The Dynamic Effects of Growth, Financial Development and Trade Openness on Tax Revenue in Malaysia

  • Nanthakumar Loganathan Universiti Teknologi Malaysia
  • Norsiah Ahmad Universiti Sultan Zainal Abidin
  • Thirunaukarasu Subramaniam University of Malaya
Keywords: Economic, Growth, Financial development, Rolling windows, Taxation, Trade openness


This study explores the effects of domestic financial development, growth and trade openness on tax collection for Malaysia using the ARDL and bootstrap rolling window estimates covering the period 1970-2017. The empirical results suggest that, the presence oflong-run relationship between tax revenue and per capita GDP and short-run relationship between tax collection, economic growth, financial development and trade openness. We foundthatthere is a short-run unidirectional causality running between tax collection, economic growth and financial development. This result suggests that, in the long-run, economic performance and financial development have an adverse effect on tax collection, while trade openness has no significant causality impact on tax collection in Malaysia. Based on the empirical results of the study, the country should pay more attention to enhance the effectiveness of future public expenditure programs and put more emphasisson dynamic fiscal policy targeting on tax reform and securing new sourcesof tax revenues to ensure continuous flow of long-term tax revenue coupled with sustainable economic growth, trade and financial performances in up-coming years.


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How to Cite
Nanthakumar Loganathan, Norsiah Ahmad, & Thirunaukarasu Subramaniam. (2020). The Dynamic Effects of Growth, Financial Development and Trade Openness on Tax Revenue in Malaysia. International Journal of Business and Society, 21(1), 42-62.