Abstract
The optimum design of a tax structure depends on various factors that differ from region to region. This research work aims to explore the relationship between tax structure (TS) and economic growth (EG) in middle-income (MI) Asian countries. To analyze this relation empirically, panel data for the period 1990-2017 of 20 Asian countries is collected and a two-step system GMM estimation technique is applied. Moreover, the existing tax structure of middle-income Asian countries is further divided into direct and indirect taxes to study its separate as well as combine effect on EG. Findings of separate tax analysis demonstrate that payroll & workforce and GST have a positive and significant while corporate, property, and international trade taxes show a negative impact on economic growth. Furthermore, in the combined analysis, the positive effect of indirect taxes counterbalances the negative impact of direct taxes, making consumption taxes more striking as compared to income taxes. These results suggest that to accomplish optimal tax structure design, corporate and trade taxes must be discouraged in middle-income Asian economies if the objective of the countries is to achieve economic growth.