On the basis of national accounts data Nam C.W., Parshe R., Schaden B. (2001) analyzed tax evasion on Value Added Tax in selected countries. They divided their study into two parts. First, exploring aspects and Value Added Tax analysis second, supposing connection between Value Added Tax and tax evasion by using of several countries encountered. Outcomes of this study described that Value Added Tax performance did not impact inflation rate and subtraction of Value Added Tax influences on trade deficit depended on change of prices of exportable and importable goods. Ultimately, the result revealed that there was negative and considerable correlation between Value Added Tax rate and the number of tax evasion.
12 Read more
Abstract- We have developed two scenarios to see how rapidly India can raise people to the standards of living implied by the Empowerment Line. The first, which we call “stalled reforms”, assumes that no bold policy measures are taken and that slow economic growth continues. The second considers an alternative path of “inclusive reforms”. The path of inclusive reforms envisages a far more positive alternative, one in which the nation takes steps to stimulate investment, job creation, and farm productivity, as well as dramatically improve the delivery of basic services. These reforms could potentially allow India to achieve an average GDP growth rate of 7.8 percent between 2012 and 2022. This could lift 580 million people above the Empowerment Line, leaving 100 million (7 percent of the population) below it in 2022 and 17 million (just 1 percent) below the official poverty line—virtually eliminating extreme poverty in just a decade. The higher GDP growth inherent in the inclusive reforms scenario generates more tax revenue that can be ploughed back into spending for basic services— and it simultaneously ensures that India meets its fiscal objectives more quickly. To achieve this goal, India will need to increase its investment rate from nearly 36 percent of GDP since 2005 to an average of 38 percent over the next ten years. The combination of higher investment, faster economic growth, and increased tax revenue could allow India to bring its fiscal deficit to 6 percent of GDP from 2017 onward while enabling a moderate but steady increase in social spending, in line with GDP growth, that could bring access deprivation in basic services down from 46 percent to just 17 percent. Although these goals are aspirational, they are feasible based on successes already demonstrated by India’s better-performing states.
explaining this development. Indirect taxes have impact on demand and positively effect on economic growth. Direct taxes can have an impact on GDP by affecting labour utilization and labour productivity or both. However, it is generally difficult to assess the overall effect of the tax changes on GDP. For example, changes in any single tax may simultaneously affect several determinants of GDP. The effects of changes in taxation often depend also on the design of other policies and institutions. Thus, the negative effect of labour taxes on employment is often dependent on wage setting institutions which determine e.g. minimum wages, which negatively affect labour cost and then GDP growth.
20 Read more
FIGURE 5b. Post-1980:IV estimated impact of an exogenous deficit-driven tax increase of 1 % of GDP on GDP, as in equation (2) with controls for lagged GDP growth and one and two standard-error confidence bands (bootstrapped)
18 Read more
This paper empirically analyzes the long run relationship between GDP growth and indirect tax for forecasting sustainable economic growth through social equity and justice of Bangladesh. For analyzing the long-term relationship, the paper uses time series data for the period between 1972 to 2015. For the unit root test used ADF test (1981) and KPSS test (1992), for long run cointegration test among the variables used the Johansen-Juselius cointegration test (1990), VECM used for short run relationship between variables, Granger Causality test (1969) used for pairwise Granger cost test among the explained and for other explanatory variable finally used stability tests to examine whether the model is stable or not. The result implies that growth of GDP and indirect tax are having long run negative relationship, which also shows that indirect tax has significant negative impacts on GDP. The study result of Johansen Normalized cointegrating test presented that from the first cointegrating equation implies that if indirect tax raise 1percent then GDP will fall 0.96 percent. The economy will lose USD 2,572 million while collecting indirect taxes (for more, please see the Appendix -6) of USD 167.511. That is, the opportunity cost of the revenue earnings through indirect tax will be immense, which is not justified by the economic point of view and it does not go in accord with the issues of social justice and equity. Again, the outcome of the study finds that indirect taxes Granger cause on GDP at 1% level of significance which shows indirect tax has the impact on GDP. If government increases indirect taxation with conventional way and without any concern for internal and external economic agents then it leads to a reduced economic growth (GDP) in the future. Generally, the impact and incidence of indirect taxation are differently executed for individuals, institutions, and even government. Again, the tax authority of Bangladesh (NBR) itself does not identify which strata of the society are responsible for the final burden of the indirect taxation.
