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Is There Any Obvious Relationship Between Taxation And Economic Growth?

Author

Listed:
  • CRĂCIUN Andreea-Florentina

    (West University of Timisoara, Romania)

  • RĂCĂTĂIAN Raluca-Ioana

    (West University of Timisoara, Romania)

  • ȚĂRAN Alexandra-Mădălina

    (West University of Timisoara, Romania)

  • MOLDOVAN Nicoleta-Claudia

    (West University of Timisoara, Romania)

Abstract

In an economy facing multiple crises (economic, pandemic, energy crisis, political and security crises) becomes necessary to determine the implications of fiscal changes on the economy’s evolution. This paper aimed to assess the link between taxation and economic growth in the European Union Member States, considering panel data for the period 2000-2021 to identify taxation’s specific implications on economic growth. The methodological endeavour encompassed both qualitative and quantitative research approaches. The qualitative analysis of the study involved a bibliometric analysis of the existing literature and visual mapping of the bibliographic data employed to highlight the differences between the values of the variables recorded in the EU countries. The quantitative research methodology assumed the empirical analysis through a panel data regression with fixed and random effects to identify the reaction of the growth rate of the gross domestic product to changes in direct and indirect taxes. Our results indicate a relationship between taxation and economic growth, depending on the tax type. We have identified a direct relationship in the case of taxes on the income or profits of corporations, including holding gains and value-added taxes and an indirect relationship in the case of taxes on individual or household income including holding gains and other taxes on production. In addition, the impact of indirect taxes is more significant. These specific relationships influence the change in fiscal policies in response to economic shocks.

Suggested Citation

  • CRĂCIUN Andreea-Florentina & RĂCĂTĂIAN Raluca-Ioana & ȚĂRAN Alexandra-Mădălina & MOLDOVAN Nicoleta-Claudia, 2023. "Is There Any Obvious Relationship Between Taxation And Economic Growth?," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 18(1), pages 69-89, April.
    • Handle: RePEc:blg:journl:v:18:y:2023:i:1:p:69-89
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    References listed on IDEAS

    as
    1. Andreea-Florentina Crăciun & Alexandra-Mădălina Țăran & Grațiela Georgiana Noja & Marilen Gabriel Pirtea & Raluca-Ioana Răcătăian, 2023. "Advanced Modelling of the Interplay between Public Governance and Digital Transformation: New Empirical Evidence from Structural Equation Modelling and Gaussian and Mixed-Markov Graphical Models," Mathematics, MDPI, vol. 11(5), pages 1-25, February.
    2. Gancho Ganchev & Ivan Todorov, 2021. "Taxation, government spending and economic growth: The case of Bulgaria," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(3), pages 255-266.
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