Studying the Effect of Value Added Tax on the Size of Current Government and Construction Government

The present research studies the effect of value added tax on the size of current government and construction government. Research hypotheses tested by studying the relationship between value added tax and the size of current government (in the form of current cost to gross domestic product (GDP)) and the size of construction government (in the form of construction cost to GDP). In this regard, seasonal time-series statistic within the period of 2008-2014 applied through using ARDL model. Research results show that there is a positive, significant relationship between value added tax and the size of current and construction governments. This tax more influences the size of construction government than the size of current one. Indeed, contrary to developed countries, collecting value added tax mostly influences the ratio of construction expenditures to GDP rather than influencing reduced poverty through increasing welfare expenditure, which increase government current expenditures.