Optimal Threshold Taxation : An Empirical Investigation for Developing Economies

In this study we empirically assess both linear and nonlinear relationships between the total tax burden and several tax items with real per capita GDP growth rates for 41 developing countries between 1990 and 2019. We use panel data techniques to evaluate the effects of taxation, as a percentage of GDP, on economic growth for both short and long run perspectives, and to find threshold values for different types of taxes. Besides contributing with previous evidence on the linear effects, our results support the existence of nonlinearities and motivate policies focused on raising certain tax revenues without hindering economic growth