Taxes are generally divided into two categories: direct taxes, which are levied directly on individuals and households, and indirect taxes, which are added to the price of goods and services and are levied on consumers. Value added tax (VAT) is one of the indirect taxes in the category of consumption and sales taxes. Since this tax is levied on consumption and consumption fluctuates less as part of gross domestic product (GDP), the imposition of this tax creates a kind of sustainable income for the government. Considering the consequences and effects of the VAT system, an attempt has been made to identify the sensitivity of GDP compared to direct taxes and VAT. For this purpose, first, the theoretical foundations of endogenous growth models and studies conducted in the past were assessed. Then, the model was estimated based on time series data for the Iranian economy during the period 1973-2016, using the autoregressive distributed lag (ARDL) model. The variables of physical capital inventory, employed labor, direct taxes, and indirect taxes were used as VAT index, and the average years of education were used as human capital index. The results of the model estimate indicated that, in the short run, the direct taxes and VAT variables have a negative and significant effect on GDP, and in the long run, the effect of direct taxes on GDP is negative, but the impact of VAT is positive on production. And the error correction coefficient shows that, in each period, 23% of the imbalance in GDP is adjusted and approaches its long-run trend.

Objective: Revenue enhancement through improving the tax efficiency generates more income for the government without increasing the tax burden, and sustain economic growth. The objective of this study is to investigate the relationship between value added tax collection efficiency and growth.   Theoretical Framework: Endogenous economic growth model allows for investigating the effects of fiscal policy on growth. In tax literature, indirect taxes are considered close to growth because they do not discourage saving and investment. The study decomposes the VAT revenues and use the VAT C efficiency to estimate the impact on growth.   Method: The methodology adopted for this research is based on structural vector autoregressive SVAR. SVAR allows us to impose structural restrictions according to economic theory and to analyze the impact that an individual shock has on other variables included in the model.   Results and Discussion: The study found that value added C -efficiency has a small and positive impact on growth, only in the short term. The maximum effect is in the third quarter, when one percentage point improvement in collection efficiency, increase the real per capita GDP, about 0.3 percent. Further improvements in collection efficiency are needed to generate more tax revenues and sustain growth. The study also found that total tax to GDP has a positive impact on growth, that is significant only in the short time. Government expenses have supported economic growth. An increase in government expenses as a percentage of GDP, is followed by an improvement in real per capita GDP with about 1.05 percent, average impact.   Research Implications: The present research uses four fiscal variables, and only inflation rate based on GDP deflator as a control variable. Further research could be extended by including other control variables.   Originality/Value: This study contributes to the tax literature in developing countries by estimating the impact of VAT on growth using C -efficiency ratio.

Moving the federal government from its heavy reliance on taxes on income and profits to taxes on general consumption has been proposed as a way to improve equity, economic efficiency, and transparency of the tax system. The value‐added tax and the retail sales tax offer economically equivalent approaches to general consumption taxation, differing only in how they are administered. A comparison of the two taxes as they now operate, however, suggests considerable advantage for the value‐added tax as a national revenue source. Only in terms of requiring fewer businesses to collect the tax is there an advantage to the retail sales tax. The value‐added tax is superior or equivalent to the retail sales tax in other important fiscal criteria.

Consumption Tax and Business Tax) and income taxes have played a dominant role in revenue-raising and income redistribution … important taxes include: value-added tax at 17 per cent; corporate income tax (ying jiao suode shui) at … cent of China’s GDP in value-added terms, 49 per cent of industrial value added and 40 per cent of total

income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income) An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Taxation rates may vary by type or characteristics of the taxpayer and the type of income. The tax rate may increase as taxable income increases (referred to Recent studies found a large price elasticity of supply due to reduction in labor force participation rates and human capital investment. Some studies have suggested that an income tax does not have much effect on the numbers of hours worked. The higher costs to labour and capital imposed by income tax causes dead weight loss in an economy, being the loss of economic activity from people deciding not to invest capital or use time productively because of the burden that tax would impose on those activities. There is also a loss from individuals and professional advisors devoting time to tax-avoiding behaviour instead of economically productive activities.