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Taxation for Economic Growth: Evidence from Ethiopia

Author

Listed:
  • Dasalegn Mosissa Jalata

    (Department of Accounting and Finance, College of Business and Economics, Wollega University, Ethiopia.)

Abstract

Ethiopia is one of the fastest developing countries situated in the North-Eastern corner of Africa. At the contemporary periods, Ethiopia’s economic growth transformed from single to double digit. Taxation is important mechanism that boosts country’s economic level. This paper investigated empirical evidence on contributions of tax revenue for economic growth of Ethiopia using time series data from 1993 to 2012. This work is both descriptive and inferential in nature. It uses data on gross domestic product (GDP), total tax revenue (TTR), non-tax revenue (NTR) and foreign revenue (FR) sourced from Ethiopian Revenue and Custom Authority (ERCA), Ministry of Finance & Economic Development (MOFED), and Ethiopian Economic Associations (EEA). The data was analyzed using both descriptive statistical tools and simple regression methods. Findings revealed that the ratio of TTR to GDP was 8.1% on average however; TTR explains about 91.84% significant variations of GDP during the periods under review. In addition, F. Ron average contributes for the compositions of GDP by 5.16%, and contributions of NTR averaged 4.11%.Likewise, the average growth rate of TTR was 16%, while GDP growth rates become 8.97% on average. There was positive and significant correlation between TTR and GDP and both of them fluctuated greatly during the period though TTR was more stable than both FR and NTR. Therefore, it is appropriate to depend sufficiently on TTR and to some extent NTR than waiting the support of FR. In addition, the collections and implementations of tax revenue must be supported by strong administration system.

Suggested Citation

  • Dasalegn Mosissa Jalata, 2014. "Taxation for Economic Growth: Evidence from Ethiopia," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(7), pages 294-300, July.
    • Handle: RePEc:ijr:journl:v:2:y:2014:i:7:p:294-300
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    References listed on IDEAS

    as
    1. Richard M. Bird, 2005. "Value-Added Taxes in Developing and Transitional Countries: Lessons and Questions (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0505, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Giesecke, James A. & Nhi, Tran Hoang, 2010. "Modelling value-added tax in the presence of multi-production and differentiated exemptions," Journal of Asian Economics, Elsevier, vol. 21(2), pages 156-173, April.
    3. Brautigam,Deborah & Fjeldstad,Odd-Helge & Moore,Mick (ed.), 2008. "Taxation and State-Building in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521716192.
    4. Robert W. McGee (ed.), 2008. "Taxation and Public Finance in Transition and Developing Economies," Springer Books, Springer, number 978-0-387-25712-9, September.
    5. Brautigam,Deborah & Fjeldstad,Odd-Helge & Moore,Mick (ed.), 2008. "Taxation and State-Building in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521888158.
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    More about this item

    Keywords

    Taxation; Economic growth; Contributions; Ethiopia;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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