Role of Income Tax Policy in Realizing the Economic Goals in Palestine

This study aimed at identifying the meaning and nature of the economic goal realized by the income tax in Palestine. The study sought to examine the economic indicators and their relation with the income tax and the nature of the different economic problems which plague Palestine. The searcher divided his study into three chapters. In the introductory chapter, he examined the circumstance, which tax has experienced, and the mechanism of its development over time. In addition, the researcher introduced the different types of taxes and income tax in particular. He also studied the history of the Income Tax Law in Palestine. In chapter one, the researcher dwelt on the general context of tax policy in terms of definition and its relationship with the different system and its place in the governments general financial policy. Chapter two was devoted to the relationship of the tax policy with the economic aspects. The researcher examined the economic goals, the Income Tax Law in Palestine and the various economic goals which the law is expected to realize. The chapter ended with an identification of the different economic problems, and the mechanisms needed to solve them by using the tax policy. Section three of chapter two was devoted to the failed study. The failed study sought to identify the reality of the economic goals realized by the income tax in Palestine. To this end, the researcher conducted a failed survey on a stratified random sample. The sample of the study consisted of two populations. The first included the various economic sectors: industry, financial brokerage, internet trade, transportation, storage, telecoms and building. The second population included employees in the government sectors. A questionnaire, developed by the researcher, was distributed in the West Bank only, because the researcher was unable to distribute the questionnaire in the Gaza Strip given the Israeli measures on the ground. To check its reliability and the purpose of the study objectives, the researcher presented the questionnaire to a group of referees who suggested some modifications on some of its items. The researcher managed to collect 1,253 copies of the questionnaire from the first population. From the second population of the study, the researcher collected 2,895 copies, mostly from government ministries employees. After collection, the data were coded, fed into the computer and statistically processed by using SPSS. To test the hypotheses of the study, the researcher used Independent T-test, One Way Anova, Chi-square and Chronbach-alpha. After data analysis, it was found that the income tax policy had an important impact on the various economic sectors and the industrial sector in particular. However, the income tax policy had a lower impact on the government sectors employees as well as the private sector (individuals) due to the decrease of the value of tax imposed on them. It was also found that the Income Tax Law in Palestine was slow and unable to respond to and keep abreast of the economic changes in the world. In the light of the study findings, the researcher would like to offer the following recommendations: 1. Pertaining to the income tax policy and determination of income tax rates, the latter, for economic sectors, should be set in a way that takes into consideration the economic situation and the public budget. In addition, the tax authority should grant comparative rates to the various economic sectors. 2. Concerning the government ministries employees as well as the private sectors employees, the researcher recommends a reconsideration of the tax categories cited in the Income Tax Law. In this context, the researcher recommends decreasing the size of each category in order to achieve fair distribution of tax burden on all individuals of the society. 3. Concerning the tax exemptions, the researcher recommends that the judiciary authorities facilitate obtaining tax holidays given their important impact on the economic sector and reconsider the Investment Promotion law to allow granting income tax exemptions to the economic sectors whose capital volume is less than that stated in the law. Thus achieving building of the country. Regarding the individuals, the researcher recommends that the concerned authority reconsider the tax exemption of salary granted to the taxpayer as approved by the previous law. Further, tax exemptions for families should be increased because of their relative economic significance. 4. Pertaining to reductions for the economic sectors, the researcher recommends that the value or percentage of reductions be increased, related to the tax regime issued by the minister as cited in the law, pertaining to depreciation or disuse of equipment, machinery and furniture. Concerning the individuals, a system and effective laws should be adopted in assessment of the economic situation of the taxpayers and adopt reduction in proportion with the special circumstances of each taxpayer.