Tax Burden and Economic Performance: Does the Taxpayer Impact a Country’s Economic Performance?

Abstract

Many studies examine the effects of tax policy on economic performance, as a main factor that influences private consumption and corporate investment. Many focus on the general tax level imposed by governments on their households, or enterprise, establishing a distinction between said “liberal” countries, which believe in the market autoregulating itself and state intervention to be as limited as possible, including via tax levers, and more “socialist” or welfare states which, on the contrary, believe in a beneficial state intervention which must be financed through a higher level of tax. However, only a few researchers have gone beyond the level of tax and looked into the figure of the taxpayer: indeed, at comparable general tax levels, one can find countries where taxes are almost entirely borne by households, while in others, taxes are borne by corporate companies. Using data from the OECD database, 2019 edition, this thesis finds that, in economies open to international competition, and at comparable tax levels, imposing tax on companies rather than households seems to have a negative impact on national economic performance. This finding is in congruence with empirical research and might be beneficial when analyzing how countries fix their tax policy, a highly political choice which goes beyond the traditional segmentation between liberals and welfare states.