In january 2003 president bush approved the jobs and growth tax relief reconciliation act of 2003, substantially cutting taxes on business income. Identify the effect of tax revenue on labour force lf in nigeria. 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. The result indicated a unidirectional causality between tax revenue and economic. In january 2003 president bush approved the jobs and growth tax relief. Tax revenue and economic growth in india uk essays. The marked reversal in tax revenue shown in the figure did not come disproportionately from any economic group especially the middle class and poor. Economic development encompasses policies that governments undertake to meet broad economic objectives such as price stability, high employment, expanded tax base, and sustainable growth.
Tax systems are primarily aimed at financing public expenditures. Advocates of tax cuts claim that a reduction in the tax rate will lead to increased economic growth and prosperity. At this stage, however, there is little agreement about federal reserve board, washington. They include hedge fund managers, consultants, and investment managers, who are among the passthrough business owners currently in the 39. Yet african countries continue to experience low tax revenue, hence declining economic growth. The most important empirical output, for the 6 investigated easteuropean countries during. Economic growth drives the level of tax revenue tax. Tax structure, taxation, gdp, economic growth, budget revenues.
The robustness of the result is confirmed by sensitivity analysis, where the author controled for other plausible. Pdf the effect of tax structure in economic growth researchgate. 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. The objective of this paper is to examine the causality between tax revenue and economic growth in india. The relationship between economic growth and tax revenues is a debate that has existed for a long time in the living history. Bush signed the economic growth and tax relief and reconciliation act into law, initiating a multiyear program of reductions in taxes on individual income. 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. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the countrys macro economic objectives in the. Clearer is the existence of the relationship between tax burden of income tax and vol. This study examines the effect of tax revenue on economic growth in nigeria, utilizing time series data for the period spanning from 1970 to 2011. The broad objective of this study is to ascertain the effect of tax revenue on economic development in nigeria. The sample period of the study spans from 195051 to 200809.
Widmalm 2001 used pooled crosssectional data from 23 oecd countries, between 1965 and 1990, and found evidence that the proportion of tax revenue raised by taxing personal income has a negative correlation with economic growth. Pdf on jan 1, 2017, john kwaku amoh and others published the. 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. Evaluate the effect of tax revenue on infant mortality im in nigeria. Energy tax revenues in relation to final energy consumption. Tax rates and economic growth by arpit gupta with president obama reluctant to tout obamacare or the 2009 fiscal stimulus, tax increases on the rich have at times seemed like the only idea he is. Economic growth is the growth of an economys output of goods and services which is. During the 19652012 period as mentioned above, the top marginal income tax rate on labor income has trended downward and the effective tax rate has fluctuated in a narrower range, while average hours worked has steadily declined see. As we will see, there are good reasons to be skeptical of such a claim, and several decades of research on the relation between state taxes and growth confirm that such claims are vastly overblown and sometimes completely misleading. The contribution of taxation to any economy globally cannot be overemphasized.
Tax rates and economic growth pacific research institute. This paper investigates the impact of taxes tax revenue on economic growth of pakistan by using time series data for the period of 19762011. All oecd economics department working papers are available on the oecd internet website at. Tax policy challenges for economic growth and fiscal sustainability. 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. The general objective of this study is to evaluate the impact of tax policy on economic growth of nigeria. Tax systems are also used to promote other objectives, such as equity, and to address social and economic concerns. However, since a greater overall tax revenue means less disposable income for individuals, there will be less saving, less investment, and lower rates of growth. Data and research on income taxes including oecd tax databases, taxing wages, revenue statistics, tax policy studies. Mergers and acquisitions sometimes happen because business firms want diversification, such as a broader product offering. This report investigates how tax structures can best be designed to support gdp per capita growth.
This would combine equalizing the tax burden for all sources of capital income and. Furthermore, taxation is a government monopolistic power, which unavoidably distorts market efficiency. Taxation, efficiency, and economic growth harvard university. Importance of economic growth organization of report policy and economic growth the algebra of growth 1. Tax structures and economic growth unuwider united nations. After checking the stationary of the variables through adf test. 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.
Conversely, between 2007 and 2009, total tax revenue in the u. Tax evasion and economic growth in selected african countries, 19852010 william bekoe4 abstract major tax reforms were undertaken in the 1980s with the aim of enhancing revenue mobilisation and laying the foundation for sustained economic growth. Jones stanford gsb, stanford, ca, united states nber, cambridge, ma, united states contents 1. To observe the growth pattern of vat revenue and gdp 2. We specifically consider 69 countries with at least 20 years of observations on total tax revenue during the period 1970200921 high. If a large conglomerate thinks that it has too much exposure to risk because it has too much of its business invested in one particular industry, it might acquire a business in another industry for a more comfortable balance. 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. Our approach gets away fromthe false juxtaposition between positive and normative analyses of optimal taxes on the one hand, and studies of tax administration and political economy on the other. It is found that economic growth, measured by gdp per capita, has h. It achieves this by systematically merging data from a number of. Effect of tax policy on economic growth in nigria 199420.
Growth comes from the accumulation of capital both human and physical and from innovations which lead to technical progress. Data were sourced from central bank statistical bulletin and extracted through desk. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960. Dependency theorists argue that sometimes lowincome earning countries shown evidence of economic growth with. Fiscal sustainability and economic growth are key concerns at the current juncture. Ormaechea and yoo henceforth aoy2012, which examined the relationship between tax structures and economic growth rates, finding that revenue. The study uses annual data collected from the economic survey of india, 200809, indian public finance statistics, 200809 published by ministry of finance and handbook of. Ascertain the relationship between tax policy and economic growth in nigeria. Tax rates and economic growth congressional research service 3 taxes could affect the hours intensity of work. Government revenue dataset grd from the international centre for tax and development.
The study found that there exist both short run and long run relationship between economic growth and tax revenue. Tax revenue is essential to accelerate the economic development basirat et al. To investigate the relationship between the changes of vat revenue on the economic growth of nigeria 3. We conclude the paper with a summary and discussion of policy implications in section 6. Pdf the effects of tax revenue on economic growth in. If the idea that cuts in the top tax rate spur economic growth, the correlation of r. The impact of the government revenues and expenditures on. Harelimana, 2018 there is a temporary impact on the tax policy exogenous model growth. The beneficiaries dont fit anyones reasonable definition of a small business. The study examined the impact of tax revenue on the nigerian economy. Part i of this document discusses four principal determinants of economic growth that tax policy may be able to influence.
Worryingly, the results of studies such as this have. 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. Taxation of corporations and their impact on economic. Gdp is taken as dependent variable while taxes, exchange rate, life expectancy and trade liberalization as independent variables. Pdf the determinants of tax revenue growth of an emerging.
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