THE LINKED BETWEEN TAX STRUCTURE AND ECONOMIC GROWTH IN VIETNAM

Abstract

Using annual data from 1990 to 2022, this study examines the relationship of tax structure and economic growth in Vietnam. Data was collected from the General Statistics Office of Vietnam, Ministry of Finance, and the State Bank of Vietnam in order to conduct the analyses. To limit issues of bias and to observe the long-run and short-run relationship between the components of taxes and economic growth, Johansen cointegration and the error correction mechanism were used. The results suggest Petroleum Income Tax and Corporate Income Tax have a statistically significant positive effect whereas Personal Income Tax, Customs Duties and Excise Taxes were less favorable for growth. Overall, these results demonstrate a heterogeneous growth effect of different tax instruments. From a policy standpoint, this research indicates Vietnam should investigate changes to its revenue system structure, reducing reliance on distortive taxes, such as personal income tax and trade-related taxes, and strengthening the role of growth-enhancing taxes, including petroleum income tax and corporate income tax. Additionally, improving tax administration and tackling issues of tax evasion of corporate and value-added tax will be essential for achieving stable revenue and sustainable growth. Overall, this study contributes to the literature by providing disaggregated empirical evidence of the taxation--growth nexus within the context of a transition economy.