The main reason for focusing on value added Tax (VAT) is expanding Tax base and increasing Tax Revenues. Regarding the implementation of VAT Act initiated in October 2008, this paper attempts to estimate Tax Revenue resulting from this Act, which is based on input ! output table and production method.Based on the results of this research, VAT base according to the Act is about 44 percent of GDP; with regard to the rate of 1.5 percent, potential VAT Revenue will be 0.67 percent of GDP.Results of this study show that the full implementation of VAT act with rate of 1.5 percent will not have significant effect on reducing the operating budget deficit. The VAT rate should be increased in order to makeup such a deficit.

The significance of Tax Revenue as the primary source of government finance underscores the importance of accurately measuring Tax efforts using unbiased methodologies. This study employs a state-space model and the Kalman filter algorithm to estimate Tax effort as an unobservable variable within the Tax Revenue equation in Iran from 1970 to 2021.The findings reveal a nuanced relationship between various factors and the Tax ratio. Per capita income exhibits a positive impact, while the agriculture share in GDP exerts a negative influence. Interestingly, the coefficients of openness and monetization initially have negative elasticity but transition to positive after reaching a certain threshold, indicating a dynamic relationship with the Tax ratio. Conversely, the services and industry share in GDP demonstrate a positive effect on the Tax ratio before reaching a peak, after which their squared coefficients turn negative.Tax effort in Iran, throughout the studied period, has never been more than 0.25 highlighting a significant disparity between actual and potential Tax Revenue and underscores inefficiencies within the Tax system. Introduction Due to dependence on oil and structural problems, attention to important Tax indexes has been neglected in Iran’s Economy. Therefore, in order to achieve more accurate results, a new approach has been taken by the research to estimate Tax effort as an indicator that shows the ability of the government to enhance Tax Revenues. Traditionally, Tax effort is calculated by dividing actual Tax Revenue by potential Tax Revenue. However, this method is inherently biased as it fails to account for the influence of economic, social, and political factors on Tax Revenue collection, alongside Tax effort itself. To address this limitation, the study employs the Kalman Filter estimation technique, which treats Tax effort as an unobservable variable within the Tax Revenue function, alongside other economic variables. Methods and Material In literature, Tax effort is calculated by estimating the following equation:   (1) F1 =  =   = where T is Tax share, F is Tax effort, Z is a vector of other factors affecting Tax share and ω is an error term. It is evident that the estimator F1 is a biased estimator for Tax effort F. Considering the effect of Tax effort on Tax Revenue, the index should be included as a dependent variable in the Tax Revenue function. Referring to the study of Kim (2007) and in order to overcome the bias, the research suggests a state-space approach and Kalman Filter Algorithm. The structural time series method allows Tax effort to be taken into consideration in the Tax Revenue function as an unobservable variable. In this context, the Tax Revenue function considered a linear form incorporating variables such as per capita income, the share of agriculture, services and industry, openness, and monetization . However due to the low coefficient of determination and the results of Ramsey Reset test, adopting a quadratic function  became imperative. Consequently,the final equation was changed as follows:   (3) Results and Discussion In econometric analysis, the  stationary test of data typically examined. However, According to Harvey, the stationary test holds less signifcance in the structural time series model.. The analysis of variables confirms that all variables exibite statistical normality. The results of estimating equation 3 are reported in Table 1, which shows that the variables are significant at one percent level. Table 1. The results of estimating the square function of Tax Revenue using the STSM method Prob t-statistic RMSE Coefficients Variables 0.0090 -2.7836 0.0647 -0.1801 Level break 1998 0.0000 5.3930 0.0586 0.3159 Level break 2005 0.0000 -5.8246 0.0569 -0.3314 Level break 2000 0.0000 6.4744 0.9254 5.9920 LPY 0.0000 -6.0820 0.0611 -0.3719 LPY^2 0.0031 -3.2082 2.4578 -7.8851 LMO 0.0030 3.2130 0.2998 0.9631 LMO^2 0.0449 -2.0900 0.5520 -1.1536 LOP 0.0626 1.9312 0.0766 0.1480 LOP^2 0.0000 5.9359 3.2214 19.1223 LIND 0.0000 -6.1448 0.4668 -2.8682 