The role of Personal Income Tax Reforms in the transition to a democratic and egalitarian Egypt

Abstract

The efficacy of the 2005-Personal Income Tax (PIT) reform in enhancing the macroeconomic performance in Egypt is tested using a structural vector autoregressive model. The results reveal that PIT reforms have successfully generated jobs and accelerated GDP growth. The reforms may cause mild inflation in the short-run, but their long-term effects are non-inflationary. This is the first effort to assess the PIT reforms in Egypt, with the aim of helping the new government to assess preceding policies and pursue the successful ones. The research is also an important lesson for the leaders of emerging economies encountering similar circumstances to enact reforms and to perpetuate economic growth and sociopolitical stability.