The Effects of VAT on Inflation in Iran's Economy in 2010

The value-added tax (VAT) system has been implemented in more than half of countries in the globe during recent decades. This tax، which is collected from firms’ value-added in various phases of production and distribution، has several advantages such as low tax rate، reduced tax evasion، neutrality against economic variables، and it is a reliable source of earning for government. Those countries that have not pursued VAT or those who implement it with delay are of concerns including after-tax inflationary effects. The main goal of current research is to investigate the inflationary effects of VAT implementation in Iran’s economy. In this regard، a price model was used to analyze the inflationary effects of a VAT -with 3% tax rate and special rates for particular goods- on different economic sectors in 2010. In addition، VAT effects on tax performance evaluation indicators were considered and the amount of increases in government sustainable revenue was determined by an Input-Output (I-O) Table.