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Effects of Change in Effective Tax Rate on Public Budget, GNP and Welfare Using General Equilibrium Model

Author

Listed:
  • Farahnak, Fardin

    (Ph.D. Candidate in Economics, University of Semnan)

  • Maddah, Majid

    (Associate Professor of Economics, University of Semnan)

  • Shakeri , Abbas

    (Professor of Economics, Allameh Tabataba'i University)

Abstract

Review of the public budget indicates the necessity of an increase in the share of Tax Revenues in the provision of Public Resources. Increasing taxes influence Public Resources and Expenditures, GNP and Welfare. In this research, while a general equilibrium model for analyzing Iran financial issues has been introduced, by using mentioned CGE model through GAMS effects of increase in three main groups of taxes including: Excises, Tariffs and Income Taxes, and also all these taxes together (in form of three single scenarios and one combined scenario) on the economy, have been investigated. Reviewing results of single scenarios shows that the maximum effects occurred caused by 10 percent increase in effective excise rate, which raise public resources and expenditures 0/88 and 0/79 percent and decline budget deficit and welfare 14/04 and 1/58 percent. But, the best result overally obtained from the combined scenario with 19/74 percent fall in budget deficit due to 1/26 and 1/13 percent potential raise in public resources and expenditures along with only 0/14 percent decrease in welfare, which recommended as the preferred scenario for implementation. While, changes in GNP because of restricted tax bases in all scenarios obtained negative and negligible

Suggested Citation

  • Farahnak, Fardin & Maddah, Majid & Shakeri , Abbas, 2018. "Effects of Change in Effective Tax Rate on Public Budget, GNP and Welfare Using General Equilibrium Model," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 5(2), pages 81-102, August.
    • Handle: RePEc:ris:qjatoe:0109
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    More about this item

    Keywords

    Budget resources and expenditures; Government budget balance; General equilibrium model; Gross national product;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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