Comparative Study of the Effects of Value Added Tax and Payroll tax on Iran's Economic Growth: Computable General Equilibrium (CGE) Model Approach

Taxes are one of the most important sources of government revenue, which has received increasing attention in the country's economy in recent years.Important sources of taxation are VAT and payroll taxes, which play a major role in raising tax revenues.Therefore, the present paper tries to examine the effects of increasing the VAT and payroll tax rates on Iran's economic growth.The Computable General Equilibrium (CGE) model is used to analyze the effects of these tax policies.The main source of data is the latest Social Accounting Matrix (SAM) provided by the Central Bank of Iran.Policy analysis is done based on three scenarios: 5%, 10%, and 15% increase in VAT and payroll tax rates.The results show that increasing the VAT rate increases economic growth, but an increase in the payroll tax rate will lead to a reduction in economic growth.On the other hand, as the rate of both taxes increases, government revenue increases, but the increase in VAT revenue is far greater than payroll tax revenue.Therefore, in general, an increasing the VAT rate takes precedence over the payroll tax rate.Also, the results of sensitivity analysis indicate the high accuracy of the research model and the reliability of the results of policy analysis.