Assessing The Relationship Between Taxation Policies and Economic Growth: A Case Study of Botswana 2008-2019

Abstract – The efficacy of fiscal policy in determining economic growth and development can be assumed to be determined by tax administration, tax policies, tax efficiency, and tax levels. Using quarterly data, this study investigates the relationship between Botswana’s tax system and economic growth between January 2008 and December 2019. Multivariate regression analysis was used to investigate the relationship between various forms of taxation and Botswana GDP on a quarterly basis from January 2008 to December 2019. The research employed a multivariate regression model with Botswana’s GDP as the dependent variable while explanatory variables were; income tax (Ytax), customs tax (custax), minerals tax (min tax), export tax (xtax), property tax (protax), vehicle tax (vehtax), license tax (Litax), and VAT (Vtax). Findings revealed a weak positive relationship between all forms of taxation and Botswana’s GDP. These findings indicate that the Botswana government provides a wide range of services, including health, education, security and defense, social services, and many others. The government heavily subsidizes food and transportation. Thus, citizens in Botswana trust their government to provide basic necessities of life. The study’s findings indicate that all forms of taxation in Botswana have a weak positive relationship with GDP. As a result, direct links between taxpayers and the government should be strengthened. In this regard, it means that tax payers should be given opportunities to express their views on how they perceive the benefits of the funds they contribute to their economy through taxation. Basing on coefficient estimates, lowering the corporate tax rate by ten percentage points can raise the real annual per capita growth rate by 1.1 to 1.8 percentage points. Given an adjusted R2 of 0.89 and a statistical probability of less than 0.05 at the 5% level of test, it appears that a strong relationship exists between GDP and various forms of taxation. Tax policies, efficiency, and administration all point to a shaky relationship between economic growth and tax systems. As a result, Botswana’s fiscal policies are regarded as a poor economic policy for boosting economic growth.

Keywords: economic growth, GDP, taxation, income tax, customs tax, minerals tax, export tax, property tax, vehicle tax, license tax, and VAT

[Cite as: Dzingai, M. E., Musiiwa, R., Chinorwadza, T., & Machete, J. (2023). Assessing The Relationship Between Taxation Policies and Economic Growth: A Case Study of Botswana 2008-2019. Diverse Journal of Multidisciplinary Research, Vol. 5, Issue 2, Pages 1-10.]

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