Page 27 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.76, # 2, 2019, pp. 21-30

From equation (8) we obtain the level of tax burden that maximizes the value of
GDP in The Republic of Azerbaijan as equal to 2.64 percent.

And now we can estimate the following regression equation for evaluating the II
type Laffer point for the Republic of Azerbaijan:

LOG(VATR_AZE) = C(1) + C(2)*VAT_TB_AZE + C(3)*VAT_TB_AZE^2 + [AR(1)=C(4)] (9)

Here, VATR_AZE is the value of VAT revenues in the Republic of Azerbaijan.
The following result was obtained from the econometric evaluation of the regression
equation (9):

LOG(VATR_AZE) = 10.5167836735 + 2.28999268034*VAT_TB_AZE - 0.356455697876* VAT
_TB_AZE^2 + [AR(1)=0.894916682525] (10)
(t-Statistic) (25.26346) (4.509341) (-3.180596)
R-squared = 0.955045; Adjusted R-squared = 0.929357; Durbin-Watson stat = 1.959042

15.0
14.5
14.0
13.5
13.0
12.5
.3
12.0
.2
.1
.0
-.1
-.2
06 07 08 09 10 11 12 13 14 15 16 17
Residual Actual Fitted
Graph 3. Plot of the Actual, Fitted (10) and Residual values of VAT revenues for the
Republic of Azerbaijan.

The statistical indicators of the regression equation (10) show that the model is
adequate. Based on the results obtained from this equation, the level of the tax
burden on VAT that maximizes the VAT revenues in the Republic of Azerbaijan
equals 3.21 percent.

A summary of the results of the research conducted to determine the optimal level of
the tax burden on VAT are given in the following table:

27