The Impact of Tax Policy on the Economic Growth of Greece

Grigorios Spirakis and Antonios Sarantidis
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Grigorios Spirakis: Tax Revenue Agency, Ministry of Finance and Economics

Chapter 16 in Taxation in Crisis, 2017, pp 411-437 from Palgrave Macmillan

Abstract: Abstract This chapter examines the relationship between tax policy, foreign direct investments, and economic growth. The aim of this chapter is to analyze and to estimate the impact that frequent changes and modifications of tax policies have on the FDI and economic growth of Greece. The sample is based on time series data with annual observations from 1980 to 2014. The empirical part utilizes the methodologies of PCA, OLS regression, GARCH and GARCH-M. In this chapter, tax policy is measured as the annual number of tax legislation changes that have a direct negative impact on the income of citizens and businesses. We construct a new Tax Policy (TP) Index for Greece, by using the Tax Policy variable and five other variables as proxies in this analysis. The results suggest that the new TP Index has negative effects on GDP growth while it has no effects on FDI. The research provides to policy makers insights into the effects that an unstable tax environment has on FDI and economic growth.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-65310-5_16

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DOI: 10.1007/978-3-319-65310-5_16

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