bu ali sina university Journal of Applied Economics Studies in Iran 2322-2530 9 34 2020 07 22 The Effect of Replacing Oil Revenue with Tax Revenue on the Institutional Governance Index in Iran The Effect of Replacing Oil Revenue with Tax Revenue on the Institutional Governance Index in Iran 137 161 3389 10.22084/aes.2020.20700.2994 FA Moloud Jafari Tadi PhD Student in Economics, Islamic Azad University, Isfahan Branch (Khorasgan), Isfahan, Iran Morteza Sameti Retired Professor, Department of Economics, University of Isfahan, Isfahan, Iran Mostafa Rajabi Assistant Professor of Economics , Khomeinishahr Branch, Islamic Azad University, Isfahan, Iran Sara Ghobadi Assistant professor, Isfahan (Khorasgan) branch, Islamic Azad University, isfahan, Iran Journal Article 2020 01 02 This article analyses the effect of replacing oil revenue with tax revenue on Iran's institutional quality. For this purpose, good governance index that is derived from the mean of 6 good governance indices, Voice and Accountability, Political stability, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruptionwas ,considered as indicators of the institutional governance quality. The Threshold model of Oil revenue effect on the governance quality in Iran, over the period 1996:1-2017:1 estimated by Smooth Transition Regression Model (STR). The inverse U-shaped relationship between the share of oil revenue from GDP and the good governance index  and a direct relationship between the share of tax revenue from GDP and this index are obtained. The Estimated threshold level of oil revenue impact for good governance index was equal to 2.378 percentage. The scenario of a 10% decrease in oil revenue and a 10% increase in tax revenue showed that this replacement resulted in a 11% improvement in the quality of governance in Iran. It is therefore recommended that the reform of the tax structure in Iran be put on the agenda of the government and parliament in order to meet the government's financial needs as well as the state's independence from oil. The government, through its competitiveness and accountability mechanisms, supports the establishment of civil society institutions and enhances the power of citizens to help raise tax revenue. <br />  This article analyses the effect of replacing oil revenue with tax revenue on Iran's institutional quality. For this purpose, good governance index that is derived from the mean of 6 good governance indices, Voice and Accountability, Political stability, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruptionwas ,considered as indicators of the institutional governance quality. The Threshold model of Oil revenue effect on the governance quality in Iran, over the period 1996:1-2017:1 estimated by Smooth Transition Regression Model (STR). The inverse U-shaped relationship between the share of oil revenue from GDP and the good governance index  and a direct relationship between the share of tax revenue from GDP and this index are obtained. The Estimated threshold level of oil revenue impact for good governance index was equal to 2.378 percentage. The scenario of a 10% decrease in oil revenue and a 10% increase in tax revenue showed that this replacement resulted in a 11% improvement in the quality of governance in Iran. It is therefore recommended that the reform of the tax structure in Iran be put on the agenda of the government and parliament in order to meet the government's financial needs as well as the state's independence from oil. The government, through its competitiveness and accountability mechanisms, supports the establishment of civil society institutions and enhances the power of citizens to help raise tax revenue. <br />  https://aes.basu.ac.ir/article_3389_8643c8e2107ba86c47371e037059c4b7.pdf