Page 50 - Azerbaijan State University of Economics
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THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 2, 2023, pp. 47-59
This issue seems more relevant for countries whose economic growth is formed
primarily through the export of natural resources, including Azerbaijan.
Diversification of the economy, increasing the share of the manufacturing sector and
other industries in the structure of national wealth are among the main priorities of the
economic policy pursued in our country. In this regard, the study of the relationship
between taxes and economic growth in Azerbaijan is adopted as the purpose of the
article. The results of the study can provide substantiated scientific arguments for
improving state tax policy in terms of supporting economic growth.
LITERATURE REVIEW
Blanchard and Perotti (2002) used a structured VAR model to analyze the dynamic
impact of fiscal policy changes on real gross domestic product growth. They found a
positive link between government spending and economic output and a negative link
between tax revenue and economic growth.
Arnold and co-authors (2011) analyzed the relationship between tax revenue and
economic growth using the economic data of 21 countries in the OECD (Organization
for Economic Co-operation and Development). They found a negative link between
tax revenue and economic growth in long term. They also analyzed how the structure
of tax revenue impacts economic growth and they found that increasing the weight of
indirect taxes has a positive impact on GDP (Gross Domestic Product) per capita.
Acosta-Ormaechea and Yoo (2012) analyzed the impact of different tax types on
economic growth both generally and focusing separately on high and mid-income and
low-income countries. The general results show that there is a negative impact of both
income tax and social security payments on economic growth, a positive impact of
transition from income tax to property tax on economic growth, and a positive impact
of decreasing income taxes while increasing indirect taxes on economic growth. The
authors found a positive impact of an increase in the weight of consumption and
property taxes on economic growth in high-income countries, while they found no
statistically significant relationship between an increase in the weight of consumption
taxes and economic growth in mid-income countries. The authors found that
increasing income and corporate profit taxes in both high and mid-income countries
results in lower economic growth. The authors found no statistically significant
relationship between different types of tax revenues and economic growth in low-
income countries. The absence of any statistically significant links may be due to weak
tax administration in less developed lower-income countries.
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