The Effect of Capital Gain Tax on Capital Formation, Financial Development and Economic Growth, “Case Study of Iran and Some Selected Trade Partners

Bahare Maleki¹ Majid Sameti² Morteza Sameti³ Homayoun Ranjbar⁴

1) PhD Candidate of Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
2) Associate Professor of Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
3) Professor of Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran
4) Associate Professor of Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran

IOI Code : XYFH-BBGGC
Publication : 2nd International Conference On Management and Economics in 21 Century(icme21.com)
Abstract :
    Tax is the most important source for government income. In countries with different political and economic structure, the importance of this variable is different and the impact of this variable on the other economic variables is not the same. One type of these taxes is capital gain tax. The capital formation, financial development and economic growth are among the variables which are affected by economic structure. In this paper, by simultaneous equations system in GMM method, the impact of capital gain tax on the capital formation , financial development and economic growth in Iran and selected trade partners(Denmark, Steven, Italy, Netherlands, Swiss), will be studied in panel form. The results indicate that the capital gain tax growth rate, with three lags, increases the physical capital formation growth rate. Also, capital gain tax growth rate, with three lags, decreases the financial development growth rate and increases the economic growth rate.

Keywords : capital gain tax capital formation economic growth financial development simultaneous equations system gmm