Does Financial Inclusion Create Tax Revenue for the Government? A Panel Study on Developing Countries

Abstract

Financial inclusion (FI) carries enormous income into the economy. This mobilization generates prospects for the governments. While it decreases exploitive informal credit sources, it increases the documented economy as FI of the people augments. With the growth in formal sector it may lead to an increase in the tax contributions. This research aims to analyse the impact of FI on governmental tax revenue (TR). We make a model based on 19 developing countries in which we use a sample from 2004 to 2020. We intend to see the impact on TR by FI, FDI, Saving and GDP, Population, corruption and interest rate using co-integration technique. The result concludes that TR and FI are significantly and positively related to each other. For conclusion we also provide policy implications for FI as it plays a key tool to enhance TR, improves welfare and development, reduces poverty and increases macroeconomics stability.