An investigation of the relationship between tax revenues and economic growth: The case of Namibia
Loading...
Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Namibia
Abstract
This study empirically investigated the relationship between tax revenue and economic
growth in Namibia using the annual data for 1981-2020. The time series on GDP, net tax,
private consumption and gross capital formation were extracted from annual national
accounts tables available on Namibia Statistics Agency’s web site. The ARDL bound test
confirmed no cointegration between tax revenue and GDP growth hence, the short-run
ARDL was employed. The results of the short-run ARDL revealed a positive and
significant contemporaneous relationship between taxation and economic growth. It is
therefore, inferred that Namibia conforms to the hypothesis that economic growth and tax
revenue reinforce each other In the same vein economic growth is significantly and
negatively affected by the some historical values (lags) of net tax.. Moreover, the Granger
causality test divulged neither unidirectional nor bidirectional causal relationship between
tax revenue and GDP growth. In the final analysis, it is recommended that tax policies
should be concurrently implemented with accelerated supply side policies such as
business financing, product cost subsidization, entrepreneurial skill acquisition, especially
in growth-driving sectors and eventually broaden the tax base. In other words, the results
of the study implies that growth policies should be supplemented by a strong tax system
so as to optimize revenue collection. The consistence of the findings of this study with the
optimal tax theory implies that excessive taxation can distort economic activity, therefore,
slow down production
Description
A thesis submitted in partial fulfilment of the requirements for the degree of master of science in economics
Keywords
Tax revenue, Gross domestic product, Private consumption, Gross capital formation, Fiscal policy