Comparison of Growth Effects of Taxation Reforms in Iran: A CGE-DCGE Analysis

One of the challenging questions in the economics is the relation between the taxes and economic growth. In the last few decades, investigation of the effects of tax structure (i.e., wage tax, capital income tax, and consumption tax) on the economy of different countries has been in the focus of attention. In the present study, for the exact and comprehensive analysis of the effects of tax reform on the investment, gross domestic production, and production structure in the country, static and dynamic general equilibrium models have been used. Findings of the general equilibrium static of the research show that taxation on the wage and capital income results in the decrease in economic growth and investment of the country, while effects of the taxation on consumption positive evaluated. Simulation results of the comparative static analysis show that the wage tax has the most effect on the economy of the country. The next most effects are associated with the capital income tax and the consumption income tax, respectively. Moreover, based on the results of the dynamic analysis, it has been demonstrated that the wage tax exerts more effect on the economy of the state than the capital income tax in the long term.