CALCULATING OPTIMAL RATES OF “BUSINESS & PROFESSIONS INCOME TAX” AND “CORPORATE INCOME TAX”

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MOHAMMADI FARDIN; GHOLAMI ELHAM

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Journal: Journal of Tax Research Year:2009 | Volume:NEW SERIES - 17 | Issue:6 (54) Page(s): 7-39

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Information Journal Paper

Title

CALCULATING OPTIMAL RATES OF “BUSINESS & PROFESSIONS INCOME TAX” AND “CORPORATE INCOME TAX”

Author(s)

MOHAMMADI FARDIN | GHOLAMI ELHAM | Issue Writer Certificate

Keywords

BUSINESS AND PROFESSIONS INCOME TAXQ3

CORPORATE INCOME TAXQ2

OPTIMAL TAX RATEQ2

INCOME DISTRIBUTIONQ2

Abstract

In this paper, OPTIMAL TAX RATEs for real and legal entity income taxes have been estimated. Optimal taxation means optimal maximization of total utility functions of entities with regard to the budget constraint and a constraint wherein the entities make their choices of labor supply taking into consideration the relationship between labor and income. The foundation of our estimation has been Diamond’s model (1998) which is itself an extended form of Diamond and Myrrless’s model (1971). This model is, in its turn, an adaptation of Saez’s model, an important optimal taxation model. The statistic population being used for the calculation includes real entities in Tehran and legal entities in Tehran and Kermanshah cities. In order to cover the fairness of INCOME DISTRIBUTION, the statistical data has been classified in terms of income deciles, and Gini coefficient was calculated as an indicator of INCOME DISTRIBUTION variance. Then, an appropriate model which is assumed to have the best impact on the decrease of the Gini coefficient has been selected. Finally, through the application of the selected model and taking into account different levels labor force elasticity (for real entities) and services supply elasticity (for legal entities), the OPTIMAL TAX RATEs have been calculated. The results obtained indicate that in the Iranian tax system, the application of new rates would lead to a better distribution of income as well as an increase of 150% in the government tax revenues. Moreover, the calculated rates are able to be interpreted on the basis of an extended formulation of Laffer’s curve.

Cites

OPTIMAL EFFECTIVE RATE OF INCOME TAX IN IRAN: AN APPLICATION OF RAWLSIAN SOCIAL WELFARE

References

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APA: Copy

MOHAMMADI, FARDIN, & GHOLAMI, ELHAM. (2009). CALCULATING OPTIMAL RATES OF “BUSINESS & PROFESSIONS INCOME TAX” AND “CORPORATE INCOME TAX”. TAX JOURNAL, NEW SERIES - 17(6 (54)), 7-39. SID. https://sid.ir/paper/89691/en

Vancouver: Copy

MOHAMMADI FARDIN, GHOLAMI ELHAM. CALCULATING OPTIMAL RATES OF “BUSINESS & PROFESSIONS INCOME TAX” AND “CORPORATE INCOME TAX”. TAX JOURNAL[Internet]. 2009;NEW SERIES - 17(6 (54)):7-39. Available from: https://sid.ir/paper/89691/en

IEEE: Copy

FARDIN MOHAMMADI, and ELHAM GHOLAMI, “CALCULATING OPTIMAL RATES OF “BUSINESS & PROFESSIONS INCOME TAX” AND “CORPORATE INCOME TAX”,” TAX JOURNAL, vol. NEW SERIES - 17, no. 6 (54), pp. 7–39, 2009, [Online]. Available: https://sid.ir/paper/89691/en

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