Building a sustainable future through taxation: Examining the effect of taxation on the achievement of sustainable development goals (SDGs) in developed and developing countries in Asia and Europe

With novel literature recognizing the significant role of taxation in achieving the Sustainable Development Goals (SDGs), policymakers have hitherto been involved in the mobilization of tax reforms and measures to influence the spheres of sustainable development. Although developed and developing countries have been engaged in the agenda for sustainable development, these countries experience economic differences that influence their capacity to tax. In this regard, the study considers the perspectives of developed and developing countries within Asia and Europe as meaningful points of comparison. The study employed a quantitative approach through econometric models to articulate the effect of corporate, personal, sales, and combined effects of tax rates on the SDGs. Such tax rates were measured through the highest statutory rate and the average tax rate (represented by the tax index). The overall scope comprised 34 European and Asian countries from 2000-2020. In this regard, the findings of the study indicate that the mentioned tax rates have a significant relationship toward the achievement of the SDGs, with varying implications for developed and developing nations. The SDG index in developed countries notably has a negative relationship with direct taxes (corporate and personal) and a positive relationship with indirect taxes (sales). Conversely, the SDG index in developing countries has a positive relationship with direct taxes but a negative one with indirect taxes. However, the combined effect (when implemented simultaneously) may result in different findings. Overall, given these results, the study aims to improve the ongoing dialogue on the impact of taxation on SDGs and provides recommendations to stakeholders for future developments in their respective fields.