LIND^2 0.0007 3.7434 7.1427 26.7385 LSEV 0.0004 -3.9563 0.8990 -3.5566 LSEV^2 0.0106 -2.7203 0.1102 -0.2997 LAGR Reference: Research calculations and software output There were breaks in 1998, 2000, and 2005. The cause of these breaks can be attributed to the Asian financial crisis, the dot-com bubble, and oil fever, respectively. "In addition to examining elasticities, the squared coefficients of variables hold significance in the analysis. Despite the elasticity of the agricultural sector share being -0.29, its squared coefficient was omitted from the model due to its low explanatory power. Notably, the Tax exemption status of the agricultural sector in Iran contributes to a negative impact on Tax Revenues. Regarding per capita income, its elasticity is positive, yet its squared coefficient is negative. Initially, an increase in per capita income enhances Tax Revenues, but subsequently leads to a decline in the Tax ratio. This phenomenon arises because governments can only collect a specific portion of per capita income as Taxes. Continued Taxation may result in Taxpayer resistance, consequently leading to a reduction in Tax Revenue.". The share of industry and services, both, have negative elasticity and squared coefficient. Initially, an increase in these variables leads to a rise in Tax Revenue, followed by a subsequent decrease where the negative effect predominates. Notably, only in cases where production is efficient, the industry can generate a significant Taxable surplus.  Therefore, the inefficient industry sector will not result in higher Tax Revenue in Iran. Due to the lack of a full database and since some economic activities in Iran are unregistered and consequently untraceable, a significant percentage of Tax evasion occurs in the services sector. Hereupon, the increase of this sector in Iran will not lead to more Tax Revenue. Both openness and monetization exibit positive quadratic coefficients. The effect of these variables on the Tax ratio is negative at first and becomes positive after the minimum point. The negative elasticity of these two variables is respectively caused by the government's policies such as lower tariffs for essential goods and the adverse effects of inflation on monetization and Tax Revenue as a result. The Tax effort trend is shown in Figure 1. The unevenness of the trend is caused by the fluctuation in oil Revenues in Iran. Tax effort in the last 50 years has always been lower than 0.25, which indicates the misutilization of Tax capacities. Figure 1. Tax Effort Trend in Iran during the years 1970-2021   Reference: Research Findings Conclusion Recognizing the significance of Taxes as a primary source of government Revenue, this research employs the Kalman Filter algorithm and a state-space model to calculate Tax effort in a novel manner. In this approach, Tax effort, treated as an unobservable variable, is incorporated into the Tax Revenue function alongside six other variables. Given the low coefficient of determination and the outcomes of the Ramsey reset test, the linear model was deemed unsuitable. Consequently, the quadratic form of the function was adopted to better capture the complex relationship between Tax effort and Tax Revenue."The estimations showed that the effect of per capita income on Tax ratio is positive due to the increase in the potential of citizens to pay Taxes, and the impact of agriculture share is negative due to Tax exemptions. The elasticity of monetization is negative owing to high inflation in Iran and its adverse effects on sales Tax. The effect of this variable on Tax ratio is initially negative, but after the minimum point, it becomes positive due to the compliance of Taxpayers with inflationary conditions. Openness also has a negative elasticity due to the negative effect of import promotion policies. The share of industry and services have a positive effect on the dependent variable before reaching the maximum point. However, due to a high rate of Tax evasion within this sector and production inefficiency in manufacturing, this effect reverses after surpassing the maximum point.. The discrepancy in the signs of the elasticities for some variables can be attributed to utilization of  different approaches in estimating the Tax effort. The low Tax effort in Iran reveals the necessity to make changes in government Tax policies to make the most of Tax capacities. For the purpose of enhancing Tax Revenue, some measures should be taken to reduce Tax evasion and increase the Tax potential of economic sectors. Eliminating unnecessary Tax exemptions can also improve Tax performance. The exemptions should be gradually phased out until they are completely eliminated,as long-term Tax exemptions in Iran create non-competitive structures.

