Analysis of the Linkages between Foreign Investment, Trade, and Economic Structure on Tax Revenue in Asia

Muhammad Budi Utama, Tedi Harianto

Abstract


Tax revenue is the main source of funding in various countries, including countries in Asia. However, in the Asian context, there are still some serious problems related to tax revenue, such as tax ratio problems and tax evasion. This study identifies the determinants of tax revenue in Asia over the period 2008-2023. We use the Generalized Method of Moments (GMM) model to analyze the results and find that foreign investment inflows and per capita GDP increase are the main sources of tax revenue increase compared to agriculture, manufacturing, and trade. For this reason, the government is expected to review the tax policies that have been issued to achieve a balance in state tax revenue.

Keywords


Foreign investment, Trade, Per capita GDP, Asia

Full Text:

PDF

References


Afolabi, J.A., Taiwo, A.S. and Adebayo, S.N. (2024), “The Nexus between Illicit Financial Flows and Tax Revenue: New Evidence from Resource-Rich African Countries”, Scientific Annals of Economics and Business, Vol. 71 No. 3, pp. 381–398.

Anastasiou, A., Kalligosfyris, C. and Kalamara, E. (2024), “Determinants of Tax Revenue Performance in European Countries: A Panel Data Investigation”, International Journal of Public Administration, Vol. 47 No. 4, pp. 227–242, doi: 10.1080/01900692.2022.2111578.

Andrejovská, A. and Puliková, V. (2018), “Tax Revenues in the Context of Economic Determinants”, Montenegrin Journal of Economics, Vol. 14 No. 1, pp. 133–141, doi: 10.14254/1800-5845/2018.14-1.10.

Apeti, A.E. and Edoh, E.D. (2023), “Tax revenue and mobile money in developing countries”, Journal of Development Economics, Vol. 161, p. 103014, doi: 10.1016/j.jdeveco.2022.103014.

Arellano, M. and Bond, S. (1991), “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”, The Review of Economic Studies, Vol. 58 No. 2, pp. 277–297, doi: 10.2307/2297968.

Arezki, R., Dama, A.A. and Rota-Graziosi, G. (2021), “Revisiting the Relationship between Trade Liberalization and Taxation”, SSRN Electronic Journal, doi: 10.2139/ssrn.3907727.

Cagé, J. and Gadenne, L. (2018), “Tax Revenues and the Fiscal Cost of Trade Liberalization, 1792–2006”, Explorations in Economic History, Vol. 70, pp. 1–24, doi: 10.1016/j.eeh.2018.07.004.

Camara, A. (2023), “The Effect of Foreign Direct Investment on Tax Revenue”, Comparative Economic Studies, Vol. 65 No. 1, pp. 168–190, doi: 10.1057/s41294-022-00195-2.

Chamisa, M.G. and Sunde, T. (2024), “Key determinants of tax revenue in Zimbabwe: assessment using autoregressive distributed lag (ARDL) approach”, Cogent Economics & Finance, Cogent, Vol. 12 No. 1, p. , doi: 10.1080/23322039.2024.2386130.

Chaudhry, I.S. and Munir, F. (2010), “Determinants of low tax revenue in Pakistan”, Pakistan Journal of Social Sciences, Vol. 30 No. 2, pp. 439–452.

Chettri, K.K., Bhattarai, J.K. and Gautam, R. (2023), “Determinants of Tax Revenue in South Asian Countries”, Global Business Review, SAGE Publications India, p. 09721509231177784, doi: 10.1177/09721509231177784.

Cung, N.H. (2019), “Impact of Economic Freedom Index and Corruption Perceptions Index on Corporate Income Tax Revenue in Vietnam”, European Scientific Journal ESJ, Vol. 15 No. 28, pp. 185–196, doi: 10.19044/esj.2019.v15n28p185.

Desta, T. (2022), “Tax Revenue Collection in Ethiopia: Does Institutional Quality Matter?”, No. August, p. 792.

Faeth, I. (2010), Foreign Direct Investment in Australia: Determinants and Consequences, Melbourne University Custom Book Centre.

Gaalya, M.S., Edward, B. and Eria, H. (2017), “Trade Openness and Tax Revenue Performance in East African Countries”, Modern Economy, Vol. 8 No. 5, pp. 690–711, doi: 10.4236/me.2017.85049.

