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Taxation Effects on Economic Growth

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  • Kremastioti Vasiliki
  • Athanasios Anastasiou

Abstract

We examine the impact of total taxation and individual taxes on growth in 21 European Union countries from 2000 to 2017 using OECD data. The method used is ordinary least squares. Secondly, owing to the endogeneity which is observed in our estimation, we used a two-step system—generalised method of moments—for the analysis. Tax on corporates appeared statistically important, which shows a strong relationship between tax on corporates and the logarithm of Gross Domestic Product. A policy of high taxation can impact negatively on investment, entrepreneurship and activities which improve research and development. The negative effect of taxes on corporates during an economic crisis could be responsible for the increase in tax evasion, discouragement of small business activity and increase in corruption and inequalities.

Suggested Citation

  • Kremastioti Vasiliki & Athanasios Anastasiou, 2023. "Taxation Effects on Economic Growth," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 24(1), pages 87-108, January.
    • Handle: RePEc:wej:wldecn:887
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