Document Type : Research Article
Authors
1
PhD Student of Bu-Ali Sina University, Hamedan, Iran
2
Assistant Professor of Economics, Department of Economics Faculty of Economics and Social Science, Bu-Ali Sina University, Hamedan-Iran
3
Professor of Economics, Department of Economics Faculty of Economics and Social Science, Bu-Ali Sina University, Hamedan, Iran
4
Associate Professor of Economics, Department of Economics, Ayatollah Boroujerdi University, Lorestan, Iran
10.22084/aes.2025.30487.3763
Abstract
Taxation is one of the important economic variables that affect the economic welfare of households through its impact on consumption, investment, income distribution, and the quality and quantity of public services.Historically, due to oil revenues, the governments reliance on tax revenues has been less. Howewer, especially in recent years, due to various reasons including sanctions, most of government expenses are financed from taxes. Therefore, it is necessary to analyze the effect of paying taxes on the welfare of households. Given the subject's significance, this research examines the effects of government tax revenue (including Direct Taxes) shocks on the economic welfare of Iranian households, period 1350-1402, using a dynamic stochastic general equilibrium approach. The findings indicate that a shock in income tax from the formal sector, and profit tax leads to a decrease in the economic welfare of households. However, the effect of income tax on the reduction of household welfare is greater than that of profit tax. Imposing a profit tax reduces profitability and the ability to increase productive investment in companies. The decline in productive investment decreases employment and economic growth, thereby reducing the economic welfare of households. On the other hand, taxing income leads to an increase in production costs. With rising production costs, the production of goods and services and employment decreases, resulting in a decline in household welfare; furthermore, the increase in production costs causes firms to transfer part of the tax burden to consumers through higher prices for goods and services, which is associated with a further decrease in the quality of life and welfare of households. Therefore, income tax reduces household welfare more severely than profit tax.Therefore, it is recommended toreduce the income tax rate and increase the profit tax rate and the government, while increasing the efficiency of tax collection, by allocating a greater share of ressources from tax collection to productive activities, upgrading educational and health infrastructures and regular evaluation of the effectiveness of welfare programs, improve the quality of househilds life.
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