Analysis of General Equilibrium of Economic Growth Reaction caused by Tax Change Subject to Article 105 of the Direct Taxes Act

Abstract

The purpose of this paper is to analyze the empirical reaction of macroeconomic variables, including economic growth due to the change in tax rates subject to Article 105 of the Direct Tax Act. The research method is quantitative and for data analysis, the Computable General Equilibrium approach is used with GAMS software. Research data is derived from the latest Social Accounting Matrix produced by the central bank. Policy analysis is performed in the form of three scenarios: 5%, 10% and 15% reduction in tax rates. The results of the study indicate that the reduction of tax rates subject to Article 105 of the Direct Taxes Act will increase economic growth. Also, sensitivity analysis results indicate the high accuracy of the research model and reliability to the results of policy analysis. Therefore, it is recommended that the Government in Note (6) of the annual budgetary laws to reduce the tax rate of 15 % subject to Article 105 of the Direct Taxes.



Abstract

The purpose of this paper is to analyze the empirical reaction of macroeconomic variables, including economic growth due to the change in tax rates subject to Article 105 of the Direct Tax Act. The research method is quantitative and for data analysis, the Computable General Equilibrium approach is used with GAMS software. Research data is derived from the latest Social Accounting Matrix produced by the central bank. Policy analysis is performed in the form of three scenarios: 5%, 10% and 15% reduction in tax rates. The results of the study indicate that the reduction of tax rates subject to Article 105 of the Direct Taxes Act will increase economic growth. Also, sensitivity analysis results indicate the high accuracy of the research model and reliability to the results of policy analysis. Therefore, it is recommended that the Government in Note (6) of the annual budgetary laws to reduce the tax rate of 15 % subject to Article 105 of the Direct Taxes.