International Journal of Nonlinear Analysis and Applications

Investigating the effect of changing the corporate income tax rate on employment level: A case study companies listed on the Tehran Stock Exchange

Articles in Press

Document Type : Research Paper

Authors

Department of Economics, University of Tabriz, Tabriz, Iran

Abstract

One of the key measures in any country's tax system is the selection of the tax base and its corresponding tax rate, which must be determined accurately based on rigorous scientific studies. Given the significance of this issue, as government fiscal policies through taxation can influence employment levels, this study investigates the effects of changes in the corporate income tax rate on companies listed on the Tehran Stock Exchange with respect to employment levels. The objective is to develop policy strategies aimed at reducing unemployment or increasing employment over the period from 2010 to 2023 (1389 to 1402 in the Iranian calendar) using the Generalized Method of Moments (GMM). The findings indicate that the first-order lag of the effective corporate income tax rate, the ratio of expenses to financial liabilities, per capita wages, and private ownership of companies harm corporate employment levels. Conversely, the size of corporate assets, return on assets, and the debt-to-asset ratio have a positive impact on employment growth. To assess the robustness of the results, the studied companies were divided into two groups: privately owned and state-owned companies. The effects of income tax rates on the employment levels of these groups were analyzed separately. For state-owned companies, the effective corporate income tax rate, the ratio of expenses to financial liabilities, and per capita wages negatively impacted employment levels, while the size of corporate assets, return on assets, debt-to-asset ratio, and the previous period's employment level had a positive effect on increasing employment. For privately owned companies, the size of corporate assets and the previous period's employment level positively influenced employment growth. In contrast, the effective corporate income tax rate, the ratio of expenses to financial liabilities, per capita wages, return on assets, and debt-to-asset ratio hurt employment levels.

Keywords

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International Journal of Nonlinear Analysis and Applications

Articles in Press, Corrected Proof
Available Online from 14 March 2026
  • Receive Date: 10 June 2025
  • Revise Date: 02 September 2025
  • Accept Date: 13 September 2025