Sectoral GDP and Tax Revenue: a Panel Data Analysis

Abstract

To analyze tax revenue from its relationship with the sectoral gross domestic product (GDP) becomes essential. Sectoral GDP plays a role in achieving sectoral tax revenue and, in turn, obtaining tax revenue in total. This paper aims to reveal this relationship using empirical evidence. Using a dataset from 34 provinces in Indonesia, the researchers found that industrial, mining, accommodation, and financial sectors positively correlated with tax revenue. On the other hand, agriculture, transportation, and communication correlated negatively with tax revenue. These results have a meaningful implication for the government, particularly for the Directorate General of Taxes (DGT). DGT may apply this result to predict and to establish strategy to boost tax revenue based on the sectoral GDP.