Impact of the tax burden on long run economic growth: A BRICS perspective

Master Thesis

2017

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University of Cape Town

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The topic of taxation and its impact on economic growth remains a widely debated one. This study contributes to literature by assessing the impact of the tax burden on GDP growth on the BRICS countries for the period 2000-2012 by using panel data estimation techniques. The three panel data estimation techniques examined in this study are: the fixed effects model, random effects model and the pooled regression model. In evaluating the tax effect on GDP growth, the paper reviews both theoretical and empirical literature. In line with literature that seems to prefer the fixed effect modelling technique, the tests in this study show that the appropriate model for the empirical data is the fixed effects model. The tax burden is defined as the tax revenue-to-GDP ratio. The explanatory variables explored against GDP growth in the study are: the tax burden, government expenditure, government debt, fixed investment, labour, education and population. Findings of the study show that there is a positive tax effect on GDP growth for the BRICS countries for the period explored.
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