Tax Buoyancy, Imports, And The Service Sector: How Does Regulatory Quality Moderate These Relationships?

Abstract

One way to measure the effectiveness of the tax system is through tax buoyancy, which refers to the total response of tax revenue to changes in national income. Therefore, this research aims to determine the simultaneous and partial effects of the service sector and imports on tax buoyancy in Asia-Pacific countries, using Regulatory Quality as a moderator. The study adopts a quantitative descriptive method with panel data regression analysis. The econometric model is estimated using the Random Effect Model (REM). The research findings indicate that the service sector and imports, as well as the moderated interaction between the service sector and imports, have a significant influence on tax buoyancy in the Asia-Pacific region. Partially, the study reveals that the service sector has a positive and significant impact on tax buoyancy, while Regulatory Quality and the import sector do not affect tax buoyancy. Moreover, Regulatory Quality weakens the positive relationship between the service sector and tax buoyancy and it also weakens the negative relationship between the import sector and tax buoyancy. Based on these findings, governments should formulate comprehensive economic and fiscal policies that integrate various sectors to enhance tax buoyancy and strengthen the tax base in Asia-Pacific countries.