Determinants of tax revenue performance in tanzania an analysis

Abstract

It s extensively believed that, the domestic tax revenue performance in the country is mostly driven by internal factors rather than external factors like foreign loans, aids and grants. Thus, assumed that, higher inventions of new reliable sources of domestic government revenue, higher significances of tax revenue performance within country. In Tanzania, there is underperformance in tax revenue collections (Table A2.1). Thus, Tanzania run deficit situation, since, government expenditures exceeds government revenue. Meaning, Tanzania depends on foreign donors and other development partners. This research focus on empirically investigating and analysing major and potential determinants of tax revenue performance influencing domestic tax revenue performance in Tanzania. It s a single-country-level time series analysis from 1992 to 2018; analyzed using E-View and S.P.S.S. Whether independent variables of tax rate (TR), ratio of trade to G.D.P (RTGDP), population (POP), tax base (TB) and control variables; influence dependent variable tax revenue performance in Tanzania TRPT. The findings reveal that, TR; RTGDP; and POP have strong long-run positive relationship with TRPT while TB have long-run negative relationship with TRPT from 1992 to 2018. But, it recommended that, 18 percent V.A.T TR shouldn't be increased, hence, remain unchanged. Also, more openness of exportation and importation of goods and services especially for major commodity groups in Tanzania, with affordable trade terms, less bureaucracy and allowing trade liberalization in Tanzanian economy. Tanzanian population should increase for coming decades so as to enhance capacity to pay and collect taxes with increasing level of population. However, increasing level of population must be accompanied with increasing individual s economic levels and their purchasing powers. On TB; it s recommended that, both taxes on import and local goods and services, taxing subsistence agricultural activities, and export taxes must be reduced significantly in Tanzania