11 Read more
The aim of the paper is to analyze changes in taxation and their impact on economic growth in the European Union. The analysis is performed on adjusted annual panel data of 24 European Union countries in a period 1995–2008. Panel regression with ﬁ xed eﬀ ects is used as a basic method of re- search. The panel regression is based on analysis the eﬀ ect of total tax quota changes on GDP growth in model 1, of changes in its components (social contribution, direct and indirect tax quotas) in model 2 and of personal and corporate income tax quota changes in model 3. Results of empirical tests verify statistically signiﬁ cant negative eﬀ ect of tax burden on GDP growth. Total tax quota increased by 1% decreases the GDP growth rate by 0.29% in the same year. Estimations conﬁ rm a statistically signiﬁ - cant negative eﬀ ect of direct taxes on GDP growth as well. A cut in the direct tax quota by 1% raises the GDP growth rate by 0.43%. The model also presents a high negative impact of an increase in the cor- porate income tax quota on GDP growth (a value of the regression coeﬃ cient is minus 1.28%). The ef- fect of social contribution quota on GDP growth is not statistically signiﬁ cant in any estimation. taxation, tax burden, economic growth, panel regression
SZAROWSKÁ IRENA: Shi in tax burden and its impact on economic growth in the European Union. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013, LXI, No. 4, pp. 1153–1160 This article deals with a tax burden in the European Union in as ﬁ nancial and economic crisis has impacted also on tax systems in the European Union. Governments’ tax measure aims to consolidate public ﬁ nance and promote an economic growth. The article provides empirical evidence on a shi in a tax burden and its structure and analyzes the eﬀ ects of shi in tax burden on economic growth in the EU. It is used the Eurostat deﬁ nition to categorize tax burden by economic functions and implicit rates of consumption, labour and capital are investigated. The analysis is based on annual data of the EU member states in a period 1995–2010. On average, labour taxes have decreased by 1.9 p.p., capital taxes have also decreased – by 2.1 p.p., but consumption taxes have mildly increased by 0.4 p.p. in the European Union in a period 1995–2010. Pairwise Granger Causality Test was used for examining relations between economic growth and tax burden by economic functions in short-term. Results conﬁ rm that there is two-way causality between change of implicit tax rate of consumption and GDP growth; and also GDP growth Granger-causes change of implicit tax rate of capital and implicit tax rate of labour through one-way causality.
Although capital structure determinants have been the main focus of many research papers, it would appear that the ‘capital structure puzzle’ has yet to be solved. Hence, this study would like to contribute to this subject by conducting a longitudinal study of companies in E7 and G7 countries over the period 2005- 2014. Especially, multivariate regression models are used to examine the direct impact of macroeconomic variables on the capital structure choice of publicly traded non-financial companies. Evidence has been found that there are similarities and differences across E7 and G7 countries with respect to the impact of macroeconomic variables on capital structure. In particular when comparing the E7 with the G7 countries, macroeconomic variables such as the real GDP growth rate, corporate tax rate, bond market development, financial freedom and law enforcement show similar relationships to leverage – characterised as long-term book and market debt – while the inflation rate, stock market development, bank concentration, creditor protection and perceived level of corruption state divergent relationships across the countries. Overall, these findings partly support earlier research outcomes but also indicate new types of relationships within emerging and developed countries.
14 Read more
After the end of Afghanistan war and the cold war the huge inflows of foreign aids and soft loans ended. This situation got worse when the government of Pakistan had to start repayment and interest payment on loans taken during the 1980s. The era of 1990s was also full of events like drastic reduction in custom duties because of WTO regime, drastic increases in sales tax and income tax due to IMF conditionalities and due to recession in the economy, the tax to GDP ratio remained constant. However during this period pressure were on the tax authorities to increase tax revenue through improved efficiency. Therefore the purpose of this paper is to check the efficiency of tax system during these two periods. This purpose is tried to achieve through two steps regression analysis. In the first step each taxes are regressed on several tax capacity variables like GDP growth, inflation and tax reforms. Where as in second step the residual from the first step are regressed against time. The results shows that in case of sales tax, income tax and total tax in the decade of 1980s when the GDP growth and inflation were high and consequently the natural growth in tax collection were high. This was the period when there was no pressure from IMF and World Bank to keep budget deficit low, so the tax efforts for add ional tax collection was meager and tax efficiency was low. In the second decade 1990s when the GDP growth and inflation were low and so the natural growth in tax collection. However, in this period after the cold war the pressure from IMF and World Bank were very high to keep budget deficit low. Therefore the tax authorities in Pakistan put add ional efforts to increase revenue, which increased tax efficiency..
