آیا فعالیت های سیستم مالی بر درآمد مالیاتی در مالزی تاثیر می گذارد ؟ محدوده آزمون و رویکرد علیت

We provide new empirical evidence on the relationship among direct tax revenue and banking and non-banking activities in Malaysia's financial system, utilising monthly data for the period 1997–2008. The existence of the long run equilibrium relationship between tax revenue and the financial system was investigated using the autoregressive distributive lag (ARDL) bounds testing approach to cointegration. We find a long-run equilibrium relationship between the financial system and tax revenue in Malaysia. The short-run dynamic relationship between direct tax revenue and financial system was investigated using the vector error correction model (VECM). The estimated ECTt−1 coefficient indicates a relatively fast speed of adjustment from short-run disequilibrium to long-run equilibrium. The Granger causality tests reveal unidirectional causality running from stock market towards direct tax revenue, indicating that an increase in stock market activities is likely to improve the collection of direct tax revenue. Overall, we show that the impact of the financial system on direct tax revenue is more profound in the short run than in the long run.

For a developing country such as Malaysia to progress well, the combination of a strong financial system and solid fiscal policy is necessary to promote economic growth. Despite the importance of these measures and voluminous literature on the topic, understanding of the relationship between the financial system and fiscal policy as well as their joint impact on economic growth is far from complete. Although it is generally accepted that this relationship exists in developed countries (Akitoby and Stratmann, 2008 and Arin et al., 2009), studies do not agree on the direction of the causality or provide very little insight into the particular fiscal policy tools that could help a government to achieve a desired financial market response (Ardagna, 2009, Darrat, 1988, Darrat, 1990 and Laopodis, 2009). This is important because fiscal policy tools, especially taxation arrangements, may have an impact on both the competitiveness of a country's financial markets and banking and non-banking institutions operating in those markets. Moreover, in developing countries this relationship needs to be investigated, and the evidence of either no or negative causality between financial markets and taxation (e.g. a financial market does not contribute to taxation revenue) should be used to raise additional questions as to why these findings have occurred. In addition, the causal effect of specific financial variables on a taxation system seems to be an under-investigated area, since previous studies have largely focused on a small portion of a financial system typically proxied by the stock market while neglecting the bonds market and banking sector activities. For instance, Bohn (1990), Demirguc-Kunt and Huizinga (2001), Tavares and Valkanov (2001), and Ardagna (2009), focus on either banking or non-banking activities in the financial system, but do not attempt to examine the impact of both types on tax revenue collection. The main purpose of this paper is to examine the short-run and long-run linkages between taxation (direct tax revenue) and the financial system (both banking and non-banking financial activities) in Malaysia as a developing country, utilizing monthly data for the period 1997–2008. The existence of the long run equilibrium relationship between tax revenue and the financial system was investigated using the autoregressive distributive lag (ARDL) bounds testing approach to cointegration, which can be used regardless of whether the underlying variables are integrated of different orders or fractionally integrated. The short-run dynamic relationship between direct tax revenue and financial system was investigated using the vector error correction model (VECM). This paper contributes to the literature on the relationship between taxation and the financial system in three ways. First, it focuses on a wide range of financial variables that represent both banking and non-banking financial activities. Second, to the best of our knowledge, this is the first paper to concurrently examine the relationship between tax and the financial system in developing Asia with particular attention to Malaysia. Third, unlike previous studies which examined the role of fiscal policy in Malaysia (e.g. the impact of tax rate changes on financial activities in that country), our aim is to investigate the effect of the financial system on the direct tax revenue collection, given that for the past two decades direct tax revenue has been the major contributor to government income in that country (Malaysia, 2008). Table 1 demonstrates that the share of direct tax revenue in the total government revenue increased from 39% in 1980 to more than 50% in 2008. The structure of this paper is as follows: Section 2 surveys the literature while Section 3 presents the data used in the study and discusses the empirical methodology. The findings are presented in Section 4. The paper concludes with a brief summary, followed by a discussion of the implications of our findings in Section 5.

