Economic Analysis of Tax and Subsidy Policies and Regulations in Iranian Financial Markets with a Distributive Justice Approach Based on Kaldor–Hicks Efficiency Theory

دانشنامه حقوق اقتصادی

Volume 29, Issue 22, February 2023, Pages 142-113   

Document Type: Scientific research

DOI: 10.22067/economlaw.2023.74587.1132

Authors

mahmood bagheri^{* 1}; Saeed Mohammadi Bidhendi²

¹Professor of Private Law, Faculty of Law and Political Science, University of Tehran

²Graduate of international trade and economic law

Abstract

It is assumed that financial markets by utilising private law instruments operate in a way which lead to equilibrium and efficiency based on distributive justice. However, in case financial markets deviate from this equilibrium and efficiency, there is a need to provide and implement economic law remedial solutions which, includes the utilisation of tax-subsidy policies that bring in favorable distributive outcomes. The present study uses library resources and descriptive analytical approach to analyze important tax-subsidy interventions in Iranian financial markets, explain appropriate normative framework for tax-subsidy intervention in financial markets and examine compliance of tax-subsidy interventions in Iranian financial markets with this normative framework. The authors believe that the most appropriate way to restore the efficiency and equilibrium of financial markets is to apply those tax-subsidy policies and regulations that are based on the Kaldor-Hicks formula of distributive justice; Derived from economic analysis of law. These interventions are designed in a way that if in short-term they bring in adverse effects for some groups, these groups will be compensated by the effect of wealth maximization in the long run.
 

Keywords

Keywords: Tax; Subsidy; Distributive Justice; Kaldor-Hicks Criterion; Financial Markets

References

[1] Badini, Hassan. (2003). Philosophical Principals of Economic Approach to the Law. The Tehran University’s faculty of law and political sciences journal, 62, 91-136. (in persian)

[2] Bagheri, Mahmood. (2007). Market Economy and Private Law Failure. Law & Politics Research Journal, 8(19 (Special of Law)), 41-88. (in persian)

[3] Burman, L. E., Gale, W. G., Gault, S., Kim, B., Nunns, J., & Rosenthal, S. (2016). Financial transaction taxes in theory and practice. National Tax Journal, 69(1), 171-216.

[4] Central Bank of the Islamic Republic of Iran. (2021). Deposit Interest Rates. https://www.cbi.ir/simplelist/1515.aspx

 [5] Dadgar, Yadollah. (2012). What Should Lawyers Know About Economics. Journal of Law Research, 15(58), 7-43. (in persian)

[6] Darškuvienė, V. (2010). Financial markets. Vytautas Magnus University. Kaunas.

[7] Deardorff, A. V. (2001). Deardorff’s glossary of international economics. February, 24, 2008.

[8] Donya-e-Eqtesad Newspaper (2019). Issuance of 321 million bank cards in the country. https://donya-e-eqtesad. om/. (in persian)

[9] Ernst & Young. (2021, January 21). Korea enacts 2021 tax reform bill. https://www.ey.com/en_gl/tax-alerts/korea-enacts-2021-tax-reform-bill

[10] Fleischacker, S. (2009). A short history of distributive justice. Harvard University Press.

[11] Forsyth, D. R. (2006). Conflict. Forsyth, DR, Group Dynamics, 388-389.

[12] Hansson, A. (2004). Normative Positions and Market Failures-The Implications of Political Ethics on Cures for Market Failures.

[13] Hodge, S. A. (2017). The Economic Effects of Adopting the Corporate Tax Rates of the OECD, the UK, and Canada. Tax Foundation, Fiscal Fact, 477.

[14] Horton, M. A., & El-Ganainy, A. (2009). Back to Basics: What is fiscal policy?. Finance & Development, 46(002).

[15] Hosseini, Ebrahim. (2018). Is there a large number of bank branches in Iran? Donya-e-Eqtesad Newspaper. https://donya-e-eqtesad.com/

[16] Internal Revenue System (2021, September 23). Exempt Organization Types. https://www.irs.gov/charities-non-profits/exempt-organization-types

[17] J Delgado, F., Fernandez-Rodrıguez, E., & Martınez-Arias, A. (2018). Corporation effective tax rates and company size: evidence from Germany. Economic research-Ekonomska istraživanja, 31(1), 2081-2099.

[18] Kumar, S., Aggrawal, V., & Garg, S. (2009). Levy of tax on cash withdrawal: Logic and rationality. IITM JOURNAL OF MANAGEMENT AND IT, 1(1), 67-70.

[19] Mattera, P., & Tarczynska, K. (2015). Uncle sam’s favorite corporations. Good Jobs First.

[20] Mellon, B. N. Y. (2018). Financial Transaction Taxes (FTT): A Global Perspective. Via Internet (24.7. 2019):<https://www. bnymellon. com/emea/en/_locale-assets/pdf/our-thinking/ftt-globalperspective-brochure-03-2018. pdf.

[21] Middle East Bank. (2021). Recent Economic Developments in Iran a Quarterly Report, No. 24 (in persian)

[22] Middle East Bank. (2014). Economic Analysis of Iranian Petrochemical Industry.(in persian)

[23] Miller, C., & Tyger, A. (2020). The impact of a financial transaction tax. Fiscal Fact, (690).

[24] Mittermaier, K. (2020). The hand behind the invisible hand: dogmatic and pragmatic views on free markets and the state of economic theory (p. 278). Bristol University Press.

[25] Pekanov, A., & Schratzenstaller, M. (2019). A Global Financial Transaction Tax-Theory, Practice and Potential Revenues. Practice and Potential Revenues (May 29, 2019).

[26] PKF International Limited (2020). Capital Gains Tax on Shares in the EU Anno 2020. https://www.pkf.com/media/8d8910f34a4a2ec/capital-gain-tax-on-shares-in-the-eu-1.pdf

[27] Saunders, A., Cornett, M. M., & Erhemjamts, O. (2012). Financial markets and institutions. McGraw-Hill/Irwin.

[28] Statistical Center of Iran. (2021). Consumer Price Index-September 2021. (in persian)

[29] UK Government. (2021, April 1). Rates and allowances for Corporation Tax. https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax

[30] UK Government. (2021). Tax on dividends. https://www.gov.uk/tax-on-dividends

[31] UK Government. (2021). Tax on savings interest. https://www.gov.uk/apply-tax-free-interest-on-savings

[32]Grossman, M. (2019). efficiency. Encyclopedia Britannica. https://www.britannica.com/topic/efficiency-economics-and-organizational-analysis

[33]  Shor, Mikhael. (2005). "Hicks Optimal" Dictionary of Game Theory Terms, https://www.gametheory.net/dictionary/HicksOptimal.html