Do revenue-neutral tax swaps boost growth?

Hüseyin Şen and Ayşe Kaya

Journal of Economic Policy Reform, 2023, vol. 26, issue 4, 401-420

Abstract: Do revenue-neutral tax swaps boost growth? To answer this question, we use a panel data set of nine OECD countries for the period 1981-2017 and arrive at the following main results under revenue-neutral conditions: First, the most growth-damaging tax is the corporate income tax, followed by the personal income tax. Second, a shift from income taxes to consumption taxes is associated with higher growth, while a shift from social security contributions and property taxes to payroll & workforce taxes has significant negative effects on growth. Overall, our results confirm the view that revenue-neutral tax reforms focusing on a shift from income taxation to consumption and property taxation would promote growth.

Date: 2023
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DOI: 10.1080/17487870.2023.2238107

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