The Effect of Tax Complexity on Economic Growth: A Dynamic Panel Data Model for Selected Developed Countries

One of the most important concerns of economists is identification of the economic growth determinants. Meanwhile, institutional factors are of important ones. This paper aims to empirically investigate the effect of tax complexity, as a determinant institutional factor of economic growth in 42 relatively developed economies during 2008-2016. The tax complexity variables include: the time spent for payments, the number of payments, and the distance to frontier or the best tax performance, these measures data are extracted from "tax payment" report under the section of doing business that is published by the World Bank, each year. The reason for selecting more developed countries is the complexity tax data on these countries is more reliable than other countries. The findings from a dynamic panel data model using the generalized method of moments (GMM) show that tax complexity has a negative effect on the economic growth of the relatively developed countries. In other words, the more complicated tax system, the less economic growth can be observed in these countries.