The effects of labor wage tax reform on the Iran economy: A computable general equilibrium model approach

摘要

Government revenue in Iran is highly dependent on the oil sales. Iranian government in order to decrease dependence on oil sales should obtain new income resources by expanding the tax base. Labor wage tax is not considered an important source of government revenue. Thus increasing tax rate on labor wage is necessary for government revenue. This paper attempts to develop and use computable general equilibrium model to examine the economic impacts of increasing labor wage tax in industrial and mining sector on the Iran economy. It contacted three simulations to examine the consequences of possible changes that occur in Iran economy due the increase in labor wage taxes. The policy issues addressed in this paper are 5, 10 and 15% increase in labor wage tax in industry and mining sectors. The increase of the labor wage tax rate may cause Iran's gross domestic product (GDP) and household income to decline from the benchmark level while the government revenue would increase. Also the sectoral effects are discussed in this paper.