THE ROLE OF TAXES IN EXPLAINING THE BUDGET DEFICIT FLUCTUATIONS

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NIKI OSKOUEI K.; ASAD ELAHZADEH BALI M.R.; ZAMANIAN MAHBOUBEH

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Journal: Journal of Tax Research Year:2009 | Volume:NEW SERIES - 17 | Issue:5 (53) Page(s): 39-68

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Title

THE ROLE OF TAXES IN EXPLAINING THE BUDGET DEFICIT FLUCTUATIONS

Author(s)

NIKI OSKOUEI K. | ASAD ELAHZADEH BALI M.R. | ZAMANIAN MAHBOUBEH | Issue Writer Certificate

Keywords

GOVERNMENT BUDGET DEFICITQ2

TAX REVENUESQ2

OIL INCOMESQ2

STRUCTURAL VAR APPROACHQ2

STRUCTURAL SHOCKSQ2

Abstract

Fiscal policies have an effective and dynamic role in the process of economic development. They are an almost inseparable part of countries’ economic processes. The efficiency of fiscal policies is a function of proper arrangement and combination of fiscal policy instruments namely, the government revenues and expenditures as well as their flexibility and their being effective on economic goals. In Iran, however, fiscal policies are not sufficiently efficient due to the significant role of oil revenues in the government budget and insufficient TAX REVENUES alongside with inflexibility of government expenditures. The inefficiency of fiscal policies has, in its turn, back grounded the role of TAX REVENUES in decreasing the GOVERNMENT BUDGET DEFICITs. This study aims at examining the relationship between budget deficit fluctuations and TAX REVENUES using a STRUCTURAL VAR APPROACH. By imposing long-run restrictions on a VAR model, four STRUCTURAL SHOCKS have been identified: oil income shock, real product shock, tax shock and government expenditure shock. The results show that an impulse in the tax revenue decreases the economic growth (a result which is in line with economic theory) but this negative effect converges to zero in the long-term. Positive impulses both in the oil income and the real product increase the tax revenue levels. Moreover, the government expenditure shock leads to an increase in TAX REVENUES after three periods of time. The results of accumulative impulse response functions show that positive shocks both in oil income and tax revenue decrease the budget deficit levels but the decreasing effect of an oil income shock on the budget deficit is larger than the tax revenue. A variance decomposition of variables shows that real product shocks and tax revenue shocks are the main sources of fluctuation of TAX REVENUES; but government expenditures shock dose not have an important role in explaining tax revenue changes. The high degree of dependency of the government budget on oil revenues, unimportant role of taxes in budget deficit changes and great effects of structural factors in budget deficit fluctuations are main outcomes inferred from the variance decomposition of budget deficit.

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APA: Copy

NIKI OSKOUEI, K., ASAD ELAHZADEH BALI, M.R., & ZAMANIAN, MAHBOUBEH. (2009). THE ROLE OF TAXES IN EXPLAINING THE BUDGET DEFICIT FLUCTUATIONS. TAX JOURNAL, NEW SERIES - 17(5 (53)), 39-68. SID. https://sid.ir/paper/89686/en

Vancouver: Copy

NIKI OSKOUEI K., ASAD ELAHZADEH BALI M.R., ZAMANIAN MAHBOUBEH. THE ROLE OF TAXES IN EXPLAINING THE BUDGET DEFICIT FLUCTUATIONS. TAX JOURNAL[Internet]. 2009;NEW SERIES - 17(5 (53)):39-68. Available from: https://sid.ir/paper/89686/en

IEEE: Copy

K. NIKI OSKOUEI, M.R. ASAD ELAHZADEH BALI, and MAHBOUBEH ZAMANIAN, “THE ROLE OF TAXES IN EXPLAINING THE BUDGET DEFICIT FLUCTUATIONS,” TAX JOURNAL, vol. NEW SERIES - 17, no. 5 (53), pp. 39–68, 2009, [Online]. Available: https://sid.ir/paper/89686/en

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