AN EXAMINATION OF THE IMPACT OF EXCHANGE RATE FLUCTUATIONS ON TAX REVENUES IN IRAN FROM 1979 TO 2018

Abstract

This research paper studies the impact of exchange rate fluctuations on tax revenues in the Iranian
economy from 1979 to 2018. It is argued that taxes are a significant source of government funding and an
ethical means of financing public goods and services, providing social and welfare services, and controlling
economic and social activities. However, in Iran, the tax system has several challenges and has not yet reached
its full potential as a source of public funding. The paper recommends identifying influential variables and
recognizing the direction of their influence to increase the proportion of tax revenues to GDP. Exchange rate
variations are one of the primary variables that affect tax collection, and abnormal exchange rate fluctuations
reduce buying power and force exporters to either stop operations or seek more profits for greater risk. To
achieve this, the paper employs unit root tests, Durbin-Watson tests, GARCH models, ARDL models,
experimental model specification, and tests analysis to examine the impact of taxation in the Iranian economy.