Measuring the Impact of Taxes and Fees on Economic Growth in the Kingdom of Saudi Arabia. An Applied Study
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Abstract
This study aimed to measure the impact of taxes and fees on economic growth in the Kingdom of Saudi Arabia and to examine the long-term relationship between non-oil government revenues and GDP. The researchers employed a comprehensive analytical methodology, including the Johansen cointegration test, unit root tests, and threshold regression analysis. The results indicated the existence of a long-term equilibrium relationship between taxes and economic growth, showing that increases in non-oil revenues are associated with higher GDP. The threshold regression model identified two governing regimes for this relationship:
Regime 1: When revenues are below the threshold of 11.04, a 1% increase in taxes leads to a 0.17% increase in GDP. Regime 2: When revenues exceed the threshold of 11.04, the same 1% increase in taxes results in a 0.23% rise in GDP. These findings suggest that taxes and fees positively contribute to economic growth, with the model explaining 82.5% of the variation. Based on these results, the study recommends increasing taxes on non-essential goods while directing the additional revenues toward government investment expenditure to promote sustainable economic development.
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Taxes, fees, GDP, Laffer curve, Threshold Regression
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