To what extent do tax expenditure policies contribute to enhancing investment and employment in Algeria?

Djelil, Zinelaabidine and Abdel-illah, Khelassi (2026) To what extent do tax expenditure policies contribute to enhancing investment and employment in Algeria? PÉNZÜGYI SZEMLE/PUBLIC FINANCE QUARTERLY, 72 (1). pp. 65-87. ISSN 0031-496X (nyomtatott); 2064-8278 (online)

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Abstract

This study analyses the impact of tax expenditure policies on investment and employment in Algeria using the ARDL model. The following variables were used in the analysis: Tax expenditures, gross Domestic Product (GDP), corporate tax rate, and deposit interest rate (independent variables), and investment and employment (dependent variables). The results show that tax expenditures negatively affect both investment and employment in the short term but positively enhance them in the long term. Additionally, GDP has a positive impact on both investment and employment, while the corporate tax rate also plays a positive role. On the other hand, the deposit interest rate shows a negative effect on employment in the long run. Based on these findings, the study recommends improving the structure of tax expenditures to target sectors that contribute to job creation and economic and social development, reducing deposit interest rates to encourage private investment, and developing tax policies that better support investments. The study also recommends diversifying the economy to reduce dependence on oil and to promote investment in non-oil sectors, thereby contributing to sustainable and inclusive development.

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