Shahid Beheshti University International Journal of New Political Economy 3060-6233 7 2 2026 08 01 Indirect Effects of Financial Inclusion on Tax Revenue in Selected Developing and Developed Countries 193 226 107291 10.48308/jep.2026.240681.1235 EN Fahmideh Fattahi Ph.D of Economics, Faculty of Economics and Management, Urmia University, Urmia, Iran. 0009-0002-3228-5111 Samad Hekmati Farid Associate Professor of Economics, Faculty of Economics and Management, Urmia University, Urmia, Iran Journal Article 2025 07 14 This study employs the Panel Smooth Transition Regression (PSTR) framework to analyze how financial inclusion indirectly shapes tax revenue across 50 countries (28 developing, 22 developed) during 2004–2024. A financial inclusion index, constructed via Principal Component Analysis (PCA) using ATM density, bank branch penetration, and outstanding deposits, serves as the transition variable. Results confirm non-linear relationships between financial inclusion, tariff structures, financial development, institutional quality, economic growth, and tax revenue. For developing nations, the threshold is 4.2240 with slope 2.1008. In Regime 1, bank branches show negative effects (-0.2166), while financial development is positive (0.2849). Beyond the threshold, bank branches remain negative (-0.0626), financial development positive (0.0573), and institutional quality turns favorable (0.0660). For developed economies, threshold is 6.7464 with slope 2.1993×10⁴. In Regime 1, bank branches are negative (-0.0502) while tariffs are positive (0.0516). In Regime 2, bank branches become positive (0.0077), financial development turns negative (-0.0853), institutional quality becomes strongly negative (-1.1205), and economic growth positive (0.4496). Granger causality tests reveal bidirectional relationships in developing countries, while developed nations show unidirectional causality from tax revenue to financial inclusion. Findings underscore that financial inclusion's influence on tax revenue is non-linear and context-specific. Policy recommendations include strengthening digital financial infrastructure in developing economies and implementing regulatory frameworks to prevent excessive inclusion in developed countries. https://jep.sbu.ac.ir/article_107291_0c5f6fe6ecff25adbe0b2e7b60c5df11.pdf