Net Tax as a Driver to Tackle the Negative Impact of Capital Income Tax on Economic Growth: A Dynamic CGE Analysis of CEMAC Countries

While theoretical studies suggest that capital income tax (CIT) has positive effects on economic growth, empirical research yields mixed results. This study aims to bridge the gap in existing literature by investigating the role of net taxes in explaining the impact of CIT on economic growth, focusing on the Central African Economic and Monetary Community (CEMAC) countries. Using a recursive dynamic computable general equilibrium (CGE) model and 2015 social accounting matrices (SAMs), simulations are conducted for the period 2023-2030. The findings reveal that most CEMAC countries experience a positive impact from indirect tax on commodities, but only Chad and Gabon exhibit positive effects from CIT. Notably, these countries have negative net taxes, leading to public deficits, which are offset by increases in CIT. The results highlight the potential for targeted investments in key sectors to leverage the positive impact of net tax on economic growth. Therefore, policymakers should consider granting more subsidies to firms to boost productivity and drive higher economic growth.