Tax revenue, expenditure, and economic growth: An analysis of long-run relationships

2017 ◽  
Vol 24 (3) ◽  
pp. 04-26
Author(s):  
SU DINH THANH ◽  
NGUYEN PHUONG LIEN
Keyword(s):  
Economic Growth ◽  
Tax Revenue ◽  
Long Run

scholarly journals Taxation, government spending and economic growth: The case of Bulgaria

2021 ◽  
Vol 7 (3) ◽  
pp. 255-266
Author(s):  
G. Ganchev ◽  
◽  
I. Todorov ◽  
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Tax Revenue ◽  
Gdp Growth ◽  
Real Gdp ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Short Run ◽  
The Impact

The objective of this article is to estimate the impact of three fiscal instruments (direct taxes, indirect taxes, and government expenditure) on Bulgaria’s economic growth. The study employs an autoregressive distributed lag model (ARDL) and Eurostat quarterly seasonally adjusted data for the period 1999–2020. Four control variables (the shares of gross capital formation, household consumption, and exports in GDP as well as the economic growth in the euro area) are included in the model to account for the influence of non-fiscal factors on Bulgaria’s real GDP growth rate. The empirical results indicate a long-run equilibrium relationship between Bulgaria’s economic growth and the independent variables in the ARDL. In the short term, Bulgaria’s real GDP growth rate is affected by its own past values and the previous values of the shares of direct tax revenue, exports, government consumption, and indirect tax revenue in GDP. In the long term, Bulgaria’s economic growth is influenced by its own previous values and the past values of the share of household consumption in GDP and the euro area’s real GDP growth rate. Fiscal instruments can be used to stabilize Bulgaria’s growth in the short run but they are neutral in the long run. The direct tax revenue, government consumption, and indirect tax revenue are highly effective and can be used as tools for invigorating and stabilizing Bulgaria’s economic growth in the short run. However, in the long term, the real GDP growth rate can be hastened only by encouraging domestic demand (final consumption expenditure of households) and promoting exports. This research cannot answer the question of whether flat income taxation stabilizes the economy or not, since it does not separate the impact of tax rate changes from the influence of tax base modifications.

Government revenue and economic growth of Pakistan (1979 – 2017)

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Wajahat Rehman ◽  
Raza Ali Khan ◽  
Shazia Kousar
Keyword(s):  
Economic Growth ◽  
Significant Relationship ◽  
Secondary Data ◽  
Forecasting Model ◽  
Tax Revenue ◽  
Government Revenue ◽  
Distributed Lag ◽  
Revenue Sources ◽  
Long Run ◽  
Short Run

The study is conducted to identify the relationship between economic growth of Pakistan and government revenue sources – i.e. Tax Revenue, Non-tax Revenue and Additional Receipts, while measuring the change in economic development occurs due to change in government revenue sources in short-run as well as in long-run. Autoregressive Distributed Lag (ARDL) is performed on time series secondary data for the period from 1979 to 2017 and a forecasting model is developed to anticipate change in economic growth due to change in government revenue sources. Results concluded that Tax Revenue has positive significant relationship and Additional Receipts have negative significant relationship, however, Non-tax Revenue has positive insignificant relationship with economic growth of Pakistan in long-run, whereas no short-run relationship is identified among dependent and independent variables. The analysis indicated that 1% change in Tax Revenue results in 1.24% change in economic growth in the same direction, whereas 1% change in Additional Receipts results in 0.18% change in opposite direction in economic growth of Pakistan in long-run. However, evidences showed that in recent years, government has increased its dependency on the Additional Receipts as compared to Tax Revenue and Non-tax Revenue. For prosper and accelerated economic growth, it is suggested that policy makers should focus on increasing the revenue collection from Tax Revenue sources since economic growth of Pakistan is positively influenced by Tax Revenue and minimize dependency on the Additional Receipts as it hinders the economic growth. Proposed forecasting model provides promising results and projected the gross domestic product (GDP) for year 2018 with mare 0.32% and 4.44% deviation in logarithm value and rupee values, respectively.

scholarly journals Tax Buoyancy and Economic Growth: Empirical Evidence of Bulgaria

