LBEF RESEARCH JOURNAL OF SCIENCE, TECHNOLOGY AND MANAGEMENT(LRJSTM)

Author(s):Rohit Shrestha, Dr. Sandeep Kautish

Abstract:Economies with large public sectors grow slowly because of large tax wedges but a lack of growth-enhancing government initiatives may stymie growth in countries with very small governments. Governments need to perform various functions in the field of political, social and economic activities to maximize social and economic welfare. Government revenue impacts economic growth through meeting the various governmental needs. Though all taxes have disincentive effects, taxes that reduce incentives to invest in human or physical capital and innovation are particularly damaging. This study was therefore poised to empirically examine the impact of government revenues and economic growth in Nepal of last five years for the period between FY 2070/71 and FY 2074/75 by employing Economic Growth (EGR) as the dependent variable and Direct Tax Revenues (DTX), Indirect Tax Revenues (ITX) and Non-Tax Revenue (NTX) as the independent variables. The study adopted a mixed approach for the research. The study used secondary data collected from the annual reports published by Inland Revenue Department of Nepal (IRD), Ministry of Finance and World Bank reports. The study also conducted interviews with tax experts and government officials to get further detail knowledge about impact of different types of government revenue on economic growth of Nepal. Collected data was presented using tables and figures. The collected data were analyzed through correlation analysis and regression analysis. The study concludes that there is positive relationship between different types of government revenues and the economic growth. However, indirect tax revenue and non-tax revenue positively significantly impact economic growth while impact of direct tax revenue on economic growth is insignificant. Regarding economic growth, the study concludes that there has been an increase in the economic growth in Nepal over the years. However, the study concludes that the rate of economic has been gradual.

Keyword(s):Government Revenue, Economic Growth, Indirect Tax, Direct Tax, Non-Tax, GDP, Ability to Pay Theory