Impact of FDI on Tax Revenues in Zanzibar (2001-2015)

Mohammed, Mohammed Amour (2017) Impact of FDI on Tax Revenues in Zanzibar (2001-2015). Masters thesis, The Open University of Tanzania.

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Abstract

This study attempt to find the impact of FDI on Tax revenue in Zanzibar for the period of 2001-2015. Sampling involves a process of selecting a sub-section of a population that represents the entire population in order to obtain information regarding the phenomenon of interest. Foreign direct investment, employment, social benefits and tourist arrival are used as independent variables, Tax revenues as dependent variable. Augmented Dickey-Fuller (ADF). Person unit root test are used in order to see regression models are free from spurious results. The data are tested for stationarity and they are integrated in the same order, at the second stage Johansen co integration test applied to look long run relationship. Brensch-Godfrey serial correlation LM test has been used to ensure that the result is free from autocorrelation. Data were collected and analyzed using the regression model based on ordinary least square method (OLS) after considering the above conditions. The finding indicates that an increase in FDI by one percentage or units would results to increase tax revenue collection by 0.16 dollar. The result implies that FDI has a positive and significant impact on tax revenue at the 5% level. The study comes up with recommendations that, the authorities should positively concentrate on maximum utilization of resources to increase FDI in order to increase tax base. It needs effective and encouraging policies from the public sector to restore the confidence of the investors. Government should offer Business friendly environment, improve infrastructure as it provides pace to attract huge FDI hence increase tax revenue base.

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