Abstract
Inflation is taken as a secret form of taxing people, thus in literature it is also known as an
indirect form of tax. This has been tested by using the secondary data since 1975 to 2010 on
government tax revenue (GTAX) and national consumer price index (NCPI) of Nepal. Initially,
ADF test, then Granger Causality and finally OLS has been conducted. Granger Causality has
suggested that NCPI causes GTAX which helped later to consider NCPI as an independent
variable and GTAX as a dependent variable. After conducting OLS test it is found that NCPI
impacts GTAX directly.
Key Words: Inflation, Tax, Granger Causality and OLS.
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