ANALYSIS OF THE RELATIONSHIP BETWEEN ECONOMIC GROWTH, INFLATION, FOREIGN INVESTMENT, AND GOVERNMENT SPENDING ON TAX REVENUE IN INDONESIA 1972-2022
DOI:
https://doi.org/10.65886/ijde.v1i3.50Keywords:
Tax Revenue, Economic Growth, Inflation, Foreign Direct Investment, Government SpendingAbstract
This study aims to analyze the effect of economic growth, inflation, foreign direct investment (FDI), and government spending on tax revenues in Indonesia in the long term during the period 1972–2022. The main problem studied is the extent to which the four macroeconomic indicators affect the performance of state tax revenues. Although a number of previous studies have highlighted these variables, most are limited to short observation periods, do not combine all variables simultaneously, or focus on cross-country contexts so that they do not reflect the dynamics of the Indonesian economy as a whole. This study fills this gap by using quantitative methods through multiple linear regression and time-series data processed using STATA software. The results of the analysis show that economic growth, inflation, and government spending have a positive and significant effect on tax revenues, while FDI has a negative and significant effect, which is thought to be caused by the tax incentive policy given to foreign investors. The regression model used has met most of the classical assumption tests such as multicollinearity and heteroscedasticity, although there are indications of autocorrelation. The coefficient of determination (R²) value of 0.575 indicates that around 57.5% of the variation in tax revenue can be explained by the four independent variables. This finding provides important implications for the formulation of fiscal policy in Indonesia, namely the need for a balanced economic development strategy between expanding the tax base, managing inflation, the effectiveness of state spending, and periodic evaluation of foreign investment incentives in order to maintain the sustainability of state revenue from the taxation sector.
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