Tax Ratio Threshold and Economic Growth in Iran

The purpose of this article is to estimate the rate and effect of threshold tax on economic growth in Iran during 1980 - 2008. To do so, first we divide Iranʹs economy into two sectors namely, public and non-public sector based on Ram (1986) model. Then we estimate a linear model .Due to poor results of the estimated linear model we specified a nonlinear model on explain the role of tax on economic growth in Iran.. The results indicate that there exists a threshold tax rate of 22%. In other words, when tax rate is less than 22%. then as a result of an increase in tax revenue rate of economic growth will increase and beyond a tax rate of 22%. It will have a detrimental effect on economic growth of the country.