Imposing consumption tax on Saudi consumers and its contribution in promoting economic growth Essay

Introduction Saudi-Arabian-Arabian miserliness mostly relies on oil industry and its government has much control over instinctive resources and main frugal activities in the land. Ultimately, the economy of Saudi is centrally planned and therefore has free trade economy. As it can be affirmed, oil industry returns to approximately 45% of the total budget value revenue hence making it imperative to the harvest of the country. Till now, Saudi Arabia does not think that there is whatever need for inspiration revenue however, the country may face many problems in the future what may affect the economy if the oil dry out. A recent analysis from Citigroup has raised the alarming supposition that Saudi Arabia might become a net oil importer by 2030Could Saudi Arabias oil color Exports Dry Up?, 2012. However, in order to Find a Solutions to channel in raising Saudi Arabia economy for long run, and Focusing in another source rather than oil. In order to nourish frugal stabil ity, we want to direct the possibility of deluxe consumption tax income beside zakat on Saudi consumers and how it will add together in promoting economic harvest-home.Basic conceptAccording to the dictionary, Zakat iscalled (Islamic tax) or (religious tax), it is an annual tax on Muslims comprising percentages of individualized income of every kind to aid the poor in the Muslim community.zakat enquire aimThe query aim is to determine the possibility of dire consumption tax on Saudi consumers beside zakat and how it will contribute in promoting economic suppurationSub problems1. How consumption tax contributes in promoting economic harvest-time.A) Why consumption tax.B) Mechanism of economic growth.C) Identify mechanism of promoting economic growth by consumption tax.2. The possibility of imposing consumption tax on Saudi consumer.A) Analyze tax musical arrangement for promoting economic growth.B) Analyze Zakat system for promoting economic growth.C) Comp are (a) and (b) to determine the possibility of imposing consumption tax (the importance or how valuable is the consumption tax).3. Determine the possibility of using consumption tax for promoting economic growth of Saudi Arabia.Research ObjectivesAs noted in the above information, the main aim or purpose of conducting this research is to investigate the possibility of imposing consumption tax on Saudi consumers beside zakat and how it will contribute in promoting economic growth. The following information provides the objectives and research questions for the study. To determine the importance of tax particularly in promoting the growth of economy To analyze all best and possible means of imposing consumption tax on Saudi consumer To determine the possibility of using consumption tax for promoting economic growth of Saudi ArabiaHypothesis assorted studies conducted on consumption tax seduce revealed that consumption tax has a major effect on the countrys economic activities which can greatly af fect economic growth, so in this physical composition we investigate how consumption tax contributes in promoting economic growth. We hypothesized that imposing consumption tax contributes in promoting the growth of Saudi Arabias economy.We also hypothesized that the difference between tax system and zakat system will contribute in determine the importance of the consumption tax.Literature reviewEssentially, previous research indicates a closing kindred between introduction of consumption tax and economic growth in a country. umpteen economists argue that imposing a consumption tax implies increase in government revenue and gum olibanum increase in the country GDP which is essential in reflecting the countrys economic growth. in that respect are limited studies tried to identify the relationship between tax structures and economic growth, Here is some of the related literature Arnold, J. (2008) has focused in studying and analyzing the relationship between tax structures and economic growth by enteringindicators of the tax structure into a set of panel growth regressions for 21 OECD countries he ready the following results1. Income taxes are associated with significantly lower economic growth and lower levels of GDP per capita than consumption tax and property tax.2. Respectively, property taxes, and particularly recurrent taxes on immovable property, then consumption taxassociated with the highest levels of GDP per capita. Therefore, these taxes are the most growth friendly taxes in economic growth.3. Corporate income taxes have morenegative effects on GDPthan personal income tax. In general, the relationship between the income taxes and growth is negative relation.4. The progressivity of income taxes and growth are negatively related.Also, Widmalm (2001), Padovano and Galli (2002) canvas the relationship between progressivity of income taxes and economic growth in 25 countries, they reached the same result, the progressivity of income taxes and econ omic growth are negatively related.Various studies conducted on consumption tax have revealed that consumption tax has a major effect on the countrys economic activities which can greatly affect economic growth. Brys (2010) in his book OECD Tax Policy Studies Tax Policy Reform and Economic branch outlines the various effects consumer tax can have on economic activities of a country.In the book, he fixs that consumer tax will affect employment and working hours, affect international trade and regulate the activities of the underground economy. Brys continues to state that differentiated consumer tax will encourage people to work, lead to a yield in environmental benefits and reduce inequalities in income. When all these factors are brought together, economic activities of a country are likely to be affected in various ways.MethodologyResearch courtA good research is the peerless that provides answers to the research questions, validity, objectivity, accuracy, and economy. A resea rch design is the plan and structure of investigation to obtain answers to research questions. The study adopted a qualitative survey structure. Qualitative research is also adopted since it investigates the social constructivist effigy and relies on the socially constructed human race nature.It aims to fundamentally record, analyze as well as determine the substance and meaning of imposing consumption tax on Saudi consumers and its contribution in promoting economic growth. The approach is not initially based on any entropy to be compared but on the perceptions of those who have experience and knowledge based on consumption tax and its potential in enhancing economic growth of a country. The qualitative research approach here supports positivism whereby although there is no selective information to be compared as part of quantitative research, the fundamental construct of the research is based on a reality that cannot be changed.The type of this study requires to use qualitativ e research, in this study we will gathering data from the past studies related to our theme (about the effect of tax on economic growth and then, we will analyses this data And weight all the Pros and Cons, advantage and disadvantage of all type of taxes and decide which type is best for the growth of the economy.We will analyze both of tax system and zakat system and their relation with economic growth, then analyse both system and find the similarities and difference between them. Then study those differences and find solutions that may contribute in the economic growth of Saudi Arabia.Data analysis and discussion The raw materials were collected in a systematically organized manner that facilitates the analysis. To permit qualitative analysis, the data received was edited to vouch completeness, consistency, and uniformity before being analyzed to make it meaningful information regarding the study theme which is implications of imposing consumption tax in Saudi Arabia. Collectiv ely the data analyzed enables the study to establish the relationship of consumption tax and economic growth.ReferencesBrys, B., & Organization for Economic Co-operation and Development.(2010). Tax policy reform and economic growth. genus Paris OECD.Could Saudi Arabias Oil Exports Dry Up? (2012october3). nvesting dailyhttp//www.investingdaily.com/15734/could-saudi-arabias-oil-exports-dry-upalmohainykhaledmohammed. (2003). The role of the tax in the process of economic and social development. Damascus University Journal , Volume 19 Issue II.zakat. (). dictionary http//dictionary.reference.com/ patronise/zakatArnold, J. (2008), Do Tax Structures Affect Aggregate Economic Growth? Empirical Evidence from a plank of OECD Countries, OECD Economics Department Working Papers, No. 643, OECD Publishing.Bleaney, M.F. N. Gemmell and R. Kneller (2001), Testing the Endogenous Growth Model Public Expenditure, tax and Growth Over the Long-Run, Canadian Journal of Economics, Vol. 34(1), pp . 36-57.Schwellnus, C. and J. Arnold (2008), Do Corporate Taxes Reduce Productivity and enthronisation at the Firm Level? Cross-country Evidence from the Amadeus Dataset, OECD Economics Department Working Papers, forthcoming.