Impacts of Tax System on Income Distribution in Iran (1989-2002)

This paper aims at capturing the impacts of taxes on income distribution through HDI indices and is also trying to explore the factors involved in the (un)influence of the Iranian tax system on the improvement of income distribution throughout the country during thepast three post-revolution development plans (from 1989 to 2002). The paper uses two research the inferential method based upon statistical analyses within E-views program to measure the impacts of the institution of government on the changes of HDI, and the in-depth research method through doing interviews with experts in order to qualitatively study the impacts of the government on the income distribution on the basis of tax policies. The coefficient (and the sign) of the tax income in the model shows that in the event of 1% increase in the tax revenues, the HDI index will have an increase of0.07% and the vice versa. Moreover, if the coefficient (and the sign) of the share of direct tax revenues in GDP (GDP without the oil sector) has an increase of 1%, then the HDI index will have an increase of 0.14% and the vice versa. There is no statisticallysignificant relationship between the tax revenue and the HDI index and since the dependent variable representing income distribution has been the HDI index, it has been concluded that the taxes have had no distribution orientations in Iran. As for the role of the institution of government and its influence on the income distribution, the indicesexplaining the situation of a rentier government has been verified indicating the supporting role of such a government in Iran and its independence from tax revenues. In other words, the characteristics of rentier governments in Iran have led to a condition wherein the tax system has no distribution orientations.