Tax Revenue and Gross Capital An Empirical Analysis for Malaysia

Purpose: The purpose of this paper is to evaluate the causality relationship between tax revenue and gross capital in Malaysia. The government expenditure and revenue in Malaysia played a critical role to support the economic operation, however, the economy suffer from continuously budget deficit. F...

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Bibliographic Details
Published in:Global business and management research 2017-01, Vol.9 SI (1), p.360
Main Authors: Abdullah, Azrai, Hassan, Khalid
Format: Article
Language:English
Subjects:
Budget deficits
Causality
Corporate taxes
Economic activity
Economic conditions
Economic growth
Economic models
Error correction & detection
Expenditures
Fiscal policy
Goods and services tax
Government finance
Government revenue
Government spending
GST
Hypotheses
Income taxes
International
Investments
Legislation
Public expenditures
Studies
Tax rates
Tax revenues
Taxation
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Summary:Purpose: The purpose of this paper is to evaluate the causality relationship between tax revenue and gross capital in Malaysia. The government expenditure and revenue in Malaysia played a critical role to support the economic operation, however, the economy suffer from continuously budget deficit. For that, the government tend recently to increase the revenue by introduce the Good and Services tax (GST) in order to cover the budget deficit. In light of this fact the current study is work to assess how the association between tax revenue and gross capital can affect the country economic growth. Design/methodology/approach: The study utilized co-integration techniques and granger causality included an Error Correction Mechanism (ECM) as the methods of estimation Findings: The results conclude bidirectional long run causality relationship between tax revenue and gross capital. Furthermore, short run unidirectional observed from gross capital to tax revenue. Finding from this study reveal that increase in total tax revenue (TTX) crowd in gross capital in long run. As well as, the result indicate gross capital is main contributor to tax revenue. Practical implications: The results of the present study could help to better understanding for the nature of the relationship between tax revenue and gross capital in Malaysia. Findings suggested from this study can help government and policy designers for an appropriate fiscal policy. Keywords: Tax revenue; Gross capital; Error Correction Mechanism
ISSN:1947-5667
1947-5667