Garg, S., Mittal, S. and Garg, A. (2024), “Revisiting the determinants of tax revenue: an integrative model with conventional, economic policy and institutional factors”, International Journal of Social Economics, doi: 10.1108/IJSE-04-2024-0314.

Gaspareniene, L., Kliestik, T., Sivickiene, R., Remeikiene, R. and Endrijaitis, M. (2022), “Impact of Foreign Direct Investment on Tax Revenue: The Case of the European Union”, Journal of Competitiveness, Vol. 14 No. 1, pp. 43–60, doi: 10.7441/joc.2022.01.03.

Gnangnon, S.K. (2021), “Effect of volatility of foreign direct investment inflows on corporate income tax revenue volatility”, Applied Economic Analysis, Vol. 29 No. 86, pp. 124–151, doi: 10.1108/AEA-04-2020-0030.

Gnangnon, S.K. and Brun, J.F. (2019), “Trade Openness, Tax Reform and Tax Revenue in Developing Countries”, World Economy, Vol. 42 No. 12, pp. 3515–3536, doi: 10.1111/twec.12858.

Gobachew, N. (2017), “Determinants of Tax Revenue in Ethiopia”, Economics, Vol. 6 No. 6, p. 58, doi: 10.11648/j.eco.20170606.11.

Gupta, A. Sen. (2007), “Determinants of Tax Revenue Efforts in Developing Countries”, IMF Working Papers, Vol. 07 No. 184, p. 1, doi: 10.5089/9781451867480.001.

Ibrahim, M. and Arundina, T. (2022), Practical Panel Modelling: With Applications in Islamic Banking and Finance Research, edited by Dewandaru, G., Quraisy, M., Sari, C.A., Hidayati, N. and Rudhatin, F., National Committee of Islamic Economy and Finance (KNEKS), Indonesia.

IMF African Dept. (2024), “Trade Liberalization and Tax Revenue Mobilization in Comoros”, IMF Staff Country Reports, Vol. 2024 No. 005, p. 60, doi: https://doi.org/10.5089/9798400263125.002.

Jhingan, M.L. (1993), Money, Banking, International Trade and Public Finance, Konark Publishers Pvt, Limited.

Juliannisa, I.A., Parianom, R. and Abrianto, A. (2023), “Does GDP Affect Tax Revenue?”, EcceS (Economics Social and Development Studies), Vol. 10 No. 1, pp. 69–89, doi: 10.24252/ecc.v10i1.33170.

Kiang, B.K., Chiew, C.H., Hao, C.W. and Foong, L.Y. (2021), Determinants of Tax Revenue in Malaysia, Universiti Tunku Abdul Rahman.

Ma, E. (2020), “Researching the Trading Systems in the Asian-Pacific Region – APEC, ASEAN, TPP, CPTPP, RCEP and their Members”, GlobaLex, available at: https://www.nyulawglobal.org/globalex/APEC_ASEAN1.html#_2.1._Asia-Pacific_Economic (accessed 24 July 2024).

Mallick, H. (2021), “Do governance quality and ICT infrastructure influence the tax revenue mobilisation? An empirical analysis for India”, Economic Change and Restructuring, Springer US, Vol. 54 No. 2, pp. 371–415, doi: 10.1007/s10644-020-09282-9.

Mapunda, M., Kira, A.R. and Ngomuo, S. (2023), “Does service sector growth influence tax revenue in Tanzania?”, Cogent Business & Management, Cogent, Vol. 10 No. 3, doi: 10.1080/23311975.2023.2259615.

Mengistie, D. (2018), Macro-Economic Determinants of Tax Revenue in Ethiopia : A Time Series Analysis, St. Mary’s University.

Minh Ha, N., Tan Minh, P. and Binh, Q.M.Q. (2022), “The determinants of tax revenue: A study of Southeast Asia”, Cogent Economics and Finance, Cogent, Vol. 10 No. 1, doi: 10.1080/23322039.2022.2026660.

Morrissey, O., Von Haldenwang, C., Von Schiller, A., Ivanyna, M. and Bordon, I. (2016), “Tax Revenue Performance and Vulnerability in Developing Countries”, The Journal of Development Studies, Routledge, Vol. 52 No. 12, pp. 1689–1703, doi: 10.1080/00220388.2016.1153071.

