Journal of Tax Research

Although the VAT rate in Iran has been stable in recent years, but given the government's need for tax revenues, the appropriate time to change this rate is very important given its effects on inflation. Despite the high inflation rate in Iran, assessing the effect of changes in the VAT rate as a fiscal policy, in terms of price stickiness can provide clear results for policymakers. In this paper, in a Stochastic Dynamic General Equilibrium (DSGE) model, considering the nominal price stickiness, the VAT impulse channel to the final consumer is specified. And with two price sticking scenarios, higher and lower than the steady state value, the effect of this shock on the real variables was measured. The simulation results show that in the scenario with price stickiness more than steady state, Deviations in macroeconomic variables intensify in response to shocks. Also, their return period to steady state becomes shorter. In other words, if the government intends to use the VAT rate and increase it as a fiscal policy, it is better to use this policy in non-inflationary conditions, where price stickiness is high. Also, the analysis of the impulse of oil revenues and government expenditures shows that a model with price stickiness can analyze the real world better.