The Study of Value Added Tax Law Effect on Instrumental Income and Taxable Income of Firms

Purpose of this study is investigating the effect of value added tax law on instrumental income and taxable income of companies. Research statistical sample includes all legal entities of tax area in Tehran during 2009–2011 that sample size is 217 concerning screening method and eliminating outliers. In this research, value added tax and value added tax rate are considered as independent variables; public ownership, private ownership, amount of internal and external trade are control variables; instrumental income and and taxable income are considered as dependent variable. In this research in which pooled and panel data with fixed effects were used, results of data analysis in 95% level confidence show that there is significant direct relationship between instrumental income and taxable income of tax payers. On the other hand, results showed that there is significant direct relationship between value added tax rate and instrumental income and taxable income of tax payers.