The nexus between taxation and financial system has been widely discussed in the developed country context. However, in recent years there has been a growing focus in the developing countries on the importance of implementing an effective taxation policy framework to stimulate financial activities, which in turn could foster economic growth. It is suggested in the literature that fiscal policy, especially tax policy, has a significant influence on investment decisions. Theoretically and empirically, most of the literature (Ardagna, 2009, Arin et al., 2009, Laopodis, 2009 and Tavares and Valkanov, 2001) reports the negative relationship between tax policy and financial system. However, very few studies have examined the impact of financial system activities on direct tax revenue collection in a developing country, and decomposed the financial system into banking and non-banking activities. In this paper, we study both long-run and short-run relationships between direct tax revenue and banking and non-banking financial sector activities in Malaysia from 1997 to 2008 using higher frequency (monthly) data. DF-GLS unit root tests reveal that all variables are non-stationary, meaning that shocks to direct tax revenue and our proxies for banking and non-banking financial activities will have a permanent impact on these series. ZA (1992) unit root test results for models A and C also suggest the existence of a unit root in all variables except for BM and IB. For these two variables, the unit root null was rejected in favour of trend-stationary series with a one-time structural break in November 2000 (BM) and March 2008 (IB). This means that the impact of shocks on these variables, such as changes in the regulatory structure or the Global Financial Crisis, will result in a temporary deviation from their long-term growth path. These findings also have important policy implications for Malaysia. For instance, as suggested by Hendry and Juselius (2000), “variables related to the levels of any variables with a stochastic trend will inherit that non-stationarity and transmit it to other variables in turn.” Therefore, given the large extent to which direct taxation revenue, main stock market index, and commercial bank loans are integrated into the real economy, if shocks to these variables are persistent, key macroeconomic variables including GDP of which government revenue is a component are likely to inherit this persistence. The mixture of I(1) and I(0) variables allows us to investigate the short-run and long-run relationships between the financial system and tax revenue using the ARDL bounds-testing approach to cointegration. Results suggest that direct tax revenue and banking and non-banking financial activities are bound together in the long-run, linear equilibrium relationship. Following Stock and Watson (1993), this means that these variables share the same stochastic trend which is composed of the accumulated individual shocks that cause a permanent random change of the conditional mean of the series. While the variables might drift from this equilibrium relationship in the short run, in the long run they are bound together. This suggests that both banking and non-banking financial activities play a vital role in direct tax revenue collection. The diagnostic tests for serial correlation, heteroskedasticity, and normality in residuals also confirm the validity of the model. Thus, it is important to undertake a financial liberalisation by removing repressionist policies to allow both banking and non-banking sectors to better perform their function of mobilizing savings and allocating capital which, in turn, results in achieving economic growth. It is accepted in the literature that taxation policies (and in this case direct taxation policies) affect the competitiveness of companies and the efficiency of the financial sector overall. Therefore, our finding that stock market has a significant positive causal effect on direct tax revenue in the short-run run also has a significant policy implication. Equities issues are considered to be the major source of funds in the corporate sector in Malaysia to fund various investment projects. Malaysia has adopted a tax regime that minimises the cost of equity financing and bond financing by providing tax incentives for both investors in the financial market, the issuers of financial securities, and financial intermediaries. Although such policies have led to an increase in the size of the equity market in Malaysia – and in 2010 Malaysia's equities market ranked the fifth fastest growing market in Asia – stock market liquidity hinders productive investment that can lead to higher direct revenue collection. Therefore, Malaysia can take steps to inject liquidity into the stock market by reducing transaction cost, fees and charges of market participants, educating potential investors, and establishing an efficient trading system. In addition, in 2008 Malaysia changed taxation of dividends paid to the shareholders by introducing a single tier tax system (STS) that replaced the imputation tax system. The transitioning to this system will be completed in December 2013. Dividends that are paid by the companies using the STS are not taxable. Such measures related to dividend taxation as the direct taxation of income earned by shareholders should lead to further development of the stock market in Malaysia. The significant results reported for stock market activities highlight the importance of these activities in Malaysia. However, there is no evidence of a significant relationship between tax revenue and investment bank loans to the private sector. This can be explained by the decrease in both volume and value of investment bank loans to the private sector over the sample period. This is partly due to the changing role of