Tax structure and economic growth: A research on the OECD countries

In the literature, many studies have been conducted on how to realize and maintain the economic growth process. One of the important factors affecting the growth process is the capacity of the state to invest in infrastructure, technological development, and education-health services. The capacity of government investments is generally determined by the size of the tax revenue. In this study, the effect of tax structure on economic growth for 31 selected OECD countries was examined empirically. Within the scope of empirical analysis, panel data analysis was carried out by using annual data for the period 1995-2017. For this purpose, it was not only limited to total tax revenues in order to represent tax structure but also by using indirect taxes revenues, which include taxes on goods and services as value-added taxes and excises, and direct tax revenues which are collected on income, profits, and capital gains of individuals and corporates, and include social security contributions, the analysis has been deepened. As a result of the analysis using fixed effects model, the negative impact of total tax revenues on economic growth was determined in selected countries. However, different results were obtained according to the types of tax. Although taxes on income, profits, and capital gains of individuals had no significant effect on economic growth, both taxes on income, profits, and capital gains of corporates, and social security contributions were found to have a positive effect on growth. On the other hand, it was determined that value added taxes had a negative impact on economic growth while excises had a positive effect.