The Effect Of Value Added Tax On GDP growth In Iran

Document Type : Original Article

Authors

1 assistant professor, Management faculty, kharazmi university, Tehran, Iran

2 PhD candidate of economics, tehran university, Tehran, Iran

3 Master degree in economics, Sharif University, Tehran, Iran

Abstract

The effect of Taxation on macroeconomics indicator has been a main factor for Fiscal policy making. VAT ACT is one of most important tax policy in Iran which has been executing as temporary law for ten years. The most important Issue between policy making in regard to VAT is whether it affect GDP positively or negatively. A crucial point for answering this question is identification of exogenous tax Shocks. In this research using Romer and Romer (2010) narrative approach, VAT exogenous Shocks are identified. Then with a vector autoregressive regression model and IRAN seasonal data (1387-1397) the effect of this shocks on GDP growth and growth of government expenditure is investigated. The results indicate that VAT shocks in the first period have a negative effect on economic growth and in subsequent periods this effect is not statistically significant. Also, VAT shocks have no significant effect on the growth of government expenditure.

Keywords

Main Subjects

References

Blanchard O. and R. Perotti. 2002. An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output. Quarterly Journal of Economics, 117(4). pp 1329—1368.
Burman, L., & Slemrod, J. 2013. Taxes in America: What Everyone Needs To Know. Oxford University Press.
Burman, L., & Slemrod, J. 2013. Taxes in America: What Everyone Needs To Know. Oxford University Press.
Caldara, D., & Kamps, C. 2012. The analytics of SVARs: a unified framework to measure fiscal multipliers.
Cloyne, J. 2013. Discretionary tax changes and the macroeconomy: new narrative evidence from the United Kingdom. American Economic Review. 103(4). pp 1507-28.
Favero, C., & Giavazzi, F. 2012. Measuring tax multipliers: The narrative method in fiscal VARs. American Economic Journal: Economic Policy. 4(2). pp 69-94.
Grinberg, I. 2010. Where Credit Is Due: Advantages of the Credit-Invoice Method for a Partial Replacement VAT. Tax L. Rev. 63. pp 309-957.
James, K. 2015. The rise of the value-added tax. Cambridge University Press.
Kydland, F. E., & Prescott, E. C. 1982. Time to build and aggregate fluctuations. Econometrica: Journal of the Econometric Society. pp 1345-1370.
Leigh, D., Devries, P., Freedman, C., Guajardo, J., Laxton, D., & Pescatori, A. 2010. Will it hurt? Macroeconomic effects of fiscal consolidation. World Economic Outlook. 93. pp 124.
McGrattan, E. R. 1994. The macroeconomic effects of distortionary taxation. Journal of Monetary Economics. 33(3). pp 573-601.
Mertens, K., & Ravn, M. O. 2014. A reconciliation of SVAR and narrative estimates of tax multipliers. Journal of Monetary Economics. 68. pp S1-S19.
Mikesell, J. L. 1997. The American Retail Sales Tax: Considerations on their Structure, Operations, and Potential as a Foundation for a Federal Sales Tax. National Tax Journal. 50(1). pp 149-165.
Mountford, A., & Uhlig, H. 2009. What are the effects of fiscal policy shocks?. Journal of applied econometrics. 24(6). pp 960-992.
OECD. 2016a. Revenue Statistics 2016, OECD Publishing, Paris.
Romer C. and D. H. Romer. 2010. The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks. American Economic Review. 100(3). pp 763-801.
Romer, C. 2011. What do we know about the effects of fiscal policy? Separating evidence from ideology. Speech at Hamilton College, November, 7, 2012.
Schenk, A & Oldman, O. 2015. Value Added Tax: A Comparative Approach. Cambridge University Press.
Zodrow, G. R. (1999). The Sales Tax, the VAT, and Taxes in Between—or, Is the Only Good NRST a" VAT in Drag"?. National Tax Journal, 52(3), 429-442. 
Economic Strategy
Volume 9, Issue 35 - Serial Number 35
November 2020
Pages 325-358

Files

Share

How to cite

Statistics