Tax Incidence; Evidence from Iran’s VAT

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Sabouri, Nima | 2016

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 48550 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Vesal, Mohammad
Abstract:
In this paper we determine “Tax Incidence” of value added tax (VAT). Incidence Tax represents tax burden that is imposed to each tax-payers: consumers or producers. Value added tax was first implemented in Iran in Mehr 1387. Providing a natural experiment condition, it made it possible to measure tax incidence by using difference-in-difference method. Therefore, data of monthly consumer price index of 23 tax-exempt commodities, and 23 taxable commodities, have been used from Farvardin 1384 till Esfand 1393. According to the results, from 1387 to 1390, no tax incidence regarding value added tax was found. It seems, in the first years of implementation, it is the result of its resemblance with Aggregated Tariff Law. Tax shifting coefficient was positive in years 91 and 92; which means there was a tax-overshifting. Moreover, in year 1393, as we eliminate some commodities which were affected by taxation policies, an increase in Tax Incidence of value added tax occurs following the coefficients of difference-in-difference variable being significant showing full-pass through
Keywords:
Consumer Price Index ; Value Added Tax (VAT) ; Tax Incidence ; Difference-in-Difference Method

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