Unraveling the Nexus between Financial Inclusion and Tax Revenue: Insights from Global Findex Survey

The research paper endeavors to explore the relationship between tax yield and financial inclusion utilizing panel data spanning four years: 2011, 2014, 2017, and 2021. Employing a Fixed Effect Panel Model, the empirical analysis showcases a significant positive impact of financial inclusion on tax income. The study’s robustness is evident across tax revenue proxies, including direct and indirect tax revenues. Among the seven control variables examined, population, industry, trade, and employment exhibit noteworthy associations with tax revenue. Particularly, the trade demonstrates a notably beneficial effect on tax revenue. However, a negative relationship is observed when considering indirect taxes. This research underscores financial inclusion as a pivotal driver of tax revenue, suggesting that governments and policymakers can bolster tax revenue by prioritizing and augmenting financial inclusion initiatives within their respective economies. More tax collection can empower the government to foster development and provide a better quality of life to their citizens. Our empirical research utilized extensive data of all countries together sourced from global findex database. Future studies can measure the connection between tax income and financial inclusion by focusing on some regional classification and comparing highly and poorly developed nations.