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Estimation of Income Elasticity and Tax Capacity with Concentration on the Components of Tax Revenues in Khuzestan Province (in Persian)

Author

Listed:
  • Hajati, Omid

    (Ph.D. Student, Department of Economics, and Social Sciences, Shahid Chamran University of Ahvaz, Khuzestan, Iran.)

  • Farazman, Hassan

    (Associate Professor, Department of Economics, and Social Sciences, Shahid Chamran University of Ahvaz, Khuzestan, Iran. Department of Economics, and Social Sciences, Shahid Chamran University of Ahvaz, Khuzestan, Iran.)

  • Afagheh, Morteza

    (Associate Professor, Department of Economics, and Social Sciences, Shahid Chamran University of Ahvaz, Khuzestan, Iran.)

  • Armen, Seyed Aziz

    (Professor, Department of Economics, and Social Sciences, Shahid Chamran University of Ahvaz, Khuzestan, Iran.)

Abstract

The purpose of this article is to estimate the income elasticity and tax capacity of Khuzestan province for policy-making and regional planning based on tax pay ability. To this end, the direct and indirect tax revenues of the province were estimated using the Seemingly Unrelated Equations approach, for the period 2000- 2014. The results show that the direct and indirect tax revenue elasticity of Khuzestan province is 1.09 and 2.77 respectively, and the elasticity of total tax revenue is 1.34. In addition, as for the direct tax, the tax elasticity of wealth and real estate is greater than the tax elasticity of businesses and corporations. The findings also indicate that the tax capacity of the province's businesses has a positive and significant relationship with the value-added of the restaurant and hotel sector as well as per capita income. Furthermore, the relationship between corporate tax capacity and value-added services is positive and significant. Likewise, the relationship between the tax capacity of other direct taxes (wealth and real estate) with real value-added and economic growth is positive and significant, and the relationship between the tax capacity of indirect taxes with private consumption expenditures and value-added of the mining sector is positive and significant.

Suggested Citation

  • Hajati, Omid & Farazman, Hassan & Afagheh, Morteza & Armen, Seyed Aziz, 2020. "Estimation of Income Elasticity and Tax Capacity with Concentration on the Components of Tax Revenues in Khuzestan Province (in Persian)," The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی Ùˆ بودجه), Institute for Management and Planning studies, vol. 24(4), pages 97-124, February.
    • Handle: RePEc:auv:jipbud:v:24:y:2020:i:4:p:97-124
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    More about this item

    Keywords

    Tax Capacity; Income Elasticity; Direct Tax Revenues; Indirect Tax Revenues; SUR Method.;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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