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Causality Between Tax Revenue And Government Spending In Malaysia

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  • Roshaiza Taha
  • Nanthakumar Loganathan

Abstract

The trend of tax collection in Malaysia is inconsistent, changing upward and downward depending upon economic conditions. However, over a 30 year period, most years show an increasing increment in total collection. The exceptions are when there is an abnormal economic condition such as financial crisis, war or increase in world oil prices. Total tax revenue has always been a major contribution to Malaysia’s federal government revenue. Income tax is one of the surest ways to fund the government. The main objective of this study is empirically tests the causality between tax revenues and government spending in Malaysia for the past 36 years by applying an econometrics model. The results provide evidence for the existence of a long-run relationship between tax revenues and government spending with unidirectional and bidirectional causality in VAR models for the sample period 1970-2006.

Suggested Citation

  • Roshaiza Taha & Nanthakumar Loganathan, 2008. "Causality Between Tax Revenue And Government Spending In Malaysia," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 2(2), pages 63-73.
    • Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:2:p:63-73
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    Cited by:

    1. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    2. Emmanuel Eneche Onoja & Ademu Usman Odoma, 2021. "Assessing the Effect of Tax Administration on Smes Tax Compliance Level in Kogi State," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 7, July -Dec.
    3. Volkan Yurdadog & Neslihan Coskun Karadag & Murat Albayrak & Oguzhan Bozatli, 2022. "Analysis of Non-tax Revenue: Evidence from the European Union," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(60), pages 485-485, April.
    4. Nanthakumar LOGANATHAN & Suraya ISMAIL & Dalia STREIMIKIENE & Asan Ali Golam HASSAN & Edmundas Kazimieras ZAVADSKAS & Abbas MARDANI, 2017. "Tax Reform, Inflation, Financial Development And Economic Growth In Malaysia," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 152-165, December.
    5. Mihai Mutascu, 2012. "Taxation under media capture," Economics Bulletin, AccessEcon, vol. 32(4), pages 2752-2767.
    6. Mutascu, Mihai & Danuletiu, Dan, 2013. "The literacy impact on tax revenues," Economics Discussion Papers 2013-63, Kiel Institute for the World Economy (IfW Kiel).
    7. Ullah, Nazim, 2016. "The relationship of government revenue and government expenditure: a case study of Malaysia," MPRA Paper 69123, University Library of Munich, Germany.
    8. Yun, Wong Sing & Yusoff, Remali, 2018. "The Determinants of Public Education Expenditure in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 109-122.
    9. N''Yilimon Nantob, 2016. "Taxation and Income Inequality in Developing Countries: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 36(3), pages 1508-1522.
    10. Mihai Mutascu, 2014. "Influence of climate conditions on tax revenues," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 8(3), September.
    11. Raed A. M. Iriqat & Ahmad N. H. Anabtawi, 2016. "GDP and Tax Revenues-Causality Relationship in Developing Countries: Evidence from Palestine," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 54-62, April.
    12. Cristiana Montibeller Schroeder, 2020. "Human Rights and Social Work in the Brazilian Context: Diversified Language Games," European Journal of Social Sciences Articles, Revistia Research and Publishing, vol. 3, January -.
    13. Stoyan Tanchev, 2019. "Tax structure and economic growth: empirical evidence from Bulgaria," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 24-41,42-58.
    14. Hasan, Syed Akif & Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2011. "An investigation of granger causality between tax revenues and government expenditures," MPRA Paper 35686, University Library of Munich, Germany.
    15. Yuanting Xia & Wenxiu Hu & Zhenxing Su, 2022. "Economic Policy Uncertainty, Social Financing Scale and Local Fiscal Sustainability: Evidence from Local Governments in China," Sustainability, MDPI, vol. 14(12), pages 1-19, June.
    16. Loganathan, Nanthakumar & Mori Kogid & Suriyani Muhamad & Nor Haslina Mohamad Akhir, 2011. "Fiscal Adjustment And Dynamic Economics Performance: The Case Of Malaysia," Journal of Global Business and Economics, Global Research Agency, vol. 3(1), pages 1-10, July.

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    More about this item

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other

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