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2004-1980
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OLS
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.




6-2
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- 341 -

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 34 2007 2

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2007 2 34

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-4



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-3
( )

Ireland, P. 1994. Supply-Side Economics and Endogenous

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Matthews, Kent. 2003. VAT Evasion and VAT Avoidance:

Aisha, Ghaus, A. 1995. Optimal Local Sales Tax, Urban

is there a European Laffer Curve for Vat? International

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Mundell, Lee and Adams, Jack. 1982. The Laffer Curve,

Uneasy Case Against Discriminatory Excise Taxation:

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- 346 -

...

Estimating Laffer Curve for Profit Tax in Selected Jordanian Companies

Said M. Al-Tarawnih*

ABSTRACT
This study aims to analyze the relationship between tax rate and tax receipts, it also aims to determine the
optimal tax rate through estimating laffer curve. For that, the study used data for 36 Jordanian companies for
1980-2004 period. On contrast to previous literature that estimate laffer curve on macro level, this study
estimates laffer curve on micro level.
The optimal tax rate obtained after estimating laffer curve through two steps: in the first, we assure data
stationarity by using unit root test. In the second step, OLS was employed. The result revealed that the actual
tax rate is less than the optimal tax rate. This means that the government could raise profit tax rate,
especially for bank and insurance companies, to increase tax receipts. The results also showed that the actual
tax rate is approximately equal among service and productive sectors (industry). This may require
restructured tax rates among sectors towards encouraging productive sector, since Jordan economy
characterized by service sector dominances.
Keywords: Laffer Curve, Optimal Tax Rate, Tax Policy, Actual Tax Rate.

________________________________________________
* Department of Business and Finance Economics, Faculty of Business Administration, Mutah University, Al-Karak,
Jordan. Received on 3/5/2006 and Accepted for Publication on 8/10/2006.

- 347 -