Investigating the moderating role of financial development in the relationship between tax revenue and economic development in the Iranian

Document Type : Scientific paper

Authors

1 M.A. Student of Public Administration (Budget and Public Finance), Faculty of Humanities, Payam Noor University, Yazd Province, Taft Center, Iran

2 Assistant Professor, Department of Economics, Payam Noor University, Tehran, Iran

3 M.A. in Economics, Faculty of Humanities, Ayatollah Borujerdi University, Borujerd, Iran

10.22080/mrl.2025.29205.2177

Abstract

In recent years, the importance of tax revenues as a sustainable and alternative source of oil revenues in countries such as Iran has increased. However, the effectiveness of the tax system has always depended on infrastructural factors such as financial development. This study aimed to investigate the moderating role of financial development in the relationship between tax revenue and economic development in the Iranian economy to determine whether financial development can enhance or weaken the impact of taxes on development. The present study is of an applied type and has a quantitative approach. Annual time series data related to macroeconomic variables were collected from 1370-1401. For data analysis, the autoregressive distribution lag (ARDL) method was used to examine the short-run and long-run relationships between the variables in question. The data were extracted from official sources such as the Central Bank, the Statistical Center of Iran, and the World Bank. The results of the estimated model showed that personal income tax does not have a significant effect on the human development index and per capita income, which could indicate a weakness in the tax collection structure and tax evasion. In contrast, corporate income tax, if accompanied by a developed financial system, will have a positive and significant effect on per capita income. This highlights the mediating role of financial development in the impact of taxes on economic growth.Financial development as a key infrastructure can increase the effectiveness of tax policies and pave the way for sustainable economic growth. Policymakers should pay special attention to the integration between tax reforms and the development of financial systems.

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History

  • Receive Date: 11 May 2025
  • Revise Date: 15 October 2025
  • Accept Date: 23 November 2025

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