Long-Run Nexus between Tax Revenue on Economic Performance: Empirical Evidence from Malaysia

Roshaiza Taha and Nanthakumar Loganathan

International Journal of Economics and Empirical Research (IJEER), 2014, vol. 2, issue 6, 238-245

Abstract: Taxation is main source of government income and has direct linkages with economic performance for most of countries. This study attempts to investigate the long-run nexus between economic performance and tax revenue for Malaysia as a developing nation with dynamic economic progress for the last 2 decades. To determine the long-run nexus, we used the structural breaks effects with the conjunction of ARDL cointegration analysis along with causality analysis. The empirical finding successfully captures the long-run nexus between economic performance and tax revenue. Meanwhile, in the causality analysis section, we found that there is bidirectional causality running between economic performance and tax revenue for Malaysia, which indicates that both variables are cause each another to achieve long-run sustainability stage. The study opens up new directions for policy makers to improve performance of tax sector for sustainable economic growth.

Keywords: Economic performance; Tax revenue; Causality (search for similar items in EconPapers)
JEL-codes: C22 F43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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