---

There are at least two reasons to believe that tax policies affect the process of economic development. First, it may play the role of saving in financing the development programs. Secondly, it is of prime importance in adjusting the inevitable income inequality in the process of economic development. This paper attempts to provide a picture of tax policies in relation to financing the Government expenditures in the national economy. After an introduction to the structure of taxation in Iranian economy, the composition of tax revenues is examined since the objective of taxing policies are being influenced by the composition of taxes and their respective sources. Attentions are paid, in this paper, on the structure of Iranian taxation system in which indirect taxes and its main component, i.e., import duties, is the principle factor. It is also suggested that the value added tax, which is taxing the net economic activities, with its wide base, can be used to finance the Government current expenditures as well as improving the tax structure in the national economy.