Fiscal Reform as a Structural Driver: Assessing Tax Structures and Economic Growth in North Macedonia
Fiscal Reform as a Structural Driver: Assessing Tax Structures and Economic Growth in North Macedonia

Summary/Abstract: Fiscal sustainability remains a cornerstone of structural reform for transitional economies in the Western Balkans. This study evaluates the impact of direct and indirect taxation on the economic growth of North Macedonia using quarterly data from 2010Q1 to 2023Q4. Employing a Vector Autoregression (VAR) framework and Ordinary Least Squares (OLS) regression, the research identifies the distinct economic outcomes associated with varying tax structures. The findings reveal that while both direct and indirect taxes influence growth, North Macedonia’s path to sustainable social and economic development is increasingly dependent on the transition toward progressive direct taxation. The comparative analysis with neighbouring Western Balkan states highlights North Macedonia's unique fiscal position and provides a roadmap for policy reforms aimed at reducing income inequality while maintaining financial resilience. This study offers critical evidence for policymakers tasked with modernizing fiscal architectures in emerging markets.

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