Logo
Munich Personal RePEc Archive

Which type of government revenue leads government expenditure?

Abdi, Zeinab and Masih, Mansur (2014): Which type of government revenue leads government expenditure?

[thumbnail of MPRA_paper_62367.pdf]
Preview
PDF
MPRA_paper_62367.pdf

Download (819kB) | Preview

Abstract

This Malaysia is a developing Islamic state that faced government budget deficit since 1998. It is undeniable that a budget deficit or inability to cover government spending is not positively seen by external parties. The optimum level of government budget is the state where government spending is totally offset by government revenue and that can be achieved through an increase in tax revenue or decrease in spending. The paper aims to discover the existence of a theoretical relationship between government spending and the different types of government revenues namely direct and indirect taxes and non-tax revenues. Furthermore, the paper tries to find out which of the different government revenues leads government spending. As well as to discover each revenue structure relationship with government spending using sample data from Malaysia for the period of 1970-2013 and time series techniques. The paper found out that although majority of government revenue is from direct tax revenue, the government spending only varies due to a change in indirect government tax revenue and non-tax revenue. In addition, it discovered that there is a long run relationship between the variables and that direct tax and government spending are endogenous (follower) variables, while non-tax revenue and indirect tax are exogenous (leader) variables. The paper also discussed the necessity of tax reform in Malaysia, since inefficiency in direct tax revenue leads to a dependence on non-tax revenue and regressive indirect taxes.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.