Neog, Y. and Gaur, A.K. (2021), “Shadow economy, corruption, and tax performance: A study of BRICS”, Journal of Public Affairs, John Wiley & Sons, Ltd, Vol. 21 No. 2, p. e2174, doi: 10.1002/pa.2174.

Nguyen-Phuong, L., Phuong, N.N.T. and Thu, H.D.T. (2022), “Determinants of Tax Revenue: A Comparison Between ASEAN-7 Plus China And 8- European Countries”, International Journal of Business and Society, Vol. 23 No. 1, pp. 244–259, doi: 10.33736/ijbs.4611.2022.

Nguyen, V.D. and Duong, T.H.M. (2022), “Corruption, Shadow Economy, FDI, and Tax Revenue in BRICS: A Bayesian approach”, Montenegrin Journal of Economics, Vol. 18 No. 2, pp. 85–94, doi: 10.14254/1800-5845/2022.18-2.8.

OECD. (2024), Revenue Statistics in Asia and the Pacific 2024: Tax Revenue Buoyancy in Asia, OECD Publishing, Paris, doi: 10.1787/e4681bfa-en.

Ojong, C.M., Anthony, O. and Arikpo, O.F. (2016), “The Impact of Tax Revenue on Economic Growth: Evidence from Nigeria”, IOSR Journal of Economics and Finance, Vol. 7 No. 1, pp. 32–38, doi: 10.9790/5933-07113238.

Piancastelli, M. and Thirlwall, A.P. (2020), “The Determinants of Tax Revenue and Tax Effort in Developed and Developing Countries: Theory and New Evidence 1996-2015”, Nova Economia, Vol. 30 No. 3, pp. 871–892, doi: 10.1590/0103-6351/5788.

Rahman, M.M. and Islam, M.E. (2023), “Does Trade Openness Affect Taxation? Evidence from BRICS Countries”, Millennial Asia, SAGE Publications India, p. 09763996231199310, doi: 10.1177/09763996231199310.

Raouf, E. (2022), “The impact of financial inclusion on tax revenue in EMEA countries: A threshold regression approach”, Borsa Istanbul Review, Borsa Ä°stanbul Anonim Åžirketi, Vol. 22 No. 6, pp. 1158–1164, doi: 10.1016/j.bir.2022.08.003.

Rodríguez, V.M.C. (2018), “Tax determinants revisited. An unbalanced data panel analysis”, Journal of Applied Economics, Routledge, Vol. 21 No. 1, pp. 1–24, doi: 10.1080/15140326.2018.1526867.

Roodman, D. (2009), “A Note on the Theme of Too Many Instruments *”, Oxford Bulletin of Economics and Statistics, Vol. 71 No. 1, pp. 135–158, doi: 10.1111/j.1468- 0084.2008.00542.x.

Salah Eddine, S., Oussama, R. and Abdellah, E. (2021), “Trade Openness and Tax Structure in Morocco: Evaluation and Impacts”, International Journal of Economic Sciences, Vol. X No. 1, pp. 100–127, doi: 10.52950/es.2021.10.1.007.

Tandean, V.A. and Winnie, W. (2016), “The Effect of Good Corporate Governance on Tax Avoidance: An Empirical Study on Manufacturing Companies Listed in IDX period 2010- 2013”, Asian Journal of Accounting Research, Emerald Publishing Limited, Vol. 1 No. 1, pp. 28–38, doi: 10.1108/AJAR-2016-01-01-B004.

Wooldridge, J.M. (2001), “Applications of Generalized Method of Moments Estimation”, Journal of Economic Perspectives, Vol. 15 No. 4, pp. 87–100, doi: 10.1257/jep.15.4.87.




DOI: http://dx.doi.org/10.58258/bisnis.v4i4.9767

Refbacks

  • There are currently no refbacks.


Lisensi Creative Commons
Ciptaan disebarluaskan di bawah Lisensi Creative Commons Atribusi-BerbagiSerupa 4.0 Internasional.

Bussiness Management
p-ISSN: 2828-8203, e-ISSN: 2828-7606
Jurnal ini diterbitkan oleh Lembaga Penelitian dan Pendidikan (LPP) Mandala.

Alamat: Jl. Lingkar Selatan, Perum Elit kota Mataram Asri Blok O. No. 35, Jempong Baru, Sekarbela, Kota Mataram NTB. Indonesia