State needs financial resources to implement its functions fully and successfully. Expansion of economic and social functions of the state raised the importance of government revenue. The main sources of government revenue of every state are taxes. In this study analyzed causal relationship between taxes (direct and indirect taxes) and economic growth in Kyrgyzstan. For this purpose Granger Causality test and VAR analysis were applied by using quarterly data from 1995 to 2014. Research results showed that there is a negative relationship between direct taxes and GDP. Also it revealed negative relationship between direct taxes and indirect taxes. However the positive causal relationship was detected between GDP and indirect tax revenues.
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