Comparative Analysis on Effect of Tax Revenue on Economic Growth of Developing Countries

Abstract

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.