| Abstract [eng] |
This article in the statistical analysis of possible cointegration relationships among the variables from expenditure approach to GDP formula explains how taxes affect consumption to income ratio. Causal relationship, that defines investment as the leading factor in GDP formation, was rearranged and applied for the study of taxation effects, under various income levels. The technique, that was used for the es-timation of taxation effects was based on the deterministic part of causal relationship, though the inter-pretation of the results must be very careful. This analysis demonstrates that, taken to the extreme, higher taxes have a huge negative effect on consumption and very small effect on savings, in addition to, these effects depend on the level of income. The higher the incomes are, the more deteriorating ef-fects of taxes on consumption can be observed, therefore economy cannot afford high levels of taxes, even when income level is also high. As taxes have negative effects on consumption and with lesser extent on savings, tax based fiscal consolidation has to be avoided at any cost and governments should rely on tax based fiscal consolidation only if no other option is available. |
