The Role Of Taxes In The Indonesian Economy

Abstract

This study tries to look into the connection between economic growth and, taxes, and government spending to understand the role of taxes in the Indonesian economy. The World Bank provides secondary data that we use, by investigating state revenues from taxes, government spending, and economic growth to look into how taxes affect economic growth. We use annual research data from 2000 to 2020. We use vector analysis in this study. We found that economic growth, taxes, and government spending significantly influence and support each other. This shows that taxes depend on economic growth where the higher the economic growth in Indonesia, the higher the potential tax revenue as state revenue. The higher the state revenue from taxes, the greater the government expenditure for economic development in Indonesia. The higher the economic development in Indonesia through government expenditure, the higher the economic growth in Indonesia.