The Effects of Tax Revenues on Iran's Economic Growth during Business Cycles (With Emphasis on the Various Components of Direct and Indirect Taxes)

Document Type : Original Article

Authors

1 Assistant Professor Asisstant profosser, Department of Financial Affairs, School of Human Science, Afagh Higher Education Institute, Urmia, Iran,

2 Economic expert of the Ministry of Economic Affairs and Finance

3 Asisstant profosser, Department of Financial Affairs, School of Human Science, Afagh Higher Education Institute, Urmia, Iran,

4 Master of Economics , income expert of Selmas municipality, Selmas city, Iran.

Abstract

The role of fiscal policy in the economy can be divided into two perspectives: Keynesian and non-Keynesian. If expansionary (contractionary) fiscal policy leads to an increase (decrease) in private consumption and production, it has a Keynesian effect; otherwise, it has a non-Keynesian effect (Khodavaisi et al., 2019). However, various factors influence the impact of fiscal policy on economic growth. For example, business cycles are one of the most important factors in determining the size and role of fiscal policy in the economy. Empirical and theoretical studies in this area indicate that the impact of fiscal policy on output changes with the occurrence of recessions and economic booms (Deskar-Škrbić and Hrvoje, 2017). Iran's economy relies heavily on oil and has been severely affected by economic sanctions in recent years. This has led the government to seek alternative sources of income to fill this gap instead of relying on oil revenues. Therefore, the role of taxes in Iran's economy has become more prominent than ever. Iran's economy is an oil-dependent economy that has faced severe economic sanctions in recent years. This has led the government to find another source of revenue instead of oil to fill the gap. Therefore, in the Iranian economy the role of taxes has become more prominent than ever. However, there is a lot of theoretical and empirical evidence that shows how tax revenues affect economic growth during business cycles. Therefore, this article has estimated and determined the tax multiplier using quarterly data of the Iranian economy during the period 1372 to 1399 and using the Markov switching model. The results of the present study showed that the largest multiplier among the various components of direct and indirect taxes is related to income tax and consumption and sales tax, respectively. Among the various components of direct tax, during a recession income tax is a good tool to stimulate production and in the expansion, the use of corporate tax should be preferred to income tax. During the recession, if the goal is to stimulate production with indirect taxes, the use of consumption and sales taxes is preferred to import taxes.

Keywords

Main Subjects

References

 
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Public Sector Economics Studies
Volume 4, Issue 2
July 2025
Pages 205-246

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History

  • Receive Date: 03 October 2024
  • Revise Date: 21 December 2024
  • Accept Date: 23 December 2024

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