The Effect of Tax Shock on Savings Interest on the Total Portfolio: Financial Computable General Equilibrium (FCGE) Approach

The purpose of the present paper is to study the effect of levying tax on savings interest on the total portfolio (the combination of economic agents’ financial and capital assets) and saving, using the Financial Computable General Equilibrium (FCGE) approach. For this purpose, the data of the Social Financial Accounting Matrix (SAM) of Iran 2018 was used. Financial assets and liabilities have been separated into ten groups using the statement of cash flow published in 2018 by Central Bank.Model calibration has been done using GAMS software and NLP method. In this study levying a ten percent tax on the savings interest shows that the total savings of economic agents, including households and the government, and the investment of financial institutions in the construction and real estate sector will increase by 0.92%, 9.72%, and 37%, respectively. Also, savings, demand deposits, and shares will increase by 5.13%, 3.2%, and 8.8%, respectively. While, the total direct investment of economic agents decreases by 1.4 percent and the amount of short-term and long-term loans to economic agents decreases by 1.18 and 2.58 percent, respectively. The lack of coherent and advanced financial markets, the avoidance of keeping gold and foreign exchange by economic agents due to risk aversion and the lack of cash returns, and the lack of access to the housing market for all economic agents can be considered as the important reasons for the increase in savings.