Investigation of Relationship between Trade Liberalization and Tax Revenue: The case of Iran (1966-2005)

In this paper, we investigate the relationship between trade liberalization and tax revenue of government in Iran, over 1966-2005, using Autoregressive distributed lag method. The results indicate that trade liberalization has substantial negative effect on the tax revenue. For this reason, we suggest that government should increase productivity by implementing policies such as privatization and increasing private sector activity and decreasing protection policies, such as tax exemption.