Influence of Taxation on Economic Growth

This study examines the effect of corporate taxation on economic growth, a topic that has yielded varied conclusions in empirical research. Reductions in tax rates can sometimes increase, decrease, or have no significant impact on growth. The objective of this article is to analyze the role of taxation in economic growth using the ARDL model. To achieve this, we conducted an analysis covering the period 2000-2020, encompassing 38 OECD countries. Our findings reveal that taxes have a positive effect on the economy as long as the tax rate remains below a critical threshold. However, if this threshold is surpassed, fiscal policy has a negative impact on economic growth. This observation underscores the importance of striking a delicate balance in fiscal policy, highlighting the intricate influence of taxation on economic growth. Our analysis provides a nuanced perspective on the relationship between corporate taxation and growth, offering crucial insights for policymakers and economists.