Investigating Dynamic Relation between Tax Structure and Economic Growth in Iran with Emphasis on Uncertainty

The structure of the tax system and the various sources of tax revenues are one of the most important pillars of countries' economic development. Taxing and expanding tax bases is one of the tools used by governments to play a leading role in economic policies. In this regard, the stability and assured sustainability of the tax structure and revenues is an important issue that needs to be examined and analyzed. Therefore, one of the most important issues in the structure of the tax system is to examine the effect of uncertainty in tax revenues on economic growth or GDP (Gross Domestic Product). Due to the volatility in tax revenues in Iran, investigating the relationship between types of tax revenues and GDP is of great importance in the area of ​​government fiscal policy-making. Therefore, using the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) variance model and the Autoregressive Distributed Lag (ARDL) approach, this study investigates the extent and the impact of uncertainty in the Iranian tax structure on GDP from 1978 to 2017. According to the results, tax uncertainty in Iran can have both positive and negative impacts on economic growth. Thus, the variables of Uncertainty in Tax on Goods and Services (UTGS), Uncertainty in Tax on Imports (UTIM), and Uncertainty in Tax on Wealth (UTW) have had a negative impact on economic growth in Iran. On the other hand, the variables of Uncertainty in Tax on Legal Entities (UTLE) and Uncertainty in Tax on Revenue (UTR) have had a positive impact on Iranian economic growth. In addition, the variable of Budget Spending had a positive but insignificant impact on Iranian economic growth. Finally, GDP has been influenced by a positive, significant and considerable impact of its first lag.