2019 ◽  
Vol 5 (3) ◽  
pp. 236-248
Author(s):  
S. Tanchev ◽  
◽  
I. Todorov ◽  
Keyword(s):  
Economic Growth ◽  
Social Security ◽  
Income Tax ◽  
Personal Income ◽  
Tax Revenue ◽  
Personal Income Tax ◽  
Corporate Tax ◽  
Social Security Contributions ◽  
Long Run ◽  
Short Run

The study analyzes the long-run and short-run tax buoyancies of Bulgaria and their relationship with Bulgaria’s economic growth. The buoyancy measures the response of tax revenue to changes in economic growth. The buoyancy indicates whether collectability of the tax on income, profit, and consumption increases. The object of this study is the collectability of aggregate tax revenues and of the revenues from different types of taxes – value added tax, personal income tax, corporate tax and social security contributions in Bulgaria. The subject of the study is the relationship of different tax revenues with economic growth. The research methods employed are the fully modified least squares (FMOLS) and autoregressive distributed lag model (ARDL). The research covers the period from the first quarter of 1999 to the second quarter of 2017 and uses the Eurostat data (78 observations). The study aims to show which type of revenues (from direct or from indirect taxes) is more important for Bulgaria’s state budget. It is shown that the buoyancies of aggregate tax revenue, personal income tax and social security contributions significantly differ from one another in the long-run. The buoyancies of the value-added tax and the corporate tax are above one in the long run. In the short-run the buoyancy of the aggregate tax revenues, the corporate tax, the income tax and the social security contributions are different from one. The short-run buoyancy of VAT exceeds one, hence dynamics of VAT revenues is sustainable. The collectability of the aggregate tax revenue, personal income tax and social security contributions has increased neither in the long run nor in the short run. It is therefore recommended that inefficient taxes, whose collectability does not increase, be reformed.

scholarly journals Long-run equilibrium between personal income tax and economic growth in Bulgaria

2021 ◽  
Vol 7 (1) ◽  
pp. 55-67
Author(s):  
S. Tanchev ◽  
Keyword(s):  
Economic Growth ◽  
Income Tax ◽  
Personal Income ◽  
Tax Revenue ◽  
Personal Income Tax ◽  
Vector Error Correction ◽  
Long Run ◽  
Short Run ◽  
The Relationship ◽  
Long Run Equilibrium

The study analyzes the relationship of personal income tax and economic growth in the long and short runs to show which type of income tax (progressive or proportional) is more compatible with Bulgaria’s economic growth. The methods of Vector Error Correction and Correlation are applied to determine the long-run and short-run impacts of the two types of income tax. The research covers the period from the first quarter of 1999 to the first quarter of 2020. Eurostat data (85 observations) were used. The empirical research has been divided into two periods. The long-run and short-run relationships between economic growth and tax revenue from progressive income tax in Bulgaria have first been studied, followed by the relationship between economic growth and the tax revenue from proportional income tax. The research results show that there is a long-run equilibrium relationship, but not a short-run relationship, between personal income tax and economic growth. The results imply that the progressive income tax is more compatible with economic growth than proportional income tax in Bulgaria in the long run. In the short run, the progressive income tax and proportional income tax have not shown statistically significant relationships with economic growth. Therefore, a progressive income tax leads to greater economic growth than a proportional income tax. From a long-run equilibrium standpoint, it is advisable that Bulgaria switch from proportional to progressive income taxation. It may be inferred that progressive taxation is more appropriate for economic growth than proportional taxation. The results are in conformity with the theory of endogenic growth and reject the neoclassical theory.

scholarly journals Tax revenue, expenditure, and economic growth: An analysis of long-run relationships

2017 ◽  
Vol 24 (03) ◽  
pp. 04-26
Author(s):  
Lien Nguyen Phuong ◽  
Thanh Su Dinh
Keyword(s):  
Economic Growth ◽  
Method Of Moments ◽  
Generalized Method Of Moments ◽  
Tax Revenue ◽  
Dynamic Panel ◽  
Causality Test ◽  
Long Run ◽  
Integration Test ◽  
The Impact

Focusing on the investigation of “long-term” relationship between tax revenue, expenditure, and economic growth, this paper employs the Granger causality test and finds that the linkage between tax revenue and spending is a bi-directional causal correlation. Furthermore, applying Persyn and Westerlund’s (2008) co-integration test allows for corroboration of existence of long-run cointegration linkages among outcome of economy and the three variables. In addition, by adopting two-step system generalized method of moments (SGMM) for a dynamic panel of 82 developed and developing countries during 16-year period (2000–2015), this research demonstrates that the impact of tax revenue and spending is substantial and ambiguous, depending on different groups of economies.

