The Impact of Value-Added of Wholesale and Retail Trade and Hotels on Economic Activity: An Econometric Study in the Economy of Iraq between 2006-2021

Abstract

This research paper aims to measure the impact of value-added tax on wholesale and retail trade and hotels on economic activity in Iraq from 2006-2021. The study applied the Autoregressive Distributed Lag (ARDL) model to clarify the effect and demonstrate the relationship between the variables. Results showed an integrative relationship between the value-added tax on wholesale and retail trade and hotels (independent variable, X), and economic growth (the dependent variable Y). The short-term parameters showed a statistically significant relationship at a significance level of less than (1%), as the value-added tax on wholesale and retail trade and hotels significantly positively affects economic growth in the short term. Furthermore, the long-term relationship results showed a statistically significant negative relationship between the variables at a probability level of less than (1%). The value-added tax on wholesale and retail trade and hotels has a major impact on national economic expansion, as an increase in the value-added tax by one dinar leads to an increase in GDP by 10.52684 dinars.  This result is consistent with economic theory and verifies the study's hypothesis. The quality and validity of the model were confirmed through standard tests, including a heteroscedasticity test, serial correlation test, diagnostic tests for functional form, and stability tests for estimated model parameters.