TAX STRUCTURE AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM BULGARIA
Abstract
The study analyses the tax structure of Bulgaria and its relation to economic growth for the period 2003 – 2015. The results reveal that Bulgarian budget revenue mainly depends on the taxes charged on consumption. It was found that in times of economic growth tax and non-tax revenues form the necessary fiscal resources in the budget while during a crisis the revenues are insufficient, which in turn leads to the formation of a budget deficit and a subsequent increase in government debt. There are statistical arguments in support of the notion that budget revenues are inversely related to economic growth and create conditions for its reduction. Government spending has a direct proportional relation to growth and results in its increase. The econometric estimates and the interpretation of the results are calculated with the use of a multiple linear regression with an included dummy variable (OLS with a dummy variable), the Two-Stage Least Squares method (TSLS) and the Vector Autoregressive model (VAR models).
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