The standard economic approach to taxation and development focuses on how economic change in. Apr 29, 2015 the effects of state tax policy on economic growth, entrepreneurship, and employment remain controversial. Data and research on income taxes including oecd tax databases, taxing wages, revenue statistics, tax policy studies. Using the new government revenue dataset grd from the. The marked reversal in tax revenue shown in the figure did not come disproportionately from any economic group especially the middle class and poor. Taxes and economic growth page 2 of 3 tax foundation.
The objective of the study is to examine the effect of tax revenue on economic growth of nigeria and ghana. For example, a declining informal sector widens the tax net, the growth of larger. Economic growth drives the level of tax revenue tax. State tax collections grew unusually slowly over the past couple of years, creating budget challenges even for some states whose revenue has rebounded from the great recession. The pgpf chart pack illustrates that budgetmaking involves many competing priorities, limited resources, and complex issues.
This paper investigates the impact of taxes tax revenue on economic growth of pakistan by using time series data for the period of 19762011. The impact of taxation as an aid to economic development includes abstract and chapter one, complete project material available the impact of taxation as an aid to economic development in edo state a case study of oredo local government area, edo state, nigeria proposal the research work will discuss in detail the impact of taxation as an aid to economic development in edo state. Tax structures, economic growth and development the. The impact of the government revenues and expenditures on the. Revenue growth remains challenging as the widening income gap creates consumer micromarkets with unique strategic needs. The study examined the impact of tax revenue on the nigerian economy. Tax receipts in 29 states had recovered from losses in the downturn by the second quarter of last year, the close of fiscal 2017 for most states, after accounting for inflation. This paper investigated empirical evidence on contributions of tax revenue for economic growth of ethiopia using time series data from 1993 to 2012. Data in the analysis of the impact of the government revenues and expenditures on the economic growth in romania, quarterly data over the period 1998q1 2014q1 is being used. Using the new government revenue dataset grd from the international centre for tax and development ictd, we consider the effects of revenue neutral changes in tax structure on economic growth for a panel of over 100 countries with data covering the period 19802010. At the contemporary periods, ethiopiaas economic growth transformed from single to double digit.
Pdf this study examines the relationship between tax revenues and the rate of economic growth for greece. Data were sourced from central bank statistical bulletin and extracted through desk. Economic growth drives the level of tax revenue tax foundation. The impact of taxation as an aid to economic development includes abstract and chapter one, complete project material available the impact of taxation as an aid to economic development in edo state a case study of oredo local government area, edo state, nigeria proposal the research work will discuss in detail the impact of taxation as an aid. Tax revenue fell in the early 2000s before and after the 2001 bush tax cuts, only to rise again after the 2003 bush tax cut.
In this set of charts, we aim to frame the financial condition and fiscal outlook of the u. In order to raise revenue, lowincome countries have historically relied more heavily on international trade taxes, whilst richer nations employ comparatively more consumption and income taxes. The tag model estimates the impact tax changes have on wages, jobs, cost of capital, distribution of income, federal revenue, and the overall size of the economy. Are state tax revenues back to normal growth or showing early signs of economic slowdown. The result indicated a unidirectional causality between tax revenue and economic. The study focuses on the impact of petroleum profit tax, company income tax, personal income tax, value added tax revenue on nigerias economic growth between 1980 and 20.
This study used physical capital, human capital, population growth, tax revenue gdp, personal income tax, corporate income tax, consumption tax and property tax as the variables. As the economist writer implies, economic growth is a major driver of the level of tax revenues. This paper investigates the design of tax structures to promote economic growth. We study the relationships between per capita gdp, overall tax revenue and tax composition in particular direct. Download the data to see individual state trends from the first. The study used multiple regressions as tools of analysis. The impact of the government revenues and expenditures on. Clearer is the existence of the relationship between tax burden of income tax and vol. The impact of economic growth and tax reform on tax. This study examines the effect of tax revenue on economic growth in ghana using quarterly data for the period 1986 to 2010 within the var framework.
Identify the effect of tax revenue on labour force lf in nigeria. The relationship between economic growth and tax revenues is a debate that has existed for a long time in the living history. This paper exists in english only and can be downloaded from the website. Many studies argue the relationship between tax policy and the economic growth and how it. An empirical case stud y of kenya by esther wairimu gacanja x50761712009 a research paper submitted to the school of economics, university of nairobi in partial fulfillment of requirements for the award of masters of arts degree in economics university ot nairobi library 0472345 8 october, 2012. This graph shows the annual growth of corporate income tax revenue in china from 2011 to 2019. After checking the stationary of the variables through adf test. Gdp and tax revenuescausality relationship in developing. Gdp is taken as dependent variable while taxes, exchange rate, life expectancy and trade liberalization as independent variables.
Tax systems are also used to promote other objectives, such as equity, and to address social and economic concerns. We investigate the relation between changes in tax composition and longrun economic growth using a new dataset covering a broad crosssection of countries with different income levels. The impact of economic growth and tax reform on tax revenue. Dependency theorists argue that sometimes lowincome earning countries shown evidence of economic growth with. However, growth is more in line with historical averages, mostly because the tcjas impact has waned. The study period spans economic cycles for about 66 percent of the life of. This paper aims to study the mechanism of how economic growth and tax reform affect total tax revenue and structure over the period 19502011. Mar 15, 2017 we challenge the oecd view arnold et al.