scholarly journals The Dynamic Effects of Growth, Financial Development and Trade Openness on Tax Revenue in Malaysia

2020 ◽  
Vol 21 (1) ◽  
pp. 42-62
Author(s):  
Nanthakumar Loganathan ◽  
Norsiah Ahmad ◽  
Thirunaukarasu Subramaniam
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Trade Openness ◽  
Tax Revenue ◽  
Tax Collection ◽  
Empirical Results ◽  
Long Run ◽  
Rolling Window ◽  
Short Run ◽  
Sustainable Economic Growth

This study explores the effects of domestic financial development, growth and trade openness on tax collection for Malaysia using the ARDL and bootstrap rolling window estimates covering the period 1970-2017. The empirical results suggest that, the presence oflong-run relationship between tax revenue and per capita GDP and short-run relationship between tax collection, economic growth, financial development and trade openness. We foundthatthere is a short-run unidirectional causality running between tax collection, economic growth and financial development. This result suggests that, in the long-run, economic performance and financial development have an adverse effect on tax collection, while trade openness has no significant causality impact on tax collection in Malaysia. Based on the empirical results of the study, the country should pay more attention to enhance the effectiveness of future public expenditure programs and put more emphasisson dynamic fiscal policy targeting on tax reform and securing new sourcesof tax revenues to ensure continuous flow of long-term tax revenue coupled with sustainable economic growth, trade and financial performances in up-coming years.

scholarly journals Does Fiscal Policy stimulate Economic Growth in Ethiopia? An ARDL Approach

2021 ◽  
Author(s):  
Solomon Tilahun Mengistu
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Future Research ◽  
Tax Revenue ◽  
Annual Data ◽  
Distributed Lag ◽  
Long Run

Abstract Abstract In recent years, a vast literature has appeared on the relationship between fiscal policy and long-run economic growth. With the aim of give an overview of the recent discussion and establish a point of departure for future research, this study used time series techniques and used empirical model by Kneller et al (1999) and Bleaney et al (2000) to investigate the link between various components of fiscal policy on Ethiopia’s economic growth on annual data for the period 1985/86 – 2019. It employed the autoregressive distributed lag estimation technique. Results from the bound tests showed that there was a long-run relationship between the variables. Disaggregating government expenditure into productive and unproductive and tax revenue into distortionary and non-distortionary, this study found unproductive expenditure and non-distortionary tax revenue to be neutral to growth as predicted by economic theory. Moreover, productive expenditure has positive effect on growth while there was evidence of distortionary effects on growth of distortionary taxes. These results give right signal to policy makers in Ethiopia in formulating expenditure and tax policies to ensure unproductive expenditures are reduced while at the same time boosting public investment. Furthermore, there is need to encourage private investment in the country.

scholarly journals The Effect of Regional Fiscal Policy on Economic Growth in North Sumatera

2020 ◽  
Vol 3 (2) ◽  
pp. 15-20
Author(s):  
Laila Rohimah ◽  
Ahmad Albar Tanjung ◽  
Indah Permata Sari Pulungan
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Government Expenditure ◽  
Tax Revenue ◽  
Correction Model ◽  
Long Run ◽  
Short And Long Term ◽  
New Evidence ◽  
North Sumatra

The aim of this research is to evaluate and provide new evidence of the influence of regional fiscal policy with government expenditure instruments and tax revenue on economic growth in North Sumatra Province. The data used are quarterly data from 2011: 1 to 2017: 4 sourced from the Central Statistics Agency of North Sumatra Province (CSA). The analytical method used in this study is the error correction model (ECM) method. The findings of this study are that government expenditure (GE) has a positive and significant effect in the short and long term on the economic growth (PDB) of the province of North Sumatra during the study period. While tax revenue (TAX) in the long-run has a positive and significant effect, but in the short term, it has a positive but not significant effect on the economic growth (PDB) of the province of North Sumatra during the study period.

