An Estimation of Taxable Capacity in Fars Province

In this paper, I deal with estimating Fars province taxable capacity through OLS regression model and making use of time series data of a period of 21 years. Among the most important variables affecting the province tax levels and taxable taxes in respect of total taxes, tax on business, and corporate tax during the years 1983-2003, I have mentioned such variables as values of incomes and exports, value added of industry sector, value of exports, and the province total revenues. The findings show that there are tax gaps in all three kinds of taxes mentioned above due to the existence of potential capacities in the sectors thereof. Tax effort index during the intended period has been less than unit but it has gradually improved in recent years. As the tax elasticity is lower than one, it can be concluded that the tax system has relatively been inefficient in the early years of the period under investigation though in recent years, the tax performance has relatively been raised.