Modeling the Effects of Indirect Taxes on the Welfare of Income Deciles in Iran with the Computable General Equilibrium Application

After oil revenues, taxes are the second and most important source of government expenditure in Iran's economy. On the other hand, considering the importance of social justice as one of the main goals of the government, the effects of imposing taxes on households are also very important. Therefore, this research, using a calculable general equilibrium model, seeks to investigate the welfare effects of imposing indirect taxes on different income deciles in Iran. For this purpose, two scenarios have been applied and the reactions of households with different income deciles to these scenarios have been investigated. In the first scenario, a uniform tax was imposed on all goods and services at a rate of five percent and in the second scenario, a tax on food at a zero rate, a tax on some luxury goods at a rate of 14 pecent and a tax on other goods at the same rate of 5 percent. EV index was also used to measure welfare. The results of the model show that the imposition of indirect taxes in the first scenario worsens the welfare of low-income households, while the second scenario improves the welfare of poor households and worsens the welfare of rich households. However, in the first scenario, the GDP was higher than in the second scenario. Therefore, it is recommended to choose a tax policy using an integrated tax system, we will see efficiency and economic justice.