Growth Effects of Tax Structure: Evidence from Kosovo
Growth Effects of Tax Structure: Evidence from Kosovo

Summary/Abstract: Designing an optimal tax system and ensuring its continuous advancement for Kosovo as a country with a low level of economic development is vitally important for the sustainability of public finances and other economic outflows. Viewed in the long run, the structure of the tax system should compose tax rates that are in harmony with the level of economic development and social welfare in general. Only such a tax system would enable the effective realization of macroeconomic policy objectives, such as economic growth and social welfare. The purpose of this paper is to study the impact of tax structure on Kosovo's economic growth for the period 2004-2017. To measure this impact, the Ganger test was used, and with the ADF test we analyzed whether the variables were stationary. Regression analysis is also used to assess whether there is a statistically significant relationship between tax structure and economic growth. From the results we can conclude that out of the taxes analyzed, Value Added Tax (VAT) and Personal Income Tax (PIT) are significant and have a positive impact on economic growth in Kosovo.

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