Economic growth and taxation in Colombia

Abstract

The purpose of this research is to analyze the impact of indirect value-added tax and direct income tax on economic growth in Colombia from 1970 to 2023. To carry out this study, we use an endogenous economic growth model that includes consumption and corporate profit taxes. As an empirical strategy, we use Johansen's (1995) cointegration methodology, which focuses on the estimation of a vector error correction model. The main results reveal that an increase in direct tax collection positively correlates with higher economic growth. On the other hand, it is observed that an increase in indirect tax collection causes a decrease in economic expansion. This suggests caution if tax collection is to be increased.

Keywords

• Taxation
• Economic Growth
• Econometrics