to evade taxes. Furthermore, the proliferation and frequent amendment of tax laws make them complex and difficult to administer for both taxpayers and tax authorities, creating room for varied interpretations and fostering administrative corruption as taxpayers seek to bypass convoluted bureaucratic procedures [11] .
• Dissatisfaction with the Tax System, Inequity, and Presumptive Taxation: This is reflected in the recurrent resort to tax amnesties that grant evaders the opportunity to settle their arrears without penalty. This demoralizes compliant taxpayers and undermines future compliance behavior, as individuals anticipate repeated amnesties in the future.
Fourth: Socioeconomic Impacts of Tax Evasion in Syria
1. Impact of Tax Evasion on Development Financing:
Taxes represent a primary mechanism for covering public expenditures and serve as a financing instrument that contributes to economic development. However, high tax evasion rates have negatively affected economic development in Syria by undermining the government's ability to fund essential infrastructure and support private-sector investment, due to its diminished capacity to build cash reserves in the banking sector.
2. Impact of Tax Evasion on National Production:
Decreased government revenues resulting from tax evasion prompt authorities to find alternative ways to maintain revenue levels, such as raising tax rates or expanding the tax base. These new tax measures depress national production by weakening incentives for producers to expand output. Consequently, falling tax yields threaten the growth and continuity of capital expenditures and hinder the state's capacity to fulfill its vital social roles in health and education[12].
3. Impact of Tax Evasion on Prices:
To compensate for revenue shortfalls caused by tax evasion, the government often resorts to cutting subsidies on goods and services. This, in turn, drives up consumer prices, disproportionately harming low-income households, lowering their standard of living, depressing national savings, and ultimately curtailing domestic investment, even as such policies risk triggering economic stagnation.
4. Impact of Tax Evasion on Economic Planning and Competition:
Tax evasion severely distorts national macroeconomic equilibrium. Opportunities for evasion in specific sectors attract investors, leading to an overexpansion of activities that may not benefit the broader economy. This creates structural imbalances, leaving some sectors disproportionately advanced while rendering the economy asymmetric and prone to crises, thereby stripping taxation of its function as a tool for guiding economic policy[13].
5. Impact of Tax Evasion on Inflation:
Tax policy is one of the main tools used by governments to curb inflation by absorbing excess consumer purchasing power that drives price hikes. However, the prevalence of tax evasion undermines the effectiveness of this policy instrument in achieving its macroeconomic goals.
6. Violation of Equity and Equality Principles:
Tax-compliant individuals feel a sense of injustice because they shoulder a disproportionate financial burden compared to evaders. A key social consequence is the widening of class disparities, as evasion enriches non-compliant actors at the expense of public services that primarily support low-income groups.
7. Erosion of Social Awareness and Trust:
Tax evasion encourages others to emulate such behavior, turning it into a form of social contagion that erodes civic and fiscal compliance and diminishes integrity in economic transactions [14] .
Fifth: Tax Policies After Liberation
Following liberation, the Syrian government moved to restructure the tax system by drafting a new income tax law and adopting a series of executive measures aimed at improving collection, broadening compliance, and curbing tax evasion, alongside easing burdens on productive sectors.
In this context, the Minister of Finance issued Decision No. 810 on May 31, 2026, amending Decision No. 637 issued on April 29 of the same year regarding the collection of advance tax payments on imports. The decision reduced the advance tax from 2% to 1% for importers of industrial production inputs and basic food commodities, and eliminated it entirely for essential inputs to the agricultural sector.
The decision also adopted the customs tariff code as the basis for determining and collecting the advance payment rate rather than the importer’s legal status, aiming to prevent the use of shell companies or phantom importers to conceal the true importer's identity and evade tax obligations. The General Authority of Border Crossings and Customs is tasked with withholding the advance income tax upon importation, based on customs declarations cleared for domestic consumption, with the withheld amount settled against the taxpayer's final tax liability.
Tax reform in Syria aims to boost economic growth rates and achieve balance in both the state budget and the balance of payments by rationalizing public spending, increasing tax revenues, stimulating exports, boosting investment and savings, and empowering the private sector to play a vital role in development and public-sector reform. It also seeks to curb consumption by eliminating subsidies, imposing taxes on luxury consumption, and addressing social problems such as poverty, unemployment, low income levels, and unequal income distribution[15].
