TAX STRUCTURE AND ECONOMIC GROWTH: DO DIFFERENCES IN INCOME LEVEL AND GOVERNMENT EFFECTIVENESS MATTER?

Abstract

We examine the effects of both overall tax rate and changes in tax structure on growth by using data for more than 100 high, middle, and low income countries by employing the GMM estimation methods. In general, our results do not support the argument that overall tax rates or changes in tax structure have a significant effect on growth. However, we find that a shift from income to consumption and property taxes leads to a positive and significant effect on growth rate while a shift from consumption and property taxes to income taxes has a positive effect for low-income countries.