15 Read more
Another study was performed by Kueh et al. (2008) in examining the factors influencing outward FDI in Malaysia by employing few variables, namely income, exchange rate and openness. The quarterly data from 1991Q1 to 2004Q4 were analyzed using Johansen and Juselius cointegration tests as well as the vector error correction model. Further analysis was carried out by Kueh et al. (2009) by including income, exchange rate and openness and interest rate in their empirical estimation for the period of 1991Q1 to 2005Q4. From the analysis, Kueh et al. (2008) and Kueh et al. (2009) discovered that expansion in FDI and trade liberalization enables the Malaysian to benefit from better economic growth, standard of livings, technologies, knowledge as well as skills and ultimately reduce outflow of capital.
13 Read more
Opposed to this mainstream consensus are sympathizers of Andersen & Tarp (2003) who have concluded that, contrary to what Schumpeterian authors claim, the positive link between financial development and growth has not been sufficiently documented in recent empirical works. Andersen & Tarp have vehemently argued that, turning to the empirical evidence, the alleged first-order effect whereby financial development causes growth is not adequately supported by econometric work. Hence, they conclude that the empirical evidence on the finance-growth nexus does not yield any clear-cut picture (p. 1). This second school of thought has recently been supported by Asongu (2011a) in a meta-study of 186 papers on the finance-growth nexus. It will therefore be interesting to examine the positions of the embryonic African monetary zones in light of the above debate. The rest of the paper is organized as follows. Section 2 presents the data and discusses the methodology. The empirical analysis is covered in Section 3. Section 4 concludes.
20 Read more
BMA addresses model uncertainty by estimating many regressions with possible combinations of the explanatory variables and then taking the weighted average of the corresponding coefficients. The weights applied in the BMA methodology are derived from the so-called posterior model probabilities that correspond to the classical likelihood concept. A posterior model probability (PMP) is a measure of how well a model fits the data. Models with the best fit relative to model size exhibit the highest PMPs. BMA also calculates posterior inclusion probability (PIP) for each of the explanatory variables, which represents the sum of the PMPs for all the models which include a certain variable. Therefore, the PIP reflects the probability that a variable belongs to the “true” regression model. We employ the bms package available in R developed by Feldkircher and Zeugner (2009) 8 to estimate the BMA using the unit information g-prior and uniform model prior. We do not report results employing alternative priors (hyper-g or BRIC g-prior and random model prior) because they yield qualitatively similar results. We run BMA only for the long-term relationship between remittances and economic growth, as the number of observations for the short-one is insufficient for such an analysis.
39 Read more
As discussed by Eren (2014) sometimes information on the direction of the economy is as important as information on the comparison of the growth rate with a certain threshold. For instance, while investment decisions might change depending whether the growth rate is positive or negative, the monetary policy authority’s decision on interest rate somewhat depends on the actual level of growth rate. Therefore, we employ the methodology proposed by Harris (1991) and Koenig (2002), which enables us to make both qualitative and quantitative evaluations simultaneously. In particular, we make an empirical search for uncovering the predictive power of PMI on GDP growth for alternative, i.e. positive and negative, growth regions.
10 Read more
The second argument is that the "internation al demonstration effect” is intensified along with income growth. This influential concept was formulated by Nurkse (1953). He believed that in developing nations, people "come into contact with superior goods or superior patterns of consumption, with new articles or new ways of meeting old wants." As a result, these people are "apt to feel after a while a certain restlessness and dissatisfaction. Their knowledge is extended, their imagination stimulated; new desires are aroused" (Nurkse 1953, quoted in Kattel, Kregel, and Reinert 2009, 141). This international demonstration effect is tendentiously intensified with an increase in internationalization that is correlated with the development level of a country.