investment banks from offering loans to expanding off-balance sheet activities while providing advisory services to their customers. At the same time, it can also be explained by the government's decision to grant tax exemptions on the profit gained by investment banks, which has led to a reduction in the tax revenue obtained from this source. In addition, no significant results were found regarding the impact of both commercial bank loans to the private sector and the private bond market on the direct tax revenue. This finding is surprising because over the last decade Malaysian bond market grew on average 10.8% and is at present the largest in ASEAN and the third largest in Asia with well-established infrastructure facilities (Securities Commission, 2011). Similar to the equities, there are substantial direct tax incentives for institutional and individual investors, including stamp duty exemption on investing and trading of Islamic financial certificates or well known as ‘sukuk’ (Ibrahim & Wong, 2005). This finding could be due to the use of aggregate direct tax revenue as the proxy for taxation. In further analysis it would be worthwhile to decompose direct tax revenue according to its source (individuals, corporations, petroleum, stamp duty, and real property gains tax), as different tax groups have different and offsetting effects on the economy. As indicated by Arin et al. (2009), the use of disaggregated data is more accurate since different tax changes produce different financial responses. In addition, this finding could refer to foreign investor preference for equity financing (e.g. the importance of equities as compared to debt in the Anglo Saxon financial system) as compared to debt financing. For example, the US Securities and Exchange Commission named the Malaysian Securities Exchange, Bursa Malaysia, as a designated offshore securities market (Yee & Tan, 2009). As mentioned earlier, we could not find evidence that domestic credit to the private sector (CB) has a substantial causal impact on direct tax revenue. This can be explained by the financial deregulation that has occurred in the recent years, as well as access to the international capital markets which has reduced the value of bank loans as a source of finance to Malaysian private sector organisations. In fact, the beginning of the sample corresponds to the Asian Financial Crisis, during which many commercial banks in Malaysia suffered from very high rates of non-performing loans due to over-exposure to equity-based financing (Bank Negara Malaysia, 1999). The crisis severely affected the health of the banking sector, as reflected in the deterioration in capitalisation and asset quality (Sufian, 2006 and Zhang, 2009). To strengthen the resilience of the banking sector, Bank Negara undertook a merger program (completed in 2001), the result of which was the establishment of ten major banking groups that control 80% of the domestic market for private sector deposits and loans (Sufian, 2006). In addition, government created new regulatory institutions such as the asset management company and the Corporate Debt Restructuring Committee (CDRC). Although these measures were successful and led to a gradual increase in domestic credit to private sector, the contribution of income from loans to taxation was relatively small and only increased once the reforms gained success. In summary, results from this study contribute to a deeper knowledge of the financial system and direct tax revenue nexus in Malaysia. Over the past two decades, not all financial system variables have played a pivotal role in the direct tax revenue collection, which in turn might have been used by government to stimulate economic growth. The Malaysian government did try to boost investment activities by offering new incentives for domestic and foreign residents, ensuring a productive workforce, and providing political stability that would support economic development and progress (Malaysia, 2008). Most of these incentives are in the form of tax ease for investment activities, which could positively influence direct revenue collection. However, in doing so, the government needs to establish whether giving such incentives in the future will continue to provide high tax income to the economy. Our results show that, over the past two decades, tax incentives for equity might have been more important for the overall development of the stock market and direct revenue collection than the bond market, which also has quite a generous system of tax incentives. The results of this study suggest several directions for future research. For instance, as suggested by Arin et al. (2009), future analysis could utilize disaggregated fiscal variables (e.g. various components of taxes and spending), and therefore provide a deeper picture of the relationship between tax revenue and financial system activities. This is because the strength of the relationship might vary depending on the type of direct taxes or government spending used. In addition, a cross-sectional analysis could be useful for comparison purposes in order to see how Malaysia performed as compared to other countries. Finally, while our empirical findings support the pivotal role of the financial system in contributing to higher government revenue, analysis that captures the transmission of taxing and spending shocks to the financial system would be of great interest. Another extension of this study would be to focus on the size of banking and non-banking institutions in the financial system, particularly from 2001 when the main wave of mergers in banking sector was completed. This will provide a deeper understanding of the role of banking (in particular, the size of financial institutions) in the relationship between direct tax revenue and the financial system in Malaysia.