The empirical analysis of the effect of taxes on poverty and human development

As a result of the rapid and unbalanced growth of the economies of some countries with the effect of globalization, the formation of unfair and unbalanced income distribution between and within a country has increased poverty. Various international institutions and organizations are trying to create and implement various policies to prevent poverty from increasing and to ensure human development. Taxes are mandatory, unrequited, and monetary payments that the state or institutions authorized by the state collect from individuals and institutions to cover public spending and take measures to address the social and economic problems of the country. Countries have some differences in tax rates and tax types according to their own functioning. However, the tax distinction in the form of indirect and direct taxes is a distinction seen in many countries. This study analyses the effect of taxes on poverty and human development using an unbalanced panel data set covering the years 1990-2018 on a sample of developing countries. The choice between simple and multi-country specific fixed and random effects models created for this purpose is based on the Hausman test. Simple and multiple regression analysis is conducted using 10 different tax types in total under three headings of total taxes, indirect taxes, and direct taxes. There is a negative correlation between total taxes and poverty. It is observed that other total taxes were statistically significant, except for the multiple regression results of the variable related to tax income. In other words, the increase in total taxes in developing countries reduces poverty and increases human development. There is an observed positive and statistically significant relationship between indirect taxes and poverty. In other words, the increase in indirect taxes in developing countries increases poverty and reduces human development. It has been observed that there is a negative relationship between direct taxes and poverty. Simple and multiple regression results of all direct taxes are statistically significant, except for repeated taxes on real estate and multiple regression results of direct taxes showing real estate, gift, and inheritance taxes. In other words, the increase in direct taxes in developing countries reduces poverty and increases human development. In all analyses, it has been observed that increasing education and health variables effectively reduce poverty and increase human development. However, it has observed worsening of poverty and human development caused by the increase in inflation and unemployment variables.