Artificial intelligence's (AI's) role in enhancing tax revenue, institutional quality, and economic growth in selected BRICS-plus countries

Abstract

The BRICS countries, comprising Brazil, Russia, India, China, and South Africa, aim to achieve United Nations Sustainable Development Goal 8, which emphasizes sustainable economic growth. This study adds to the empirical literature by examining the impact of tax revenue and institutional quality on economic growth, incorporating the role of artificial intelligence (AI) in selected BRICS-Plus countries (the above-mentioned five countries) from 2012 to 2022. Utilizing the innovative Cross-Sectional Augmented Autoregressive Distributed Lag estimation technique, the analysis reveals a long-run equilibrium relationship among the variables. The study employs a modified Cobb–Douglas production function for its theoretical framework. The results indicate bidirectional causality between tax revenue and AI, economic growth and institutional quality, as well as institutional quality and tax revenue. Based on these findings, the study recommends that BRICS governments and policymakers enhance the integration of AI into tax systems to promote growth in both the short and long terms. However, it also advises caution regarding the interaction between AI and institutional quality, which did not support economic growth. While the AI and tax revenue interaction shows promise for fostering growth, robust measures are necessary to mitigate potential negative effects from AI’s interaction with institutional quality. Consequently, the study advocates for the development of AI-friendly institutional policies in BRICS countries, considering the dynamic and rapidly evolving AI sector.