List of Titles

Does financial system activity affect tax revenue in Malaysia? Bounds testing and causality approach

- Taha, Roshaiza, Colombage, Sisira, Maslyuk, Svetlana, Nanthakumar, Loganathan

Authors: Taha, Roshaiza , Colombage, Sisira , Maslyuk, Svetlana , Nanthakumar, Loganathan
Date: 2013
Type: Text , Journal article
Relation: Journal of Asian Economics Vol. 24, no. (2013), p. 147-157
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Reviewed:
Description: Highlights► We examine the nexus between the financial system and tax revenue collection in Malaysia. ► We found that unidirectional causality running from stock market to direct tax revenue. ► The impact of the financial system on direct tax revenue is more profound in the short run than in the long run. ► Banking and non-banking financial activities play a vital role in determining direct tax revenue. ► Tax incentives contributed more towards increased revenue collection from stock market than corporate debt market. We provide new empirical evidence on the relationship among direct tax revenue and banking and non-banking activities in Malaysia's financial system, utilising monthly data for the period 1997–2008. The existence of the long run equilibrium relationship between tax revenue and the financial system was investigated using the autoregressive distributive lag (ARDL) bounds testing approach to cointegration. We find a long-run equilibrium relationship between the financial system and tax revenue in Malaysia. The short-run dynamic relationship between direct tax revenue and financial system was investigated using the vector error correction model (VECM). The estimated ECTt−1 coefficient indicates a relatively fast speed of adjustment from short-run disequilibrium to long-run equilibrium. The Granger causality tests reveal unidirectional causality running from stock market towards direct tax revenue, indicating that an increase in stock market activities is likely to improve the collection of direct tax revenue. Overall, we show that the impact of the financial system on direct tax revenue is more profound in the short run than in the long run.

Stock market and tax revenue as determinants of economic growth : Panel data evidence from developing Asia

- Colombage, Sisira, Maslyuk, Svetlana, Taha, Roshaiza

Authors: Colombage, Sisira , Maslyuk, Svetlana , Taha, Roshaiza
Date: 2015
Type: Text , Journal article
Relation: The Journal of Developing Areas Vol. 49, no. 4 (2015), p. 89-107
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Description: Traditional growth literature advocated the role of fiscal policy in establishing economic growth (Mckinnon, 1973; Schumpeter, 1911; Shaw, 1973; Solow, 1956; Zagler and Durnecker, 2003), but it did not consider the role of the stock market and the financial intermediation as the potential determinants of growth. Among those few economic theories explaining the stock market and taxation as joint determinants of the economic growth are the Levine’s (1991) endogenous growth models (EGM), which suggests that economic growth is strongly influenced by the stock market and tax policy, and the Laffer - Khaldun curve, which demonstrates that reduced tax rates on investment income would stimulate economic growth which in turn generate more tax revenue and possibly even compensate for tax incentives given on investment. We investigate ten Developing Asia nations over the period 1990 to 2008. To study differences among the countries, the study sub-divides Developing Asia into East Asia Pacific (China, Thailand, Malaysia, Indonesia, Taiwan, Philippines) and South Asia (Bangladesh, India, Pakistan, Sri Lanka). Our motivation to choose these particular countries has been influenced by the rapid expansion of the stock markets and the rise in economic growth over the entire sample period. We employ panel unit root tests, Pedroni cointegration tests and panel Granger causality tests to estimate both short and long run causal relationships between stock market, tax revenue and economic growth. Data used included logged values of GDP to proxy economic growth, total tax revenue and stock market capitalization taken as a percentage of GDP to proxy tax revenue and stock market respectively. Findings provide evidence in support of Laffer-Khaldun curve and the Levine’s (1991) EGM: stock market and tax revenue do have an impact on economic growth even though the impact might be somewhat small or in some cases even negative. This can be due to country- specific characteristics that make a successful transition from stock market and tax revenue to economic growth more difficult (i.e., corruption, difficulties in obtaining credit at the personal level, inflation). In the short run results demonstrate the existence of causal linkages (varying directions) for the countries in East Asia Pacific and South Asia. In the long run, for all the examined sub-samples the direction of relationship runs from i) economic growth and tax revenue to stock market; and ii) economic growth and stock market to tax revenue. For policy implementation, these results indicate that in order to promote economic growth, governments of ten Developing Asia should improve the channels between the stock market, taxation policy and economic growth by developing stock market liquidity and by identifying growth-oriented tax reform strategies.

Stock market, tax revenue and economic growth : A case-study of Malaysia

- Taha, Roshaiza, Colombage, Sisira, Maslyuk, Svetlana

Authors: Taha, Roshaiza , Colombage, Sisira , Maslyuk, Svetlana
Date: 2010
Type: Text , Conference proceedings
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Description: This paper empirically tests Levine's [1] endogenous growth model, which suggests that stock market and tax policy jointly affect economic growth. Following Levine [1], tax or impeding financial market activities have the potential to lower per capita growth rate. Using monthly data from 1980 to 2008, the relationship between tax revenue, stock market as proxies by direct tax revenue and KLCI respectively and economic growth in Malaysia is modeled using the Granger causality and VECM framework. Results support Levine's theory and reveal that over the sample period both tax revenue and stock market affect pattern of economic growth in Malaysia. These findings indicate that strong growth can be achieved through booming of stock market activities and the high revenue collection. Fiscal policy authorities in Malaysia will find these results useful.

Stock market, tax revenue and economic growth: a case-study of developing Asia

- Taha, Roshaiza, Colombage, Sisira, Maslyuk, Svetlana

Authors: Taha, Roshaiza , Colombage, Sisira , Maslyuk, Svetlana
Date: 2011
Type: Text , Conference paper
Relation: 2011 Winter Global Conference on Business and Finance p. 24-29
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Description: The purpose of this paper is to establish the plausibility of stock market and taxation revenue as a tool to boost economic growth using time series data of ten developing Asia countries over the period of 1990 to 2008. We conducted a stationary test of the variables, followed by cointegration analysis and multivariate Granger causality. This study reveals that, in the case of China, we find strong evidence in support of the relationship between each of the examined variables. There is however mix findings for others countries. This paper is only preliminary analysis. The number of countries to represent the developing Asia is very limited. The paper is the first to examine such relationship especially within the developing context. This paper contributes to the literature by offering a holistic view of the role of government revenue and stock market as they pertain to economic growth. The results are significant for investors, the authority and the policymakers.

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