Investigating the Impact of Exchange Rate Uncertainty on the Absorption of Indirect Taxes in Iran: a Fuzzy Approach

Mostafa Shokri () and Masoud Saadatmehr ()
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Mostafa Shokri: PhD in International Economics University of Tabriz
Masoud Saadatmehr: Assistant Professor of Economics, Payame Noor University, Tehran

Quarterly Journal of Applied Theories of Economics, 2023, vol. 10, issue 3, 227-252

Abstract: Uncertainty of exchange rate is one of the factors that has faced Iran's economy with many challenges and has caused instability in macroeconomic variables. In the meantime, the variable of indirect taxes can be affected by the uncertainty of the exchange rate due to the two important sub-sectors of import tax and transaction tax. Because the expected fluctuations in the exchange rate can change the amount of imports or the volume of transactions. On the other hand, the change in indirect taxes, in turn, will affect the government budget and the consequences of the budget deficit will cause problems for the entire economy. Therefore, in this research, the effect of exchange rate uncertainty on indirect taxes has been investigated. For this purpose, the fuzzy regression method has been used for the time period of 1991-2021. The results showed that the uncertainty of the exchange rate has a significant negative effect on the absorption of indirect taxes in Iran's economy. The average value of the impact factor is -0.0431, which is between the upper and lower limits of -0.0338 and -0.0524. Also, the results show that the inflation rate has the most negative effect and oil revenues have the most positive effect on the absorption of indirect taxes in Iran's economy

Keywords: indirect tax; uncertainty; exchange rate; fuzzy logic (search for similar items in EconPapers)
JEL-codes: F10 F19 H20 (search for similar items in EconPapers)
Date: 2023
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