Effect of Tax Revenue on Gross Domestic Product of Nepal

Abstract

The study investigated the effect of different types of tax revenue and other macroeconomic variables, such as inflation and government expenditure, on Nepal’s GDP per capita (economic growth) from 1995/96 to 2022/23. It incorporated GDP as the dependent variable, where overall tax revenue, customs duty, excise duty, income tax, VAT, inflation, and government expenditure served as independent variables. The stationarity of the data was tested using the ADF test. Likewise, the ADRL bound test was used to determine the long-run and short-run relationships between the variables. The analysis revealed that customs duty, income tax, and VAT had a negatively significant impact, while overall tax revenue had a positively significant impact on Nepal’s GDP per capita.