Quarterly Journal of Quantitative Economics (JQE)

An Analysis of Factors Affecting Value-Added Tax: A Spatial Econometric Approach

https://doi.org/10.22055/jqe.2024.45885.2605
Volume 23, Issue 1 - Serial Number 88
Vol. 22, No. 3, spring 2025
Spring 2026
Pages 171-200
Quarterly Journal of Quantitative Economics (JQE)

Document Type : Article-Based Dissertations

Authors

seyedeh Fatemeh NajafiZadeh 1
Mohamad Alizadeh 2
mahboubeh delfan 3

1 PhD student in general economics, Department of Economics and Accounting, Faculty of Management and Economics, Lorestan University, Lorestan, Iran

2 Associate Professor of Economics, Department of Economics and Accounting, Faculty of Management and Economics, Lorestan University, Lorestan, Iran.

3 Assistant Professor of Economics, Department of Economics and Accounting, Faculty of Management and Economics, Lorestan University, Lorestan, Iran

Abstract
EXTENDED ABSTRACT
INTRODUCTION
Value-added tax can be considered one of the most necessary and important taxes because it has proven to be a very important financial tool for countries, and one of the most efficient taxes for reducing the budget deficit during financial crises. Several factors, either directly or indirectly affecting the economy, can influence the income from value-added tax. Based on the studies of economic growth, imports, unemployment, inflation, consumption, and trade openness are potential factors that have a great impact on the level of value-added tax revenues. Besides, the effect of tax revenues, especially value added tax, from neighbors and business partners is undeniable. Most of the conducted studies have focused on the identification of factors affecting value-added tax alone, and very few actions were taken regarding the effects of various factors along with the effect of proximity on value-added tax revenue. This research aims to examine the factors affecting the receipts of value-added tax from a broader perspective, consisting of the economic conditions and proximity of the countries. Therefore, in this study, the effect of important economic factors on value-added tax revenues in selected Asian countries is investigated with a spatial econometric approach, and their spatial dependence during the period of time is considered (1995-2021).
 
METHODOLOGY
This study aims to investigate the factors affecting value-added tax in selected Asian countries using the panel spatial econometric method during the period (1995-2021). The statistics and information required for the variables of GDP, trade openness as the sum of exports and imports divided by GDP, urbanization, household consumption, and unemployment rate have been extracted from the World Bank website and geographical distance from the CEPII website.
 
FINDINGS
First, to check the spatial dependence of Moran, Gray, Jettis and Ord tests, the spatial dependence of the countries was confirmed, and based on the significance of the tests, the research model was estimated in the spatial framework of a panel. Then, based on the logarithm of likelihood test, the SAC model was selected as the optimal model. The estimation results using the geographical distance matrix and SAC model show that the variables of trade openness, economic growth, and consumption have a positive and significant effect, and unemployment has a negative and significant effect on value-added tax revenues. Furthermore, the urbanization variable has no effect on the dependent variable among studied group during this period.
 
CONCLUSION
Value-added tax, as one of the main pillars of government budgets, plays a significant role in countries' growth and development. Therefore, it is crucial to identify the effective and significant factors that influence this tax structure. On the other hand, the imposition of taxes in a country is not only affected by internal factors, but other factors are also influential under the title of spatial dependence that occurs in terms of the proximity of one region to other regions. In general, it can be stated that the effectiveness of the VAT revenues of the countries in a region is undeniable due to trade relations, and the effects of proximity and neighborhood. Gross domestic production and consumption have a positive and significant impact on value-added tax. Therefore, the countries in the group should continuously implement measures to enhance the performance of various economic sectors and facilitate the successful evolution of the economy. These measures could include the introduction of new technologies, fostering innovation in production, and implementing policies that support the use of sustainable resources. Trade openness had a positive effect on value-added tax, so it can be stated that business openness can have an effect on domestic income, and consequently, value-added tax revenues through spillover effects, such as the introduction of new technologies and the increase of human capital. Moreover, unemployment had a negative effect on value-added tax revenues, so governments should have appropriate economic policies in the field of creating new jobs and employing labor in their country.

Keywords

Value added tax Value
added tax revenue
Economic factors
Subjects
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  • Receive Date 18 January 2024
  • Revise Date 27 February 2024
  • Accept Date 27 July 2024
  • First Publish Date 27 July 2024
  • Publish Date 22 May 2026

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