DIRECT AND INDIRECT TAXES AND THEIR IMPACT ON ECONOMIC GROWTH IN ECUADOR

Abstract

Economic growth is the basis for the development of nations and represents the ability of a country to produce goods and services with given resources. This indicator is evaluated from the variation of the Gross Domestic Product. The various theories of economic growth coincide in the importance of the expectations and actions of the different economic agents to promote sustained economic development. In this, fiscal policy in general and the tax system in particular play a preponderant role. The Constitution of the Republic of Ecuador promotes the progressiveness of the tax system, however, the tax policy responds to the financing needs of public spending which, in turn, is related to the political ideology of the government of the day. The present work aimed to determine the influence of tax collection on economic growth. For this, a multiple regression econometric model with a dummy variable was proposed to collect the effects of structural changes in the series in order to avoid specification errors. The results obtained show that indirect taxes are directly related to economic growth, however, the correlation between direct taxes and economic growth is not significant for the model. These results allow to broaden the field of study of taxes, their implications on economic performance and mark the need to have a tax structure aligned with effective public policies.