Empirical Analyses of Tax Base Erosion and Economic Growth: Evidence in China, 1990-2018

Abstract

Dixon [1] defines subterranean economy(SE) as a mixture of nonmarket economic activities, including home production, prohibited production and distribution of proscribed substances and legal market activities that are concealed for reasons such as tax-evasion.  Whilst the existence of SE in most countries. Up to now there are lack of consensus on the appropriate methodology for estimating its turning point. This paper seeks to shorten this gap by using Kuznets approach to analyze this results. We take China as a study case and incorporate some relevant parameters such as GDP, money supply, tax burden ratio to capture all potential dependent variable responses to relevant independent variables change, and further explore whether there exists inverse-U shaped or Kuznets curve (KC) relation between GDP and total tax revenue.