This paper offers a critical assessment of Syria’s draft Income Tax Law at a pivotal post-conflict juncture, arguing that tax reform must be understood as a political, economic, and social instrument rather than a purely technical revenue tool. It cautions against evaluating income tax in isolation from the broader fiscal system, warning that wide exemptions and near-flat rates risk creating an illusion of fiscal sustainability while undermining tax justice and revenue adequacy. The analysis highlights how unconditional export incentives, in the early post conflict phase, may exacerbate foreign-currency pressures, threaten food security, and destabilize the exchange rate in a fragile economy with weak domestic supply chains. It further shows how limited administrative capacity and weak governance transform exemptions into channels for tax evasion, rent-seeking, and potential money laundering. The paper argues that proceeding without robust economic modeling renders the draft law a high-risk policy gamble, likely to entrench a low-revenue, rent-based equilibrium. Ultimately, it contends that tax reform is central to rebuilding trust between the state, citizens, and the private sector, and that a more equitable, evidence-based approach is essential for sustainable recovery.

The analysis highlights how the draft law’s near-flat rate structure and extensive exemptions undermine both revenue generation and tax justice. While presented as pro-growth measures, these design choices weaken vertical, horizontal, spatial, and sectoral equity, reinforcing historical imbalances between income groups, regions, and economic activities. In particular, undifferentiated exemptions for agriculture and exports, rather than conditional exemptions based on performance and impact, risk distorting investment incentives, encouraging rent-seeking behavior, and disadvantaging trade and service sectors that are crucial for employment and value-chain integration.

A central concern is the treatment of exports. In a fragile economy with weak domestic supply chains, unconditional export tax exemptions may increase dependence on imported inputs, intensify demand for foreign currency, and exert pressure on the exchange rate before delivering any long-term gains. Without safeguards—such as local-content requirements, time limits, and protection of essential goods—export incentives risk generating macroeconomic instability rather than supporting recovery.

The paper further argues that weak governance and limited administrative capacity transform exemptions into channels for tax evasion, activity reclassification, and potential money laundering. In this context, technological reforms alone are insufficient without broader institutional strengthening, transparency, and accountability.

Ultimately, the paper contends that proceeding without robust economic modeling renders the draft law a high-risk policy gamble. Dynamic modeling of revenues, distributional effects, inflation, and exchange-rate impacts is presented as a prerequisite for meaningful reform. Without such an evidence-based approach, the law risks entrenching a low-revenue, rent-based equilibrium and missing a critical opportunity to rebuild trust between the state, citizens, and the private sector at a decisive moment for Syria’s recovery.