The Feasibility of Financing Government Current Expenditures through Tax Revenues: The Case of Ardabil Province

The objective of this paper is to study the feasibility of financing Government current expenditures through tax revenues in Ardabil province until the end of the 4th Development Plan (1383-1388). With the objective of financing the whole or part of the Government current expenditures from tax revenues, nine scenarios with different assumptions and with regard to the rate of growth in Government current expenditures in the Third Development Plan are defined. In other words, there are three different scenarios for the rate of growth of Government expenditures during the Fourth Development Plan and three different scenarios for financing the whole or part of Government expenditures through tax revenues (financing 75 and 100 percent). This paper shows that with the assumption of financing 50 percent of the Government expenditures through tax revenues until the end of the Fourth Development Plan and with the assumption of current expenditure growth at a rate equal to one-third of the similar growth rate in expenditures during the Third Development Plan, the minimum tax revenues under the nine scenarios amounts to 244.7 thousand billion Rial. Moreover, with regard to another scenario which considers similar growth rate in the Third Development Plan and attempts to fully finance the Government current expenditures through tax revenues, 467 thousand billion Rials increase in tax revenues is required (the maximum amount). The findings suggest that the Government should attempt to finance more than 50 percent of its expenditures through tax revenues and try to finance the remaining during the Fifth Development Plan.