Determinant of Tax Revenue in Tanzania (1997- 2014)
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ABSTRACT: The aim of the study was to investigate the determinants of tax revenue in Tanzania. The study employed only secondary data which covered the period of 18 years (1997/98-2014/15).Currently, Tanzanian total tax revenue is collected under TRA’s three department namely, domestic revenue (direct tax and VAT), Customs and Excise, and Large taxpayers department. Therefore, the total of four regressions analysis were run; three to investigate the determinants of tax revenue collected under each department and one for the determinants of total tax revenue. The total of ten variables which are GDP, inflation, agriculture, industry, service, manufacturing, FDI inflows, trade openness, urbanization, and official exchange rate were used as independent variables. The variable which stood as a dependent variable was the ratio of tax revenue to GDP. Data used were collected from the World Bank’s and TRA’s website. Data were analyzed using SPSS software and multiple regression models were used to estimate the relationships which exist between dependent and independent variables. The findings revealed that, two variables which are urbanization, and service are positive statistically significant influencing domestic revenue, revenue collected from large taxpayers, and total tax revenue. The findings also show that, urbanization is positive statistically significant influencing custom and excise revenue while official exchange rate is negative statistically significant influencing the same. Other variables which are GDP, inflation, agriculture, industry, manufacturing, FDI inflows, and trade openness were found to be statistically insignificant influencing tax revenue. This study provides new additional information about the determinants of tax revenue in Tanzania which can be very useful to policy makers in the future.