Abstract

Objectives: This study examines the impact of sales tax on economic growth in Jordan during the period 1994-2019, testing the hypothesis of the relationship between sales tax proceeds and economic growth. Methods: Based on the theory of co- integration, three types of statistical methodologies were used: bounds testing, multivariate error correction model, autoregressive distributed lag model (ARDL) and dynamic least squares (DOLS). As a result of structural changes in the Jordanian economy, time series techniques were applied that take into account structural lags. Results: This study has reached some results among them are that: sales tax played a positive role in economic growth and leadership, achieving an increase in long-term growth of 0.35-40% because sales tax proceeds are a reflection of government spending, as they caused a rapid expansion in government expenditures and government expenditures depend on tax revenues, especially sales tax, which approached 50% of them. The short-term results using the ARDL methodology also showed that the process of correcting the long-run relationship between sales tax revenue and economic growth corrected 56.4% of the current year's imbalance from the previous year's equilibrium path. Conclusion: Based on these findings, this study has suggested several recommendations such as it may be wise to enhance economic growth in Jordan by encouraging investment rather than taxes in general.