Taxation due to its mandatorily and regularity is the most important source of government Revenue in financing development programs, including strengthening physical infrastructure. Accordingly, the issue of identifying the determinants of Tax Revenue is of particular importance in any economy that Iran's economy cannot excluded from this principle. Thus, this study investigates the effect of macroeconomic variables (economic growth, inflation, exchange rate and Openness) on government Tax Revenues using an Autoregressive Distributed Lag (ARDL) model in Iran during 1978-2018. The results from this study support the views of Calder (1962), Tudaro (1969), Olivera-Tanzi (1977), and Tanzi (1989) and show that economic growth, inflation, official exchange rate changes, and urbanization-Due to the underdevelopment of the Iran's economy-have a negative impact on Tax Revenue. Also, our findings indicate that Openness and share of services in GDP have a positive and significant effect and financial instability has a negative and significant effect on Tax Revenue. Finally, based on the findings of this study, there is no evidence that the variables of exchange rate fluctuations, government oil Revenues and share of agricultural and industrial in GDP, have a significant impact on Tax Revenue.

This study seeks to investigate the effect of corporate Tax elimination on the government income. The assumption of the research is that, by eliminating the corporate Tax, firms will not have the incentive to create informal sales. The main goal of companies may be creating a false financial statement to reduce Taxes on profits. However, the VAT burden is not on those firms; they unwittingly pay less money to the government with low sales announcement. So, government Revenues may increase if firms do not have the incentive to conceal their Taxable product sales. In this research we try to compare the Tax Revenues of the government in these two situations. To do this, in a stochastic process with 12, 000 different modes of finished cost structure of firms, the current situation of the government's Tax Revenues is compared to situation where the corporate Tax is eliminated. The empirical results show that, in Iran, the total Tax Revenues of the government will increase if corporate Taxes are eliminated.

This article analyses the effect of replacing oil Revenue with Tax Revenue on Iran's institutional quality. For this purpose, good governance index that is derived from the mean of 6 good governance indices, Voice and Accountability, Political stability, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruptionwas, considered as indicators of the institutional governance quality. The Threshold model of Oil Revenue effect on the governance quality in Iran, over the period 1996: 1-2017: 1 estimated by Smooth Transition Regression Model (STR). The inverse U-shaped relationship between the share of oil Revenue from GDP and the good governance index and a direct relationship between the share of Tax Revenue from GDP and this index are obtained. The Estimated threshold level of oil Revenue impact for good governance index was equal to 2. 378 percentage. The scenario of a 10% decrease in oil Revenue and a 10% increase in Tax Revenue showed that this replacement resulted in a 11% improvement in the quality of governance in Iran. It is therefore recommended that the reform of the Tax structure in Iran be put on the agenda of the government and parliament in order to meet the government's financial needs as well as the state's independence from oil. The government, through its competitiveness and accountability mechanisms, supports the establishment of civil society institutions and enhances the power of citizens to help raise Tax Revenue.

Municipalities use three kind of resource including toll, local Tax, sharing Tax Revenue and intergovernmental transfers. By acting laws such as Value Added Tax law, major Revenue of municipalities is financed from sharing Tax Revenue associated with VAT. Distributing sharing Tax Revenue associated with VAT is in a way that involves sum kind of fiscal illusion that is called flypaper effect. This paper is trying to test flypaper effect in concentrated sharing Tax Revenue associated with VAT (adapted in Note (2), Article (39) VAT law) in cities of Iran. For this purpose, a regression model with dummy variables is used and flypaper effect coefficient is estimated separately for municipalities with different grades. Results show there is no flypaper effect in concentrated sharing Tax Revenue for none of municipalities,however, flypaper effect coefficient for metropolitans and small towns are larger than other municipalities. It could be a basis for choosing the intergovernmental grants methods for different municipalities.

Taxes are the most common and important source of funding for the provision of public Revenues and one of the most effective government's fiscal policy tools. Government through Taxes gives many social and welfare services to the serving people and many economic and social activities and events. High share of oil and the low share of Tax proceeds in combination of state budget resources will couse not only adverse effects such as dependence of earnings of the country on export of one product, but also exclude the economy from the possibility of more efficient use of Taxes for fiscal policy. In the present study, an attempt is made to analyse empirically the main factors affecting the ratio of Taxes to GDP, as an accepted index of global studies, by employing time- series econometric techeniques over the period 1387-1357 in Iran. The size of the agricultural sector as the most important part using Tax exemptions, along with other factors such as budgetary dependency on oil Revenues, cultural factors and organizational motivation factors for the collection of Taxes, the size of the underground economy and the income distribution have been considered in this study. Application of analytical-descriptive methods and econometric OLS method showed that expansion of oil Revenues and the share of agriculture have the inverse relationship with the level of Tax receipts to GDP, and organizational motivational factors are directly related.

The main objective of this study is to examine the effect of Revenue-neutral change in the Tax structure on economic growth in Iran using data for the period of 1982-2016. To this end, an empirical model has been proposed to analyze the effect of substituting different Tax items for each other on economic growth in such a way that the total Tax Revenue remains constant. The results of cointegration analysis based on the autoregressive distributed lag (ARDL) approach show that a Revenue-neutral transfer of indirect Taxes to income Tax or wealth Tax increases economic growth in the long run. However, a Revenue-neutral transfer of indirect Taxes to corporate Taxes reduces economic growth in the long run. Also, among direct Taxes, a Revenue-neutral transfer of corporate Taxes to income Tax or wealth Tax as well as a Revenue-neutral transfer of income Tax to wealth Tax promote economic growth in the long run. Furthermore, the findings indicate that the highest and lowest increase in economic growth correspond to the substitution of wealth Tax for corporate Taxes and of income Tax for indirect Taxes, respectively. The results of this study have important policy implications for Tax structure reform in Iran's economy.