Abstract

Traditional schools of thought advocated the theory of low income tax rates’ influencing economic development, whereas modern schools of thought propagated the theory of higher income tax rates producing greater economic growth, especially for developed nations. In order to justify these thoughts an attempt was made taking Botswana as a case study to pin point the effect of low and high income tax rates on economic growth. In this study various parameters were taken into account including income tax rates, income tax revenue, total revenue and GDP of the country in the nominal and real value of the money. It was located that low income tax rates boosted the economic growth of Botswana.

Key words: Income tax rates, economic development, nominal, real value of money.