Journal of Tax Research

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The purpose of this study is the effects of taxes and government spending shocks as instruments of fiscal policy on macroeconomic variables including GDP, inflation, private consumption and private capital investment in Iran with the time series for (1350-1388) and the method of Impulse Response Function has been used. According to the results, tax shock will have a positive effect on the economy. But increase the components of government spending shock leads to increase the real GDP.

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Increasing considerations on the sustainability of fiscal policy and tax smoothing hypothesis have been acquired a significant position in the theoretical background. On the one hand, the sustainability of fiscal policy requires convergence of government expenditure and its revenues in the long- run and on the other, tax smoothing indicates that the government should take action to minimize administrative costs and the welfare loss due to tax variations. So, this paper, by focusing on both challenges, aimed at investigating if the government had performed tax smoothing and/or fiscal policy sustainability in the sample period (1971-2008). After correction of the Barro's model (1979) to recover oil revenues and testing tax smoothing hypothesis, we recognized the financial repression as a main obstacle on the tax smoothing path. Also, our findings based on FMOLS method, in spite of imposing tax tilting condition to the model, reveal that the smart performing of tax tilting can be rejected. This result, i.e. no evidence of tax smoothing, provided a doubtful consequence about sustainability of fiscal policy in Iran’s economy. Therefore, using multicointegration approach, TARCH model and finally simultaneous equation system, we investigated the hypothesis of sustainability of fiscal policy. But outcomes show that there is no tract of sustainability between expenditure and tax revenues of government. Albeit, we can see a weak evidence of sustainability between government expenditure and total revenues.

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Abstract Due to the bad effects of natural resource revenues on the economy of Petroleum Exporting Countries, it seems that it is necessary to rule out that from their public budget gradually and reduce oil income dependency. For this purpose, the best alternative is tax revenues. So, an optimal path for tax revenues to achieve this goal is needed. In this study, the optimal path is derived for the taxes by using Bellman equations. The resulting paths are different for each country depending on economic conditions. But we can say that one of the most important factors in determining this path is the level of government expenditure and its growth in the future. In other words, the growth of tax revenues and the slope of optimal path depend on the government expenditures. Finally, as an application for this model, the tax optimal path is derived for Iran, so that it is possible to finance government expenditures by taxes in 1404 vision.

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Abstract

Up to now in Iran's economy, a numerous tax bases have been identified with different rates. Here's the question that comes to mind is whether these rates are optimal. Is it possible to determine an average optimal rate in a way that would bring greater growth and prosperity? In the present study, we've been looking for Iran's optimal tax rate using time series data in the years 1978-2014 via a dynamic optimal control approach and the maximum principle. According to the findings, the optimal tax rate is 20%.  And the main factors affecting tax rate are: the ratio of expenditures of the private sector to the public sector, the ratio of investment in the public sector to the private sector, depreciation rate, and rate of time preference, elasticity of production function to the investment in private sector and public sector and technical progress. Among the above factors, the ratio of expenditures of the private sector to the public sector has a negative effect and the ratio of Investment in the public sector to the private sector has a Positive effect on optimal tax rate.

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For years, Economic scholars have been recommending independency of fiscal policies from oil revenues as a tool to stay safe from resources cures. Weather these recommendations is applied in oil exporter countries or not is the main question of this study. In other words, the aim of this paper is to investigate the independency of fiscal policies’ main instruments (including Taxes and government expenditures) from oil revenues fluctuations in oil exporter countries. To do this, we use of an unbalanced panel data for 21 oil exporter countries during 1980 to 2015. To cover some kind of heterogeneities in the panel we use Dumitrescu and Hurlin procedure to test causality relationships. Final results show that we can’t reject oil dependency hypothesis for this set of countries.  Evidences show that oil is still main determinant of economic environments of these countries and fiscal policy instruments variations and business cycles are still the effects of oil cause. 
 

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Fiscal multiplier is one of the most important factors which governments and economic policymakers rely on to conduct fiscal policy. This multiplier, which shows the effectiveness of fiscal policy in stimulating domestic production and economic stabilization, has always been a contentious issue among economists and researchers, because there is no theoretical agreement on the size of this coefficient. Therefore, several researchers have tried to empirically estimate the Fiscal multiplier. This effort, which has doubled after the global crisis of 2007-2008 due to the significant role of this policy tool in reducing crises, is the main purpose of this study. This paper estimates the instantaneous and cumulative Fiscal multiplier using quarterly data of Iran economy during 1990 to 2017, using a non-linear threshold auto-regressive model. The results of TAR test and TVECM test showed that the integration of some variables used in the research is nonlinear. Similarly, the Co-integration relationship between the variables is nonlinear. Also estimation of TVAR model and simulated nonlinear impact response functions showed that the multiplier of government expenditures during the recession is greater than the boom period. This is opposite for tax. Also the largest multiplier among the three fiscal policy instruments related to current government expenditures.

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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.

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According to the important role of governments in economic development and the interrelationships between government's fiscal policies with economic growth and inflation rate, especially in developing countries such as Iran, and based on previous theoretical studies, the main purpose of this study is to investigate the causal relationships between fiscal policies (tax revenues and government expenditures) with economic growth and inflation rate in the provinces of Iran during 2009-2021 applying Domitrescu-Horlin causality test. The results indicate that there is a two-way causality between taxes and government expenditures, a two-way causality between taxes and economic growth, no causality between government expenditures and economic growth, a one-way causality from inflation rate to taxes, a two-way causality between government expenditures and inflation, and a one-way causality from inflation to economic growth. Based on the results, it is suggested that the government create a suitable and efficient tax system and also make changes in its expenditures in order to help reduce the inflation rate and affect the budget deficit.