The nature of well-being objective function in tax-free regime of ethico-economics

Purpose - The purpose of this study is to explain the effect of a tax-free regime of socioeconomics in the social well-being function. This paper carries on the message that has been recognized in the economic theory and by many for a long time now. This is that the incidence of all forms of taxes – direct and indirect taxes – proves to cause inequitable distribution of wealth. The rich still comprises the top 1 per cent of the income earners despite the existence of heavy tax burden. This paper goes beyond this observation and its explanation to make the case that the tax regime also causes distortionary effects in the generalized system of social and economic relations. Design/methodology/approach - In the midst of the generalized system of simulating the well-being function, subject to what is called the circular causation system of the endogenous variables is explained by the critical parameter of the epistemic nature in the unity of knowledge by complementarities between the variables signifying the good choices. Findings - This paper also contrarily establishes and explains the nature of equitable production and distribution of income in society at large. The tax-free regime is explained to generate and sustain balanced inter-causality between the critical variables in the generalized system of equations for simulating the well-being function. Some of the special properties of the evolutionary learning kind of the well-being simulation problem in the tax-free regime are brought out. Research limitations/implications - Empirical work could follow. Practical implications - Of special interest are the Arab Middle Eastern countries, most of which do not levy tax on households; with a small rate on businesses. Social implications - This paper goes beyond this observation and its explanation to make the case that the tax regime also causes distortionary effects in the generalized system of social and economic relations. Most importantly, the presence of tax regime disturbs the balanced forms of inter-causality between the critical variables of the social and economic type. The social well-being is thus eroded in the midst of a tax regime. Originality/value - This paper is a rare one of its kind to bring out the question surrounding the tax-free regimes usually practiced in Islamic fiscal theory and today adopted by many Muslim countries in the Middle East.