Effect of Tax on Economic Growth of Sub-Saharan African Countries: A Comparative Empirical Survey

This study investigates the impact of taxation on the economic growth of developing countries from 1990 to 2024. A total of 33 countries were purposively selected based on data availability and grouped into three regions—Africa, Asia, and Latin America—following the United Nations classification. Taxation, measured by total tax revenue, served as the independent variable, while economic growth was proxied by Gross Domestic Product (GDP), per capita income, foreign direct investment (FDI), and money supply. The study employed descriptive statistics, panel data regression, unit root tests, Wald tests, serial correlation LM tests, and Granger causality analysis using E-Views 9 software. The findings reveal that tax revenue has a statistically significant effect on all selected economic indicators. Taxation positively influences GDP, with the strongest effect observed in Asia, followed by Africa and Latin America. Similarly, tax revenue significantly impacts per capita income across the regions. However, taxation shows a negative relationship with FDI, indicating that higher taxes may discourage foreign investment unless supported by favorable fiscal policies. The regional analysis confirms this inverse effect across all three regions. In contrast, tax revenue positively affects money supply, with the strongest impact in Africa. Overall, the study concludes that taxation plays a crucial role in shaping economic growth in developing countries. It recommends that governments strengthen tax systems and institutional frameworks, align tax policies with income levels to reduce burdens, design investor-friendly tax policies to attract FDI, and carefully manage tax-induced money supply to avoid inflationary pressures.