Does financial system activity affect tax revenue in Malaysia? Bounds testing and causality approach

► We examine the nexus between the financial system and tax revenue collection in Malaysia. ► We found that unidirectional causality running from stock market to direct tax revenue. ► The impact of the financial system on direct tax revenue is more profound in the short run than in the long run. ► Banking and non-banking financial activities play a vital role in determining direct tax revenue. ► Tax incentives contributed more towards increased revenue collection from stock market than corporate debt market.