The Effect Of Value Added Tax On GDP growth In Iran

The effect of Taxation on macroeconomics indicator has been a main factor for Fiscal policy making. VAT ACT is one of most important tax policy in Iran which has been executing as temporary law for ten years. The most important Issue between policy making in regard to VAT is whether it affect GDP positively or negatively. A crucial point for answering this question is identification of exogenous tax Shocks. In this research using Romer and Romer (2010) narrative approach, VAT exogenous Shocks are identified. Then with a vector autoregressive regression model and IRAN seasonal data (1387-1397) the effect of this shocks on GDP growth and growth of government expenditure is investigated. The results indicate that VAT shocks in the first period have a negative effect on economic growth and in subsequent periods this effect is not statistically significant. Also, VAT shocks have no significant effect on the growth of government expenditure.