Tax Revenue versus Sectoral Economic Growth (Johanson Co-Integration Approach)

Abstract

A tax that is inclusive and becomes greater proportion of sectors income as the income from that sector rise is good for the sustainable development of each sector and identifying the incidence of a particular tax. Governments of all countries with no exception based on level of development and size of the economy or literacy rate of the population are struggling with the problem of appropriate tax policy formulation. The aim of this study is to analyze and figure out the determinants of the responsiveness of gross tax revenue to economic growth at a sectorial level. The result revealed that the share of service sector value added, import and over all government budget deficit to GDP affect buoyancy of gross tax revenue positively. Broadening the tax base and bringing new tax payers in to tax net, eliminating tax exemptions are some of the recommendations based on the findings of the present study.

Keywords: Tax and Co-integration.