The Simultaneous Equation among Tax Revenue, Economic Growth, and Foreign Direct Investment (FDI) in Indonesia using Two-Stage Least Square (TSLS)

Abstract

— Tax revenue is the primary source of state revenue that is used to finance a productive activity or
project, then it will affect the economic growth of a country. Tax revenue can be seen from several economic
perspectives, based on a macroeconomic perspective, tax revenue can be obtained from export and import,
foreign direct investment (FDI) and gross domestic product (GDP). Foreign direct investment (FDI) has a big
role in complementing domestic investment needs due to an increase in state tax revenue through FDI with
the increasing number of projects with direct investment from foreign countries that can increase economic
growth. This study uses secondary data that focus on 2014 until 2019 time series data using the Two-Stage
Least Square (TSLS) method with the Eviews version 9 application. Based on the analysis results, tax revenue
and Foreign Direct Investment (FDI) has a significant effect on economic growth in Indonesia and economic
growth has a significant effect on tax revenue, while Foreign Direct Investment (FDI) has no significant effect
on tax revenue.