Estimation of the Taxable Capacity: the Case study of a Developing Country

Abstract

Existence of an effective tax system is essential for economic development. This paper estimates taxable capacity on occupations in Kermanshah province, Iran, for the period 1993-2007. The results indicated that average rate of tax effort in occupations sector is more than 0.17 which represents a tax gap in the occupations sector and the existence of potential capacities. Furthermore, from 1000 business units in the province only 1/4 units pay taxes while the corresponding average level of country is 3/4.