Determinants of Tax Revenue: A Comparison Between ASEAN-7 Plus China And 8- European Countries

Abstract

The aim of this paper is analyzing the level ratio of tax revenue and GDP depending on different consumer behaviors between two groups of countries: ASEAN-7 plus China (called the Eastern) and eight European countries (called the Western). The study applied the Feasible Generalized Least Square model to confirm the robustness of the Panel Corrected Standard Errors model, and the results indicate that all countries have a positive association between tax revenue with the human capital and FDI variables. In addition, in the Eastern, forest area and broad money has a statistically significantly positive impact on tax revenue while gross savings has a negative one. Further, the Western witnessed the positive impact with gross savings while broad money variables lead to a decrease in tax revenue. The major results indicate that in the East, the Governments should focus on how to improve their taxation by promoting the broad money - M2 and expanding the forest area as well as support their consumers spending more instead of saving. In contrast, European countries try to reduce the M2, encouraging their consumers to save more. The Eastern and Western governments may control natural and demographic determinants aimed to support taxation and sustainable economic growth.