scholarly journals DINAMIKA PERUBAHAN EKONOMI MAKRO DAN DAMPAKNYA TERHADAP PERTUMBUHAN PENERIMAAN PAJAK PENGHASILAN NON MIGAS

2017 ◽  
Vol 1 (1) ◽  
pp. 23-37
Author(s):  
Mas'udin Mas'udin
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Income Tax ◽  
Oil And Gas ◽  
Tax Revenue ◽  
Long Run ◽  
Time Period ◽  
Auto Regressive ◽  
Exchange Rate Shocks ◽  
The Impact

This study examines the impact of macroeconomic on tax revenue, especially non-oil and gas income tax. The time period of study ranges from 1970 to 2016. The study was conducted to obtain empirical evidence of factors influencing the growth of non-oil tax revenues in Indonesia. The model was analyzed using Vector Auto Regressive. The VAR estimation shows that there is a one-way relationship between economic growth, inflation rate, exchange rate and non-oil and gas income tax. In the short term, shocks of non-oil and gas income tax is the factor with the greatest influence on the growth of non-oil tax. In the long run, exchange rate shocks, inflation, economic growth, ICP, and non-oil income tax incidence shocks affect the growth of non-oil and gas income tax. Studi ini mengkaji dampak ekonomi makro terhadap penerimaan perpajakan, khususnya pajak penghasilan non migas. Rentang periode kajian selama 46 tahun yaitu dari 1970 s.d 2016. Studi dilakukan guna mendapatkan bukti empiris faktor-faktor yang mempengaruhi pertumbuhan penerimaan PPh non migas di Indonesia. Model dianalisis dengan menggunakan Vector Auto Regressive.  Hasil estimasi VAR menunjukkan terdapat hubungan satu arah antara pertumbuhan ekonomi, tingkat inflasi, nilai tukar rupiah dan PPh non migas. Dalam jangka pendek, guncangan (shock) PPh non migas merupakan faktor dengan pengaruh terbesar pada pertumbuhan PPh non migas itu sendiri. Dalam jangka panjang guncangan kurs, inflasi, pertumbuhan ekonomi, ICP, dan guncangan PPh non migas berpengaruh terhadap pertumbuhan PPh non migas. 

scholarly journals Non-Oil Revenue And Economic Growth of Nigeria (1981 To 2019).

2021 ◽  
Vol 04 (09) ◽  
Author(s):  
Dr. Ogbonna Udochukwu Godfrey ◽  
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Percent Level ◽  
Significance Test ◽  
The Other ◽  
Tax Revenue ◽  
Regression Result ◽  
Oil Revenue ◽  
Long Run ◽  
The Impact

The study investigated the impact of non-oil revenue on the economic growth of Nigeria for the period 1981 to 2019. The Autoregressive Distributed Lags (ARDL) technique was adopted alongside the unit root test, which showed that in all cases, the variables in level form were non-stationary but their first differences were found to be stationary. This shows that all the variables (including economic growth) are co-integrated at order 1. The short run diagnostic tests in the result are generally impressive since the adjusted R-squared value of 0.68 is relatively high and indicates that 68 percent of the short-term changes in economic growth is explained by the explanatory variables. The Durbin-Watson statistics is also impressive at 1.95, indicating the complete absence of autocorrelation in the model. However, in the long run the coefficient of tax revenue (TAXR) is significant among the non-oil revenue variables. This coefficient is positive and passes the significance test at the 5 percent level. This means that increased tax revenue leads to economic growth in the long run. A one percent rise in tax revenue in the current period will lead to a 0.656 percent growth in the economy over a long period. The coefficient of the other non-oil revenue variable (NTAXR) fails the test at the 5% level of significance. However, given that tax revenue is the main non-oil revenue, the result shows that non-oil revenue will most likely improve economic growth in Nigeria. For the other variables, only the coefficient of human capital (HUC) passes the significance test at the 5 percent level. The results of the study show that economic growth Granger causes nontax revenue inflow, rather than the other way around. This clarifies why NTAXR did not pass the significance test in the regression result. On the other hand, tax revenue Granger causes economic growth. These results indicate that a reverse relationship exists between economic growth and non-oil revenue, through the component of non-tax revenues. Finally, the study recommends that development of policies that will increase tax revenue is key to economic growth. Similarly, the researcher also recommends that investment in human capital development will boost economic growth of Nigeria both in the short and long run.

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