This graph shows the annual growth rate of tax revenue in china from 2011 to 2019. Ethiopia is one of the fastest developing countries situated in the northeastern corner of africa. Adjusting for inflation is just one way to evaluate state tax revenue growth. Size of government and income for eu member states and noneu industrial countries. It suggests a tax and growth ranking of taxes, confirming results from earlier literature but providing a more detailed disaggregation of taxes. In order to attain this objective, relevant timeseries secondary data were collected from the central. Tax analysis and revenue forecasting issues and techniques.
Using a framework that in prior research generated significant, negative, and. The choice of the study period provides an opportunity for. Taxation of corporations and their impact on economic. The finding of the study indicates that in the long run, there would be a negative relationship between local tax revenue and regional economic growth and a positive and significant relationship between local tax revenue and local retribution revenue. The result indicated a unidirectional causality between tax revenue and economic growth and it flows from tax revenue to economic. This paper examines how changes to the individual income tax affect longterm economic growth. Company income tax, valueadded tax, economic growth, national income introduction tax revenue mobilization as a source for financing developmental activities in nigeria has been a different issue primarily because of various forms of resistance, such as evasion, avoidance and other forms of corrupt practices. The effects of state tax policy on economic growth, entrepreneurship, and employment remain controversial.
The tax foundations taxes and growth model is a tax scoring model that evaluates the impact taxes have on the economy. Is there a causality relationship between local tax revenue. Tax structure and economic indicators in developing and. The impact of taxation on economic growth in south africa munich. Dec 22, 2011 the marked reversal in tax revenue shown in the figure did not come disproportionately from any economic group especially the middle class and poor. Taxation is important mechanism that boosts countryas economic level. An empirical investigation for greece using causality analysis. The paper adds marginally to the empirical literature, showing how the two types of tax revenue influence economic growth in eastern europe, under an extended set of economic and sociopolitical control variables. Pdf the study examines the effect of tax revenue and economic growth of kenya, from 1980 to 2007. The most important empirical output, for the 6 investigated easteuropean countries during. This report investigates how tax structures can best be designed to support gdp per capita growth.
On the basis of the introduction of chinas previous main measures in tax reform, this paper uses methods as descriptive statistics, multisegment linear regression model and principal component analysis to analyze how economic growth and tax reform. Furthermore, discretionary spend across consumer segments hasnt changed significantly over the past two decades, but younger shoppers are disrupting the status quo based on new preferences and new economic pressures. Despite slow growth, tax revenue has recovered in 29. Is there a causality relationship between local tax. Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption. Different insights would be gained by tracking revenue relative to population growth or state economic output. May 30, 2019 advocates of tax cuts claim that a reduction in the tax rate will lead to increased economic growth and prosperity. Economic factors driving revenue growth were all positive in the third quarter of 2019. The impact and consequences of tax revenues components on. Most of the studies evidenced a negative relationship between economic growth and taxation poulson 2008. This paper investigated empirical evidence on contributions of tax revenue for economic growth of. Apr 02, 2020 this graph shows the annual growth of corporate income tax revenue in china from 2011 to 2019. Tax revenue is defined as the revenues collected from taxes on income and profits, social security contributions, taxes levied on goods and services, payroll taxes, taxes on the ownership and transfer of property, and other taxes.
Despite slow growth, tax revenue has recovered in 29 states. We specifically consider 69 countries with at least 20 years of observations on total. According to bretschger 2010, he found negative impacts of corporate taxes on openness and total tax revenue to the economic growth in 12 oecd countries. For example, a declining informal sector widens the tax net, the growth of. We study the relationships between per capita gdp, overall tax revenue and tax composition in particular direct vs. Magnifying revenue growth management in cp deloitte us.
At this stage, however, there is little agreement about federal reserve board, washington. Tax systems are primarily aimed at financing public expenditures. Adbe today reported financial results for its first quarter fiscal year 2020 ended feb. Part i of this document discusses four principal determinants of economic growth that tax policy may be able to influence. The study found that there exist both short run and long run relationship between economic growth and tax revenue. Christopher heady, school of economics, university of kent, keynes college, canterbury, kent ct2 7np, uk. The study examines the effect of tax revenue and economic growth of kenya, from 1980 to 2007. Total tax revenue as a percentage of gdp indicates the share of a countrys output that is collected by the. Decade after recession, tax revenue higher in 45 states. The structure and financing of a tax change are critical to achieving economic growth.
The broad objective of this study is to ascertain the effect of tax revenue on economic development in nigeria. Tax revenue collection after flat tax reforms 16 1. Using a framework that in prior research generated significant, negative, and robust. This document,1 prepared by the staff of the joint committee on taxation, includes an overview of economic growth and the impact that taxes may have on economic growth. Others claim that if we reduce taxes, almost all of the benefits will go to the rich, as those are the ones who pay the most taxes. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960. Preliminary data for the fourth quarter of 2019 indicate continued growth in overall state tax revenue collections. This paper investigates the relationship between tax structures and economic growth in a panel of developed and developing countries. Evaluate the effect of tax revenue on infant mortality im in nigeria. The tag model estimates the impact tax changes have on wages, jobs, cost of capital, distribution of income, federal revenue, and the overall size of. The discussion on the two variables has exhibit contentions from academicians and policy makers with one school holding on the view that taxation is bad for the economy while the other school believe that taxation is good for the economy. Advocates of tax cuts claim that a reduction in the tax rate will lead to increased economic growth and prosperity.