STOCK MARKET AND TAX REVENUE COLLECTION IN MALAYSIA: EVIDENCE FROM COINTEGRATION AND CAUSALITY TESTS

This study empirically examined the relationship between stock market performance and taxation in Malaysia over the period 1980 to 2008. The Gregory Hansen methodology was utilized to examine which tax collected by Malaysia’s Government most impacted stock market performance in Malaysia. The results show that stock market performance contributes most to the changes in company tax revenue as compared to personal taxes and real property gain taxes. In addition, the analysis detects a significance break, which impacts the nature of the relationship between variables. This finding indicates that stock market performance in Malaysia was influenced by strong growth of company tax revenue collection. Thus, fiscal policy authorities in Malaysia should enhance efforts to promote stock market activities, which will subsequently increase the tax revenue collection.