The Effects of Demographic Changes on Income and Consumption Taxes in Iranian Economy: Microsimulation Approach

This paper investigates the relationship between demographic changes and tax revenues, as a prominent economical subject which can be transformed to an economic problem, potentially. So, the two tax bases, which have the closest relation with population changes, have been considered. To continue analysis, a microsimulation framework is employed which itself involves several stages: Firstly, income profiles of individuals have estimated. Then, using multi-rate tax function the tax revenue of every age group has been estimated. After aggregation and projection of total income tax revenues based on multi-rate function output, sensitivity analysis of each group's income against demographic changes has performed. Also, tax on consumption has estimated based on multi stage process and applying several estimator tools and input-output coefficients. Results show that, at the present, income's tax revenues of younger groups is affecting by demographic changes and other old age groups will be affect until 2030s decade. Tax on consumption will be affect slower than tax on income.