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WorkShop 07: State Economy and State of the Economy in the Mediterranean Area: the contribution of taxation to the development of Europe - Middle East relations

Twelfth Mediterranean Research Meeting 2011


State Economy and State of the Economy in the Mediterranean Area:
the contribution  of taxation to the development of Europe - Middle East relations

directed by:

Marco Greggi

University of Ferrara, Italy
Monash University

[email protected]

Yoseph M. Edrey

Haifa University, Israel

[email protected]




Taxation might be considered a means of stimulating economic growth, yet it can be a most dangerous threat to the flourishing of the national economy, undermines the concept of the rule of law and violates some basic human rights and principles such as equality, freedom of contract and occupation and property’s rights. Ways and means in which taxes are levied, their burden and impacts are key factors in this respect.

The aim of the seminar/workshop is to investigate, in a comparative approach, how taxes are considered and used in the social and legal frameworks of the states surrounding the Mediterranean area. Special attention will be given to the following:

Tax legislation: process and substance;

Tax law and human rights (equality, freedom of contract and occupation, property rights, etc.);

Net income concept, tax holidays, tax discounts, tax incentives and tax expenditures;

Economic growth, NGP, and alternative indicators for the individuals and collective wellbeing;

Financial, human and social capital as means production, and special domestic legislation aimed to encourage them;

Justification of encouragement of means of production in general, and with tax legislation in particular

Tax burden, work supply and productivity;

Tax competition: economic, social and legal chances and risks.

The workshop offers three levels of discussion and deliberation: a general doctrinal presentation of the above issues; inquiry of the similarities and differences between European states and Middle East countries in the above topics; and introduction of the domestic approaches of the participants’ own legal systems.


Workshop Description


Tax incentives which were often used to stimulate state economies, have become a worldwide phenomena in recent times. Furthermore, the globalization process has contributed to tax-competition among developed and developing countries.

The focus of the first part of the workshop is to discuss doctrinal concepts, terms, and definitions. This includes inter alia: economic growth, its indicators, their flaws and deficiencies; alternative indicators; the role of financial, human and social capital in the economic and social development; and the justifications, if any, for different tax treatment for labor and human capital on one hand, or for financial capital on the other hand.

During the second part, the participants will examine the possible impact on the above concepts and doctrines in Europe and the Middle East states.

In the third part the participants will describe and present their own domestic tax systems pertain to the previous general discussion. Specially, their own domestic systems in term of international tax competition, tax expenditures, tax incentives, tax holidays, encouragement of capital investment and inducing work supply, stimulating the business activities and so on. Some of these incentives focus on the consumer/household side, some other on the business/firm one. For instance, a State could stimulate the purchase of some goods or services by allowing tax deductions when these  are bought; alternatively, it can support businesses by allowing specific tax relieves and/or exemptions.

However, other incentives are grounded on a different basis: indeed some are aimed at the national market (i.e. incentives aimed at national businesses), as well as others at multinational investors (or, in other words, foreign capitals). Under a purely theoretical basis, a state is reasonably free to implement in its legal framework regarding the incentives it considers  to fit best its needs, using the formers and not the latter, or vice versa, or both. Indeed currently  in the EU this possibility is seriously limited by the EU discipline of State Aids, aimed at preventing European states from the support of their national economy unless some (very restrictive) specific conditions are met. Research has previously shown that in this sense the rationale underlying the European choice was vital in order to create a level playing field throughout the Continent and to prevent a race to the bottom between states enacting a sort of harmful tax competition.

The recent economic world crisis as well as some decisions/resolutions adopted lately by European states might serve as an indication that the EU guidelines were too strict. One possible conclusion might be that significant leeway must be allowed/ permitted to the member states in order to cope/tackle in the most efficient way the effect of the global recession.


In the case of taxes the competition between states is actually partly regulated by international treaties, agreements and multinational organizations. These include organization such as the WTO (which encompass also the Mediterranean Area) or EFTA, both are larger than the European Union. All these treaties and the international organizations are generally aimed at the prevention of discrimination, the protection of the free movement of capitals, and at the consideration of taxes to be a double sided instrument of the development of the state’s economy.

The situation is not as clear, or at least not as homogeneous, on the other side of the Mediterranean Sea. In most of the cases, such lack of certainty and of the rule of law is a serious limitation to foreign investors. In some other cases, the possibility to obtain tax savings or holidays according to domestic administrative or contractual procedures makes every business decision questionable and doubtful on a long term basis.

A clear example of such a situation is the one provided by the free movement of capitals, which was embodied in the former Art. 56 of the EU Treaty, which shielded the freedom of investors in the continent, while disregarding their nationality and their origins. For instance, an Egyptian company could invoke the free movement of capital in front of the European Court of Justice (or the EFTA Court) against a European state limiting it without any justifiable reason (the Fokus Bank Case is a clear example of this approach and of the possible result of such a legal action).

Whereas Europe has implemented already legal instruments that can also be used by non EU taxpayers, investors or businesses, the situation on the other shore of the Sea is not so clear. Arguably, still a lot must be done to raise and strengthen the level of protection and confidence of foreign investors. Using the tax system for achieving these ends,  in a way consistent with the rule of law, might be one possibility that will be studied in the workshop.

The proposed seminar/workshop has therefore two goals and shall follow two major disciplines: (1) Socio-Economic and (2) Legal.

(1) According to the first discipline, the participants to the seminar shall be invited to address the following:

a) Their respective countries’  approaches   toward  using taxation as a tool aimed to cope with world economic crisis and encourage economic growth in general, and to stimulate investments in particular.

b) Whether these policy decisions were taken (particularly in the case the Middle East countries) individually or in the framework of a regional consensus, and what was the role of the Academic research in this respect. Special attention should be given to the possible “common” approach of the Mediterranean Countries to the world crisis, which could be considered as a remarkable evidence of an ongoing process of economic integration in the area preceding any attempt of legal integration of this region.

(2) The deliberation of the second discipline will be focused on two aspects:

<start_a>     The concept of the rule of law and the fundamental rights of the taxpayers in the workshop participants’ states.

<start_b>     The presentation of each of participants of their own legal system, pertaining the use of the tax system as a vehicle for encouragement of capital investments, and their impacts on the legal, constitutional, social, and economic systems.

Based on our good experience, we will require the participants to present their own papers in advance, revise them according to their own presentations and the other participants comments and suggestions during the workshop, and prepare their final version for publication. We will make every possible effort to publish the proceedings of the workshop in a book.

The importance and the significance of the proposed workshop:

The worldwide financial and economic crisis raises some meaningful doubts regarding the developed and developing countries’ tax policy in general, and their participation in the international tax competition and its social and legal cost in particular. The workshop aimed to address these issues and provide the policymakers of the European and the Mediterranean states effective tools to re-evaluate their policies.


Page last updated on 04 September 2018

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