Comparative Analysis on Effect of Tax Revenue on Economic Growth of Developing Countries (Published)
The study examines effect of tax on economic growth of developing countries categorized into three regions namely; Africa, Asia and South America for the period 1990 to 2019 with specific objective to determine effect of tax revenue on gross domestic product of the regions collectively and provided comparative analysis of the three regions. Ex post facto research design was used and data were extracted from the World Bank and Organization of Economic Community and Development (2020) while the variables were analyzed using panel regression analytical technique. The study established clear evidence that each of the regions and collective tax revenue have positive significant effect on their gross domestic product. It further found that the positive effect of tax revenue on gross domestic product of the Asian region is more significant than the African and South American countries while that of the African countries is more than that of the South American countries sampled. The study therefore concludes that tax revenue has significant effect on economic growth of developing countries and recommends that governments of developing countries should intensify efforts to sustain their gross domestic product by reinvigorating their tax system, fiscal institutional structures, and framework to generate more tax revenue and invest in critical infrastructure; ensure more efficient means of tax collection so as to reduce the cost of collection and enhance the total revenue from taxes and seek for international collaboration on taxes to enhance growth.
The relevance of foreign direct investments (FDIs) in sub-Sahara Africa has been more overstated in recent years. The benefits it attracts cannot be quantified as it generally boosts a nation’s economy and standard of living. The volume of the influx of Foreign Direct Investments is, however, dependent on various factors. One of the numerous considerable factors includes Tax rates. Tax rates are the percentages at which an individual or corporation is taxed. The rates of tax can either positively or negatively affect the inflow of Foreign Direct Investments (FDIs) in a country. This study is carried out to examine the relationship and effect of tax rates with/on Foreign Direct Investments (FDIs), finding out if Value Added Tax is adversely related with FDI, if Personal Income Tax and Corporate Income Tax are significantly associated with FDI, and if Tax rates are major determinants of FDI in sub-Sahara Africa. Data was obtained from UNCTAD reports, World Bank reports, and Trading Economics reports. Multiple regression and correlation analysis were used to carry out analysis. From the analysis, it was discovered that Value Added Tax has an adverse and significant relationship with FDIs, Personal Income Tax rates has a negative and insignificant relationship with FDIs, and Corporate Income Tax rates has a positive but insignificant relationship with FDIs. It was also derived from the analysis that rates of tax do not majorly and significantly affect the inflows of Foreign Direct Investments (FDIs). It is recommended that the governments and tax regulatory bodies of every country should emphasize the importance of the tax rates in attracting foreign direct investments and foreign investors should also support tax rates by considering it more when investing in other countries.