Effects of Local Taxes on Improving Urban and Economic Development of Tehran with an Emphasis on Real Estate Transfer Tax (Using Simultaneous Equations Method)

Today, many countries consider a wide range of tax categories including local taxes, environmental taxes on pollutants, capital gain taxes, aggregate income tax and vacant residential units’ taxes as sustainable and justified taxes. Among these taxes, local taxes have been more attended and developed due to their efficiency and advantages. All national taxes can be chosen as local tax but some of them have local option advantages. One of the most important choices is the tax on real estate. The present paper investigates the effects of real estate transfer tax on improving urban development in the metropolitan city of Tehran within the framework of simultaneous equations methodology using the 3- stage Least Square method (3SLS). The results indicate that as the potential tax base in the real estate sector is vast, applying tax on real estate transfer results in improving the urbanization in Tehran.