International Journal of Scientific & Engineering Research Volume 10, Issue 3, March-2019 415 ISSN 2229-5518 IJSER © 2019 http://www.ijser.org Relationship between tax revenues and economic growth in Bangladesh Nasrin Islam (Corresponding Author), zinchuri@gmail.com Lecturer, Department of Economics Varendra University, 529/1, Kazla, Motihar, Rajshahi, Bangladesh. Abstract The relationship between economic growth and tax revenues is a debate that has existed for a long time in the living history. The discussion on the two variables has exhibit contentions from academicians and policy makers with one school holding on the view that taxation is bad for the economy while the other school believe that taxation is good for the economy. Valuable empirical literature exists that studies the relationship between economic growth and tax revenues though most of them analyze the variable at cross - country level. However, not much literature exists exploring the relationship between the two variables at country specific level. The object in this study was thus to fill in the literature gap in country specific studies by exploring the relationship between economic growth and tax revenues in Bangladesh and also determining causation between the variables. Two approaches were utilized to accomplish the study objective. The first method involved a classical linear regression model. The second method used cointegration test. The results of the study revealed a positive relationship between economic growth and tax revenues. In addition, the government should utilize the positive relationship between tax and economic growth to realize efficient government investment expenditure that spars growth in turn boosting the revenue levels. Keywords: Economic growth, Tax revenue, classical linear regression, cointegration test, investment. Introduction One of the central questions in macroeconomics and public finance is how changes in tax policy affect economic activity and social welfare. In theory, it is usually considered that taxes are in a negative correlation with growth - so higher taxes mean lower growth rates of economy. This is explained with the fact that taxes introduce distortions to economy, that is, they do not have neutral effect on the behavior of individuals. All taxes except lump sum tax IJSER