This paper reviews how taxation policy affects long-term economic growth. Firstly, taxes are considered play an integral role in different economic instruments, like controlling and regulating with purpose of influencing the pattern of consumption, production and distribution, and yet taxes may some bad effects on economy growth in various ways. The aim of this paper is to add the debate and examine some affects with providing clear and conclusive evidences.
The paper reveals that neither the theoretical literature nor the empirical literature provides conclusive evidence of the nature of these effects. In general, the theoretical and empirical literature gives different results due to various factors such as the selection of countries' samples, the development level of countries, the period of time, the control variables included, and the methodology used. Therefore, in order to obtain more reliable results, the most advanced methods should be used in future researches.
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