The Role of Central Bank Digital Currency in Achieving the Taxation Goals of the Seventh Development Plan

Nasrindoost, Maysam; MehrjouIrani, Mahtab; Ebrahimi Salari, Taghi

doi:10.22111/ijbds.2026.52748.2264

The Role of Central Bank Digital Currency in Achieving the Taxation Goals of the Seventh Development Plan

Document Type : Research Paper

Authors

Ferdowsi university of mashhad

10.22111/ijbds.2026.52748.2264

Abstract

In Iran's economy, particularly over the past few decades as the government's reliance on crude oil revenues has diminished, the issue of taxation and its allocative and distributive effects has gained increased importance. The Seventh Five-Year Development Plan has stipulated that the share of taxes in the general budget should be increased by raising the value-added tax rate. Additionally, the plan mandates the central bank to control liquidity growth and achieve single-digit inflation by the end of the program. Consequently, the issue of tax rate hikes arises amid stagflation in Iran's economy. Since tax increases have inflationary effects, these two objectives—raising taxes and curbing inflation—do not inherently complement each other. This highlights the importance of coordinating monetary policies alongside tax policies to mitigate adverse effects. Despite these concerns, the introduction of central bank digital currency as a new monetary policy tool by central banks worldwide has opened new possibilities. This study employs a dynamic stochastic general equilibrium model to examine the inflationary effects of VAT rate increases under two scenarios: with and without CBDC issuance. The results indicate that the introduction and issuance of CBDC, along with a rule-based monetary policy, could complement fiscal measures, ensuring that tax increases do not further contribute to inflation and economic recession in inflationary conditions.

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