The Role of Tax Revenues in Stimulating Economic Growth in Emerging Economies and their Impact on the Development of the Financial Sector

Abstract

The research explores the complicated and dynamic link between tax revenues, financial development (FD), and economic growth (EG) in rising countries like the BRICS. The research uses second-generation panel econometric techniques using a sample from 2010 to 2024. The BRICS nations show high CSD and slope heterogeneity, according to the preliminary dataset. Panel unit root tests show that most variables are I(1) while economic growth (EG) is I(0). Panel co-integration experiments (Kao, Pedroni, and Westerlund) showed a strong long-run connection between these variables. Regression analysis (Fixed Effect and FGLS) shows that tax income positively and statistically significantly affects financial development. Tax revenue boosts economic development. Positive control elements were FDI and trade openness, whereas negative control elements were inflation in financial development and economic growth. BRICS policymakers need these findings to understand that an effective and strong tax framework boosts government revenue and financial sector stability and depth, which are necessary for long-term economic success. The research adds to the field by examining taxes and financial growth in developing countries.