Revisiting the determinants of tax revenue: an integrative model with conventional, economic policy and institutional factors

Purpose The Indian government is grappling in generating sufficient revenue resources through taxation to meet their expenditure on public goods and services. Therefore, the government authorities must possess adequate information on factors affecting the taxation revenue of the country to craft and execute policies effectively. Hence, this study endeavors to explore the determinants of tax revenue by incorporating conventional, economic policy and institutional factors. Design/methodology/approach The study employed the Auto Regressive Distributed Lag (ARDL) modeling by using the data set from 1991 to 2022 according to the availability of the data. Findings The findings illustrate that trade openness, life expectancy, value added by the manufacturing sector and per capita GDP (Gross domestic Product) positively affect the tax efforts of the government in the conventional determinants. Similarly, in economic policy factors, the financial deepening also exhibits a favorable effect. Conversely, the inflation rate positively boosts the tax efforts in the short run, but it ultimately erodes the tax effort of the government in the long run. In the institutional factors, the official development assistance also illustrates a positive effect. Practical implications The findings assert that the Indian government should devise better macro-economic and foreign trade policies with expediting the economic restructuring and bolstering their ability to manage and utilize the foreign aid assistance to boost the tax revenue of the country. Originality/value To the authors’ knowledge, this is the first study to incorporate these factors in the Indian context. Peer review The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-04-2024-0314