Taxation and Economic Growth in Benin: Does the Rate “eat” the Base?

Abstract In developing countries where resources are limited and population needs are immense, taxation becomes one of the State's key economic policy instruments. Benin, a small developing economy open to the world, is no exception. It inherits a primarily fiscal budget, which generates considerable interest among economic actors and policymakers. The evolving social needs, accompanied by citizen and union demands, compel the State to engage in tax reforms. This paper aims to estimate the relationship between taxation and economic growth for rational reforms in Benin. The methodological approach, based on the Scully model, shows that there is a link between taxation and economic growth in Benin. The study also reveals a fiscal shortfall for the Beninese economy, where tax pressure is below the required optimum. These findings call for vigorous action by the State, necessitating a rethink of tax policy based on relevant strategic axes. JEL classification numbers: E62, G28, H21 Keywords: Economic growth, Government, Taxation, Tax pressure, Tax reform.