Government VAT revenue feedback to corporate tax elimination

This study seeks to investigate the effect of corporate tax elimination on the government income. The assumption of the research is that, by eliminating the corporate tax, firms will not have the incentive to create informal sales. The main goal of companies may be creating a false financial statement to reduce taxes on profits. However, the VAT burden is not on those firms; they unwittingly pay less money to the government with low sales announcement. So, government revenues may increase if firms do not have the incentive to conceal their taxable product sales. In this research we try to compare the tax revenues of the government in these two situations. To do this, in a stochastic process with 12,000 different modes of finished cost structure of firms, the current situation of the government's tax revenues is compared to situation where the corporate tax is eliminated. The empirical results show that, in Iran, the total tax revenues of the government will increase if corporate taxes are eliminated.