Impact of raising tax rates in GDP growth: The case of Nepal
This study is an effort to examine whether there is a potential of variations in tax efforts of different types in making a positive impact on economic growth in a typical developing economy. We take the case of Nepal and analyse 44 years (1975-2018) of time series data of growth and fiscal variables. We conclude that Nepal has already reached its optimal tax GDP ratio. Additional efforts to collect more tax revenue are counter-productive; rather, it should take some other structural measures for higher GDP growth. Implementation of several scenarios of revenue replacement does not have a significant positive impact on GDP; however, minimising the contribution by excise duties but replacing its contribution by income tax has minimal positive impact on GDP. It refers to the need to protect Nepalese infant industries at this juncture of the fiscal-growth discourse of this small developing economy.