TAX STRUCTURES AND ECONOMIC
GROWTH: NEW EVIDENCE FROM THE
GOVERNMENT REVENUE DATASET
United Nations World Institute for Development Economics Research, Helsinki, Finland
Abstract: This study uses the ICTD UNU-WIDER Government Revenue Dataset in order to
challenge and extend existing ﬁndings on the relationship between tax structures and economic
growth, in a panel of 100 countries. The results suggest that, broadly, revenue-neutral increases in
income taxes are associated with lower long-run GDP growth and that revenue-neutral reductions
in trade taxes have not always had positive effects. Crucially, many of the results presented differ
according to income level, calling into question the validity of existing ﬁndings for developing
countries and suggesting that policy advice on this issue in developing countries should be viewed
through a more cautious lens. © 2018 UNU-WIDER. Journal of International Development published
by John Wiley & Sons, Ltd.
Keywords: tax structure; economic growth; ﬁscal policy; development
JEL Classiﬁcation: O11; O23; E62
A commitment to ‘strengthen domestic resource mobilization’ has been embodied in the
Sustainable Development Goals (UNSTATS, 2016: 35).
Yet compared with other forms
of development ﬁnance such as aid or foreign direct investment, we know comparatively
little about the macroeconomic effects of increased tax revenues or changes in the tax
structure. In large part, this can be attributed to the paucity of data. The primary source
for researchers interested in tax has traditionally been the International Monetary Fund’s
*Correspondence to: Kyle McNabb, United Nations World Institute for Development Economics Research,
Katajanokanlaituri 6 B, Helsinki FI-00160, Finland.
The UN has ratiﬁed two ofﬁcial indicators for Goal 17.1 (Strengthen Domestic Resource Mobilization […]to
improve domestic capacity for tax and other revenue collection): (i) total government revenue (% of GDP) and
(ii) the proportion of domestic budget funded by domestic taxes.
© 2018 UNU-WIDER. Journal of International Development published by John Wiley & Sons, Ltd.
Journal of International Development
J. Int. Dev. 30, 173–205 (2018)
Published online in Wiley Online Library
(wileyonlinelibrary.com) DOI: 10.1002/jid.3345
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