A study on the uses of taxation in developing countries

Abstract

The paper is intended to study the basic trends and the uses in the distribution of the total tax burden in the developing countries. The comparative analysis is focused on the cross-country differences in terms of total tax burden, measured by the tax-to-GDP ratio and design of tax structure, presented by the breakdown of the total tax revenues into standard components such as direct taxes, indirect taxes and social contributions. The relationship is investigated by the means of the regression analysis. The conclusion is that tax structure based on direct taxes is more efficient in terms of supporting the economic growth. Taxation is the process of a government claiming money from the general population for the purpose of using that money to run the country. Ideally, a government will only spend the amount it gains in taxation, although in the Western world it usually spends far more and runs a budget deficit.