Examining the share and effects of tax revenues in the budget of developed and developing countries

Taxes are one of the major revenue for a country in where taxes are collected from citizens, companies, investors and so on to generate economy. There have several impacts of taxes due to economic growth whether it is positive or negative impacts. taxes refer to the revenue that is collected by the government to provide services and finance themselves. Usually, if the country faces the economic crisis, the government will try to recover the problem using monetary or fiscal policy. In fiscal policy, the government will use either taxes or government spending based on the problem. Developing countries attempting to become fully integrated in the world economy will probably need a higher tax level if they are to pursue a government role closer to that of industrial countries, which, on average, enjoy twice the tax revenue. Developing countries will need to sharply reduce their reliance on foreign trade taxes, without at the same time creating economic disincentives, especially in raising more revenue from personal income tax. To meet these challenges, policymakers in these countries will have to get their policy priorities right and have the political will to implement the necessary reforms. Tax administrations must be strengthened to accompany the needed policy changes. personal income taxes have been contributing very little to total tax revenue in many developing countries. Apart from structural, political, and administrative considerations, the ease with which income received by individuals can be invested abroad significantly contributes to this outcome. Taxing this income is therefore a daunting challenge for developing countries. These results indicated that the tax structure in developing countries does not enhance the countries’ economic growth. By contrast, for developed countries, a significant positive relationship exists between direct taxes and economic development.