Just like other developing countries, in the recent decade, the importance and significance of TAXes in the Iranian economy has attracted the attention of economic researchers and that of policy makers. In the present paper, while I will focus on one of the most important aspects of TAX system, i.e. the whole set of incentives; EFFECTIVE TAX RATES will be calculated and analyzed from a macro-economic standpoint. The most important issues are the efficiency of TAX incentive system and the working of EFFECTIVE RATES. To do the task, I have simulated the time series in question and, by using Neo-classic Growth Theory and Jorgenson’s Theory on capital cost and defining the investment path, I have explored the impacts of investment cost and its components and the impacts of some other variables. The findings indicate that TAX exemptions do not work as incentives and do not have a considerable impact on investment. However, assets depreciation system may be used as an alternative TAX incentive to invoke investment.

EFFECTIVE TAX rate is one of the most important TAX efficiency criteria in TAX literature. Moreover, TAX system efficiency is usually measured by bilateral comparison between administrative costs and EFFECTIVE TAX rate. By examination and estimation of EFFECTIVE TAX rate, TAX authorities are able to increase TAX justice and investigate TAX burden on TAXpayers. EFFECTIVE TAX rate could be an instrument to direct capitals, as well as its wide using in policy-making and economic decisions. In present paper an attempt is made to estimate EFFECTIVE TAX rate in business and corporate income TAX. The results show that EFFECTIVE corporate TAX rate had an increasing trend from 6.08 to 11.59 during 2001 to 2008 while EFFECTIVE business TAX rate has been decreased by 2.1 to 1.3 between 2001 and 2007.

TAX on value added is a kind of indirect TAX which yields high income for governments. Thus, governments intend to increase it. However, raising TAX rate uniformly across all goods consumed by different income groups have been criticized for being regressive and unjust. In this paper, we have used two different TAX RATES to distinguish luxury goods from other essential goods. Taking Justice and equity into account while levying TAXes, this study shows that optimum TAX RATES on essential goods such as food and non-essential luxury goods are estimated to be 8 percent and 26 percent respectively. This finding, however, does not mean that TAX authority should change the TAX structure immediately disregarding its impacts, and tension it may create, but rather it proposes a gradual and planned system of TAXes, taking precautionary measures.

In this paper, optimal TAX RATES for real and legal entity income TAXes have been estimated. Optimal TAXation means optimal maximization of total utility functions of entities with regard to the budget constraint and a constraint wherein the entities make their choices of labor supply taking into consideration the relationship between labor and income. The foundation of our estimation has been Diamond’s model (1998) which is itself an extended form of Diamond and Myrrless’s model (1971). This model is, in its turn, an adaptation of Saez’s model, an important optimal TAXation model. The statistic population being used for the calculation includes real entities in Tehran and legal entities in Tehran and Kermanshah cities. In order to cover the fairness of income distribution, the statistical data has been classified in terms of income deciles, and Gini coefficient was calculated as an indicator of income distribution variance. Then, an appropriate model which is assumed to have the best impact on the decrease of the Gini coefficient has been selected. Finally, through the application of the selected model and taking into account different levels labor force elasticity (for real entities) and services supply elasticity (for legal entities), the optimal TAX RATES have been calculated. The results obtained indicate that in the Iranian TAX system, the application of new RATES would lead to a better distribution of income as well as an increase of 150% in the government TAX revenues. Moreover, the calculated RATES are able to be interpreted on the basis of an extended formulation of Laffer’s curve.

Underground economy has various names in economics literature like, black economy, unregulated economy, and unreported economy and so on. Since there is no exact definition for the Underground economy, in this study we try to measure it indirectly by using the observable variables and build a model to explain it. Then we try to estimate the model by Maximum likelihood and Instrumental Variable methods.The aim of this paper is to estimate the size of the Underground economy in Iran by using the unobservable variable model (Multiple indicator and multiple causes). Our estimates show that the share of the Underground economy in Iran was about 17.21 percent of the Gross Domestic Product (GDP) during 1350-1386. Our result also indicates that the TAX Gap was about 22 percent of the total TAX revenue for the above-mentioned period. For a number of reasons, which will be discussed later in the main text, the size of the Underground economy and TAX gap is increasing for the foreseeable future in the economy of Iran.

This study estimates optimal commodity TAX RATES regarding efficiency and social justice. A many- person Ramsey rule and Bergson – Samuelson social welfare function are used for estimating optimal TAX RATES. We need to estimate price elasticity’s of commodities before computing optimal TAX RATES. These elasticites come from estimation of Almost Ideal Demand System based on household expenditure data, in urban area's over the period of 1993-2005 and 10 cost deciles. The Almost Ideal Demand System has been estimated by using Panel Data approach. The contrast between efficiency and equity is examined by including a parameter called "Rate of inequality aversion parameter" in social welfare function. Optimal TAX RATES are computed from Lagrange - approach solution of nonlinear systems under alternative assumptions about rate of inequality aversion parameter and fixed TAX Revenues.The Results show that when inequality aversion parameter equals zero, optimal TAX of different commodities will be equal. Otherwise, they are different. The larger the parameter, the greater the difference. TAX RATES on commodities which have large share in expenditure of lower deciles decrease while TAX RATES on other commodities increase. Also, with increase of the parameter, marginal cost of the social welfare decreases.