NEXUS BETWEEN CORPORATE INCOME TAX AND ECONOMIC GROWTH IN BANGLADESH

Abstract

This study assembles a dataset on the corporate income tax (CIT) rate during 2001-2020 in Bangladesh and tries to capture the influence of CIT on the country's economic growth. It takes into account the impact of the CIT rate on per capita GDP, government spending, foreign direct investment (FDI), and inflation. In the last two decades, with the increasing trend of CIT revenue, it is observed that CIT revenue contributes almost 32 percent in total tax revenue. This study incorporates empirical analysis to capture the association between CIT and economic growth. Firstly, the associated tests identified the stationarity of variables which are significant properties of time series analysis. In the second step, one cointegrating vector has been observed in the variables. Finally, this study tries to figure out the causal relationship among variables by applying appropriate methods and tests. The test results endorse that CIT rate granger causes to GDP per capita. Accordingly, for a rise in CIT revenue, there is a positive change in GDP per capita.