Tax revenue generation in Tanzania: implications for private domestic investment

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Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
The University of Dodoma
Abstract
The primary objective of the study is to examine at the influence of tax revenue generation on Tanzanian private domestic investment. Tanzanian taxation remains characterized by complicated tax structures that discourage private domestic investment, explaining why it has been relatively low with a mixed tendency. Tanzania has not yet played a substantial role in large-scale investment efforts, other from fiscal policy modifications. The study obtained yearly time series data from the TRA (Tanzania Revenue Authority) website and the BOT from 1998 to 2020. Initial tests are conducted for multi-collinearity, heteroscedasticity, and co-integrating vectors lag length selection and unit roots, The ECM was then used to explain the long-run and short-run associations. Previous research investigating the association between tax revenue generation and private domestic investment produced contradictory findings. As a result, the study investigates the effects of corporate income tax, value-added tax, excise tax, and import tariffs on Tanzanian private domestic investment. The results of the Error Correction Model revealed that, in the long term, corporate income tax had a positive effect on private domestic investment, but VAT had a negative effect. Furthermore, whereas import tariffs have a positive and large influence on private domestic investment in the near run, excise taxes have a negative and considerable impact. According to the study, tax revenue is vital to private domestic investment and a driver of economic growth in Tanzania. As a result, progressive tax reform and a suitable tax structure are crucial for encouraging private investment. According to the conclusions, the Tanzanian government should implement a proper corporate income tax policy. In order to boost revenue collection and stimulate investment, nations through government should also decrease VAT rates, make easy their tax systems, address any shortcomings in tax administration, and shut any tax avoidance loopholes. The government should prioritize steps addressing excise tax administration, rate changes, and expanding the excise tax base. Furthermore, the government should sustain its spread advancement package in purpose to boost domestic firms to grow their operations.
Description
Dissertation (Ma in economics)
Keywords
Tax revenue generation, Taxation, Tax structures, Private domestic investment, Tanzania
Citation
Kayange, R. M. (2023). Tax revenue generation in Tanzania: implications for private domestic investment (Master dissertation). The University of Dodoma.