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Direct Versus Indirect Taxes: Impact on Economic Growth and Total Tax Revenue

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  • Taufik Abd Hakim

Abstract

This study investigates the effects and consequences of both direct and indirect taxes on economic growth and total tax revenue in a panel of 51 countries over the period 1992 ¨C 2016. The data were estimated using the dynamic panel generalized method of moments (GMM) estimation. The results indicate that direct taxes are significant and negatively correlated with the economic growth, while indirect taxes seem to have a positive but insignificant impact on the dependent variable. Additionally, this study also found a significant and positive contribution of direct taxes on the total tax revenue compared to indirect taxes. The conclusion is that tax structure based on direct taxes such as taxes on income, profit and capital gains is harmful to the economic growth, yet more efficient in terms of collecting the tax revenue in a country.

Suggested Citation

  • Taufik Abd Hakim, 2020. "Direct Versus Indirect Taxes: Impact on Economic Growth and Total Tax Revenue," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(2), pages 146-153, April.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:2:p:146-153
    DOI: 10.5430/ijfr.v11n2p146
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    Cited by:

    1. Andrei Ionut Husman, 2020. "Taxation And Economic Development In The Former Communist Bloc. A Panel Data Approach," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 5(2), pages 83-91, September.
    2. Mamon Adam Maarof & Dildar Haydar Ahmed & Ahmed Samour, 2023. "Fiscal Policy, Oil Price, Foreign Direct Investment, and Renewable Energy—A Path to Sustainable Development in South Africa," Sustainability, MDPI, vol. 15(12), pages 1-16, June.
    3. repec:uii:jcauii:v:2:y:2020:i:3:p:119-128 is not listed on IDEAS
    4. Omodero Cordelia Onyinyechi & Ajetumobi Opeyemi, 2022. "Direct Taxes and Agricultural Finance," Folia Oeconomica Stetinensia, Sciendo, vol. 22(2), pages 180-192, December.
    5. Xiaoli Hao & Yuhong Li & Shufang Wen & Lulu Zhang, 2024. "Assessing the impact of digitalization on environmental efficiency: Do population factors and institutional factors Matter?," Journal of Information Economics, Anser Press, vol. 2(1), pages 80-101, March.
    6. Cordelia O. Omodero, 2022. "Assessment of the Impact of Direct Taxes on Public Investment in Agriculture in Nigeria," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 21(1), pages 6-20.
    7. Dokas, Ioannis & Panagiotidis, Minas & Papadamou, Stephanos & Spyromitros, Eleftherios, 2024. "The impact of the shadow economy on the direct-indirect tax mix: Can central banks’ independence mitigate the effect?," Journal of Policy Modeling, Elsevier, vol. 46(3), pages 475-493.

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