The Impact of Taxes on Prices and Production in Jordan
Keywords:Taxes, Direct Taxes, Indirect Taxes, Production, Prices, Jordan
Purpose: This study aims to demonstrate the impact of taxes on prices and production in Jordan.
Theoretical framework: Study problem lies in asking the following questions
- Does the tax system in Jordan serve the economic aspects?
- Does the tax in Jordan affect the economic aspect?
- Is the tax in Jordan fair?
- Is there an impact of the tax on prices in Jordan?
- Is there an impact of the tax on production in Jordan?
- What is the effect of taxes on consumer speeding on necessary versus luxury goods?
- What is the impact of higher taxes on personal income of consumers?
- The effect of Lower taxes on the economy and disposable income?
- What is the alternative for governments to increase their income other than direct higher tax system?
- What is the effect of various government entities; such as financial, administrative, and social corruption on Jordan economy?
Design/methodology/approach: Researchers used standard analysis method and vector error correction model for the period (2011-2020), and used the profit margin ratio indicator as a representative indicator for production and prices.
Findings: Results showed a long-term causal relationship between prices and production; from one side and direct and indirect taxes; from the other side and that relationship between short-term deviations and long-term reliability is corrected at a rate of (3%) per year. Results showed a negative significant impact of indirect taxes on price competitiveness; in the long term which was reinforced by the variance components’ analysis and response function’s test. Results also showed an insignificant impact of direct and indirect taxes on price competitiveness; in the short term.
Research, Practical & Social implications: Demonstrating the impact of taxes on prices and production in Jordan. As well as, discussing the governmental tax and income.
Originality/value: The importance of study stems from research topic, since taxes have multiple effects on various areas in society which can be divided into scientific and practical importance.
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