Business Tax Income Breaks in Tehran Province

Collecting taxes has bean always a matter of great importance in the developing countries. If tax collecting has long breaks and you have an inflexible tax system in the country، inflation would reduce the real tax income. Due to the impact of inflation on real tax revenues (Tanzi hypothesis)، using annual data during (1978-2011) the length of the business tax income breaks in Tehran Province and sensitiveness of the tax system to the changing of the prices general level have been studied in this dissertation. Vector Auto regressive (VAR) tools such as Johansson and Generalized moments Model (GMM) have been used to assess the traction and tax breaks. The results show the amount of tax breaks for businesses in Tehran province، is equivalent to 1. 22 years، in other words a 14-month price elasticity of tax revenues equals to 0. 52. There are limitations in the direct tax law، taxpayers’ delinquency and operational issues are the most important causes of delay and low stretch. So the inflation has reduced the actual business tax income in the Tehran province.