The new amendments to the Syrian tax system post-liberation represent an attempt to redefine the relationship between citizen and state by easing burdens on low-income groups and achieving greater efficiency and fairness in tax collection. The key pillars for evaluating post-liberation tax policy are as follows:
1. Tax Collection:
In the 2025 budget, the Ministry of Finance achieved an actual fiscal surplus, with public revenues reaching $3.493 billion against expenditures of $3.447 billion, resulting in a surplus of $46 million (equivalent to 0.15% of GDP). This revenue growth was driven by improved economic activity, higher tax compliance rates, increased customs revenues, and better monetization of public assets. This improvement was realized even before comprehensive legislative tax reform was completed, as Income Tax Law No. 24 of 2003 and its amendments remained the primary framework for income taxation during 2025, alongside transitional measures and official government announcements preparing a new tax code [16] .
2. Tax Fairness:
The draft of the new tax law included raising the tax exemption threshold, fully exempting any annual income below 50 million old Syrian pounds from tax in a measure designed to protect the purchasing power of groups most vulnerable to rising living costs.
As part of the tax reform agenda, the Ministry of Finance announced the completion of the draft Income Tax Law [17] , representing a key milestone in moving toward a transparent and fair tax system that fosters business growth. It introduces a low tax rate on employment income across two brackets after deducting the exempt threshold, and applies competitive rates on business income across two brackets after exemptions. Furthermore, the law levies no taxes on corporate share transfers, revaluation gains on fixed assets, or bank deposit yields and interest. It also introduces special tax deductions for corporate social responsibility (CSR) contributions, streamlines taxpayer data audit procedures while guaranteeing transparency, institutionalizes electronic invoicing, and grants taxpayers the right to appeal and litigate through a specialized tax court.
3. Simplicity of Laws:
The amendments introduced in the new tax system aim to streamline administrative procedures by consolidating multiple fees into a single levy and eliminating duplicate charges on the same tax base. They also establish clear and transparent rules for both taxpayers and tax authorities in tax accounting, simplify disclosure formats according to the level of assessment, and enable electronic integration for sales and purchase invoicing. Additionally, the new system streamlines tax dispute resolution by placing the burden of proving income sources on the tax directorate, referring late-stage disputes to specialized tax courts, establishing simplified grievance and litigation procedures, creating an incentive and reward structure for compliant taxpayers, and resolving legacy and accumulated tax arrears.
4. Contribution to Economic Growth:
The new law allocates 25% of tax proceeds to support community and development projects. This provision serves as a bridge linking corporate tax compliance with tangible contributions to sustainable development, alongside providing tax deductions for donations made under CSR programs.
Despite the value of supporting social projects, concerns remain that companies could exploit this allowance for tax evasion under the guise of donations, as they can exclude up to 25% of their taxable income if donated to religious, charitable, humanitarian, or scientific causes. Furthermore, the reform was designed to attract capital by lowering corporate tax rates. The exemptions granted to distributed profits and certain categories of foreign investor income also aim to attract expatriate funds and encourage their reinvestment into the formal economy.
Regarding support for small and medium-sized enterprises (SMEs), the new law granted an exemption to businesses with an annual net income not exceeding 60 million Syrian pounds (approximately $4,500). By contrast, the 2003 Income Tax Law exempted net income up to 3 million pounds, which was worth about $6,000 at the exchange rate at the time of its promulgation. This means that, in real terms, the new law reduced the level of support for small businesses that play a crucial role in job creation, which could adversely affect their future growth and, consequently, long-term tax revenues.
Conclusion
The restructuring of the tax system represents a response to deep economic shifts inherited from the pre-liberation years and the accompanying distortions in tax collection and fairness. Declining public revenues, the expansion of the informal economy, and weak tax compliance created an urgent imperative to launch a reform trajectory that organizes resources and enhances collection efficiency. Any sustainable economic recovery requires a clear, predictable, and stable tax regime, as the lack of clarity directly affects corporate and individual decision-making, as well as capital flows and investment.
The features of the post-liberation draft tax system reflect an orientation toward resolving the imbalances of the previous era and establishing a fairer, more flexible framework aligned with future requirements. This direction is particularly critical as Syria's economy seeks greater openness to foreign direct investment, an enhanced investment climate, and price deregulation. In parallel with this opening up, developing the tax system in line with ongoing socioeconomic transformations is essential.
