Tax instruments for Tanzania's industrialization growth
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Date
2019
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Future Academy
Abstract
Tanzanian government aims to reshape the economy into a semi-industrialized nation by 2025. As a policy measure to support this reform, the government exempted producer capital commodities from value-added tax in 2017/2018 fiscal year. This aims to foster utilization of these commodities in the manufacturing sector in order to generate economic growth, employment, and social well-being of the nation. This research examines the impact of macroeconomic fiscal instruments on the Tanzanian economy, by applying a static “Partnership for Economic Policy1-1”standard Computable General Equilibrium model. We simulate a reduction of the value-added tax rate on producer capital commodities (electricity, machinery, electrical equipment, vehicles, and other equipment) under two different government closure rules. In the first simulation, government expenditures are fixed while government savings are flexible and adjust to changes in government revenue. Results show a decline in investment expenditure following a decrease in government savings and thus a negative impact on macroeconomic indicators. In the second simulation, government savings are fixed to maintain the budget deficit. The results show a decline in real Gross Domestic Product partly because of a decrease in output in governmental, some agricultural and service sectors. Conversely, output increases for all manufacturing sectors, resulting in lower the average unemployment rate.
Description
Full text article. Also available at https://doi.org/10.15405/epsbs.2019.12.05.109
Keywords
Capital commodities, Value added tax, Macroeconomic, Macroeconomic indicators, Tanzania, Computable General Equilibrium, CGE, Industrialization, Social accounting matrix, Tax, Tanzania`s industrialization, Sustainable development, Project management, Tax instruments
Citation
Maskaeva, A., Mmasa, J., Lema, N. & Mgeni, M. (2019). Tax instruments for Tanzania's industrialization growth. In the European Proceedings of Social & Behavioural Sciences (pp. 892-900) Future Academy, Russia.