Given the increasing costs for governments and Iran's heavy reliance on oil, diversifying income sources, particularly through taxation, has become critically important. This study investigates the factors affecting tax revenues across Iranian provinces from 2012 to 2021, employing a spatial panel method. The findings revealed that the added value of the industry and services sectors positively and directly impacts tax revenue. Conversely, the agriculture sector showed a negative effect, likely due to various tax exemptions. The urbanization ratio also had a positive influence, correlating with higher tax rates in cities where most businesses are concentrated. Additionally, a high inflation rate negatively affected tax revenue by causing delays in payments. The research also estimated the tax gap among provinces, finding it to be positive for some and negative for others. Provinces like Ilam, Bushehr, and Khuzestan exhibited negative gaps, while Mazandaran, Gilan, and Alborz had positive gaps. A spatial error model indicated that this gap is spatially transferred to neighboring provinces, highlighting tax inequality. For provinces with negative tax gaps (often less developed), recommendations include increasing the added value of the services and industry sectors, reducing inflation, developing infrastructure, and enhancing business transparency. For provinces with positive tax gaps, it is advised to reduce tax pressure and reallocate it to those with negative gaps.