23 Read more
Given the projection of national savings, it provides an assessment of the extent of resource gap or the savings:investment gaps. The overall savings:investment gaps are further broken down by institutions e.g. private and public sectors. Given the projections of revenue, private income, foreign direct investment, extent of public credit, and external assistance, it then assesses, whether the resource requirement can be realized. Depending on the extent of resource gap covered, further modifications of the targeted economic growth rate may take place. The iterative process continues until satisfactory outcomes are achieved. A Medium Term Working Group was formed with representatives from various institutions such as Bangladesh Bank, National Board of Revenue, Comptroller General of Audit, Bangladesh Bureau of Statistics, External Resource Department, National Savings Department, Programming and General Economics Divisions of the Planning Commission and Ministry of Finance. The members of working groups are actively involved in the formulation of the medium term macro outlook. More specifically, the frameworks provide:
47 Read more
find the concluding relationship between these variables. In case of Pakistan recent studies like Iqbal and Nawaz (2010), Ali (2014) and Ahmed et al (2013) also showed negative results but Mubarik (2005) said that there is positive relationship. Actually the high inflation is good for high income and business class population but bad low income population. The study of Ali (2014) tried find the dynamic relationship between the variables using time series analysis. The long run relationship has found between all the variables and positive relationship has found between inflation and economic growth those results was consistent with the Mubarik (2005). But need a stable rate of inflation. In case of U, Latin America some studies showed negative relationship some studies showed positive like Makil et al (2001) and some studies showed small and negative relationship of inflation with growth Mubarik (2005), following this confused results the study of M.W. Madurapperuma (2016) tried to find the degree of responsive between inflation and growth and its impact the results concluded the negative long run relationship between the variables. So in case of Srilanka inflation rate should be minimum to increase the economic growth, study has not calculated the threshold level for the inflation as previous many studies has done. The Shapan (2016) study has also examined the relationship between inflation and economic growth. And found the long run and short run relationship between the variable and found positive relationship in case of Bangladesh and results are consistent with Malik and Chawdhary (2001) and Mehmoud (2015).
24 Read more
On the other hand, an indirect tax is a tax imposed on one person but partly or wholly paid by another. In indirect tax, the person paying and bearing the tax is different. It is collected by mediators who transfer the taxes to the government and also perform functions associated with filing tax returns. Hence, indirect tax can be shifted. It is the tax on consumption or expenditures. Examples include VAT, excise duty, import & export duty. It is more convenient as the taxpayer does not have to pay a lump sum amount for tax. It is paid in small amounts and only when making purchases. There is mass participation as each and every person getting goods or services has to pay tax. Indirect tax is also the means of reaching the lower income individuals as they are generally exempted from paying direct taxes. There is less chance of tax evasion as the taxpayers pay the tax collected from customers. The collection of tax takes automatically when goods are bought and sold. The government can check on the consumption of harmful goods by imposing higher taxes.
12 Read more
significantly related to economic growth when the model neglects education quality, but once the quality of education is included in the model, the relationship between education quantity and economic growth becomes insignificant. They measured the education quality by using a simple average of the mathematics and science scores over all international test scores. Arusha V. Cooray (2009) also measured education quality by, survival rates, repetitions rates, student/teacher ratios, schooling life expectancy and trained teachers in primary education, and she found that education quantity, when measured by enrolment ratios at the primary, secondary and tertiary levels, have a positive and significant impact on economic growth. She also found that the interaction effect between government spending and education quality is significant for economic growth. However, she found no relation between government spending and economic growth.
40 Read more
The current study first investigates the nature of any systematic patterns of GDP growth across individual countries, and examines how the GDP growth of one country can interact with the others. Second, we explore GDP volatility spillovers across countries by evaluating how country-specific shocks and volatilities, as well as cross-country shocks and volatility co-movements, affect GDP volatility within one country, and the transmission of shocks among countries. Finally, we investigate the GDP volatility correlations to shed some light on how constant-conditional correlations relate to time-varying conditional variance and covariance. Specifically, we use quarterly GDP data (1961-2008) from Australia, Canada, the UK and the US for the multivariate framework of generalised autoregressive conditional heteroskedasticity (MGARCH) models.
17 Read more
Historically, many reasons may explain these discrepancies. In Israel, the inflation rates remained exceptionally high in the late 1970s and early 1980s, with annual change in the consumer price index (CPI) climbing persistently from an already high 34% in 1977 to nearly 400% in the mid-1980s and finally settling down to about 20% in the late 1980s and early 1990s. The early inflationary period in Israel also overlaps with the introduction of dollar-linked deposit accounts (i.e. the so-called ‘PATAM’ accounts), seen as one of the main factors contributing to high inflationary expectations in the following years (Fischer, 1987; Yashiv, 1994). Over the years, as demand for domestic currency was replaced with demand for currency-indexed assets, inflation actually helped total bank deposits to pick up. Meanwhile, credit to private enterprises remained relatively dormant and even decreased slightly as a share of GDP during the same period.
30 Read more