Year: 2023 | Month: December | Volume 68 | Issue 4

Tax Policy: Impact on Business Development and Economic Dynamics of the Country

Igor Sopronenkov Nataliia Zelisko Orysia Vasylyna Iryna Lutsenko and Volodymyr Saienko
DOI:10.46852/0424-2513.4.2023.14

Abstract:

The optimal system, structure, and effectiveness of the tax system depend on many factors and are
characterized by several differences depending on the country’s social and economic development.
The purpose of the academic paper is to identify the features of the impact of the EU-27 countries’ tax
policy on business development and economic dynamics to determine the differences in this correlation.
Methodology. The statistical and regression analysis of the tax structure of the EU-27 countries is used
in the scientific article to evaluate its correlation with economic dynamics for the period 2000-2022 based
on the average values for the following periods: 2000-2005, 2006-2010, 2011-2015, and 2016-2022. The
results demonstrate a slowdown in economic growth in the EU-27 in the long run from 2000 to 2019 and
economic growth in 2021 to 2022 with no significant changes in the tax structure. The dynamics of tax
revenues were revealed to be stable, despite their different shares in GDP. In general, it is possible to
assert a low level of correlation between the share of tax revenues in GDP and the annual GDP growth
rate. The established regression model shows only a 9% change in GDP dynamics depending on the
change in the share of tax revenues to the budgets of the EU-27 countries. The research has identified
three groups of countries by the share of tax revenues, by the share of taxes on income, profit and capital
gains, and by the share of taxes on goods and services in the EU-27.

Highlights

  • Low Correlation Between Tax Structure and Economic Growth: The research shows that there is a low level of correlation between the share of tax revenues in GDP and annual GDP growth rates in the EU-27 countries. The constructed regression model indicates that only a 9% change in GDP dynamics is dependent on changes in the share of tax revenues to the budgets of these countries.
  • m Complex Relationship Between Tax Structure and Growth: The academic paper reveals that the relationship between tax structure and economic growth is complex and ambiguous. It identifies three groups of countries based on the share of tax revenues, taxes on income, profit, and capital gains, and taxes on goods and services. This differentiation emphasizes the varying impact of tax policies on economic dynamics, with different countries exhibiting different patterns.




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