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The Impact and Consequences of Tax Revenues’ Components on Economic Indicators: Evidence from Panel Group Data

Authors: Taufik Abdul Hakim & Imbarine Bujang
Journal: International Research Journal of Finance and Economics
ISSN/EISSN: 1450-2887 Year: 2011 Issue: 63
Publisher: EuroJournals Publishing
Pages: 14

Abstract

The change in components of tax revenue may result in the change in the economic growth and other economic indicators. Previous studies found significant effect on the change in tax revenue to the economic growth in a country. This study is to test if the components of tax revenue and inflation rate are related to the economic growth, gross saving, and inflow of FDI in the 120 countries based on the different level of income from 1960 to 2009. The impact of tax components such as total tax revenue, taxes on income, profit and capital gain, taxes on goods and services, taxes on international trade, total tax rate, and taxes on export are examined with the three economic indicators. These three indicators are highly significant to the tax structures in four groups of country. Change in the tax revenue or tax policy for every single tax will also change the growth of GDP, gross saving and FDI. The results indicate the different impacts and consequences of types of taxes for the four groups of country. The inflation rate is also significant in affecting the tax policy and economic indicators in a country.

Keywords: Tax; economic indicators; economic growth; GDP; Gross saving; Foreign direct investment; Tax components.
JEL Classification Codes: E2 and C58





This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


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