The proposed tax framework provides immediate relief to households by exempting a broad segment of wage earners from income tax—an important step toward alleviating cost-of-living pressures given the harsh economic conditions facing most Syrians. Furthermore, reducing corporate tax rates to between 10% and 15%—low rates compared to Lebanon, Jordan, and Turkey—reflects a clear effort to attract investment. Targeted exemptions on specific income streams, particularly those of investors and expatriates, may help redirect capital domestically and encourage formal economic activity.
Despite the positive outlook accompanying the introduction of the new tax system, questions remain regarding its long-term fiscal sustainability and capacity to secure sufficient state revenues. Raising exemption thresholds while cutting tax rates could reduce individual income tax yields. Given that Syria's tax-to-GDP ratio fell below 5% in 2024, any further contraction could complicate public expenditure financing, making the state increasingly dependent on corporate taxes and the success of its bet on attracting foreign investment.
Moreover, the implementation of tax reform faces institutional and administrative hurdles, particularly the retention of administrative staff inherited from the former regime, entrenched patronage networks, and pervasive corruption. The broad scope of the informal economy poses an additional barrier to tax fairness, given the difficulty of enumerating unregistered activities and bringing them under effective oversight in the short term. Ultimately, the success of tax reform hinges on the state’s ability to strike a balance between incentivizing investment and easing socioeconomic burdens on the one hand, and broadening the tax base and ensuring sustainable public revenues on the other.
[1] Sulaiman al-Dali and Rawad Daoud, The Role of Tax Auditing in Detecting Tax Evasion: A Field Study in the Finance Directorates of Latakia Governorate, Tishreen University Journal for Research and Scientific Studies, Vol. 37, No. 1, 19/01/2015.
[2] Manaf Quman, Tax Administration Policies in Syria: Reality and Challenges, Arab Center for Research and Policy Studies, 01/07/2018, Link .
[3] Rifaat Amer and Alaa Alam el-Din, Evaluating Fiscal Policy in Syria Between 1990 and 2024 Through the Performance of the State General Budget, Qalamoon Journal, No. 31, Vol. 8, 01/04/2025, Link .
[4] Ibid., Evaluating Fiscal Policy in Syria Between 1990 and 2024 Through the Performance of the State General Budget.
[5] Ibid., The Role of Tax Auditing in Detecting Tax Evasion: A Field Study in the Finance Directorates of Latakia Governorate.
[6] Ibid., Evaluating Fiscal Policy in Syria Between 1990 and 2024 Through the Performance of the State General Budget.
[7] Ibid., Tax Administration Policies in Syria: Reality and Challenges.
[8] Ghassan Ghandour, The Syrian Tax System and Its Economic Impacts During the Period (2001–2010), Kirkuk University Journal of Administrative and Economic Sciences, Vol. 7, No. 2, 2017, Link .
[9] Analysis: The Shadow Economy in Syria: Concept, Causes, and Drawbacks, Business 2 Business, 10/09/2014, Link .
[10] Aya Walid al-Ayoubi, The Impact of Tax Evasion on Economic Development, Faculty of Administrative Sciences, Syrian Private University, Academic Year 2023–2024, Link .
[11] Iyad Saleh Hmeil, Tax Evasion in Syria: Reviewing Other Countries' Experiences in Reducing Tax Evasion, Higher Institute of Business Administration (HIBA), Academic Year 2022–2023, Link .
[12] Ibid., Tax Administration Policies in Syria: Reality and Challenges.
[13] Ibid., The Impact of Tax Evasion on Economic Development.
[14] Tax Fraud and Evasion: A Crime Originating from an Individual and Extending to Society as a Whole, Al-Thawra Newspaper, 11/05/2026, Link .
[15] A tax is a mandatory, non-refundable financial levy collected by the state under established statutory rules and imposed on taxpayers according to their ability to pay, with the aim of providing the funds necessary to cover public expenditures and achieve fiscal, economic, and social objectives.
[16] What Changed in Syria's Tax Trajectory Up to 2026?, Syrian Business Gateway, 21/03/2026, Link .
[17] Minister of Finance: Draft of New Income Tax Law in Syria to Foster Fairness and Development, SANA, 06/09/2026, Link .