The Study of Factors Involved in the Tax Capacity of Lorestan Province

The paper explores the trends of increases in taxes as part of the government revenues and focuses on the T/GDP ratios in Lorestan province. Lorestan tax capacity and the factors influencing it during the period 1360/1981-1383/2004 have been estimated through ARDL econometric method. On the basis of existing theoretical discussionsand experimental works previously done on the topic, some endogenous variables such as the value-added of different economic sectors, per capita income, rate of literacy, rate of inflation, and population have been regarded as the most important factors affectingthe tax capacity of the province in question. The results indicate that there is a positive correlation between the tax capacity, on one hand, and the value-added of the sectors industry and services, and the rate of literacy, on the other hand. However, there is no significant correlation between the tax capacity and the variables of the valueaddedof the mines sector, the per capita income, the rate of inflation, and the population. In addition, the tax capacity and tax effort of Lortestan province have been calculated on the basis of the estimated parameters of the model during the period under discussion. Acomparison between the collected taxes and the estimated tax capacities shows that the Lorestan tax administration has not been highly efficient in the period under investigation.