Effect of Electronic Fiscal Device Machines on Domestic VAT Revenue in Tanzania

Zakaria, Zakayo M. (2019) Effect of Electronic Fiscal Device Machines on Domestic VAT Revenue in Tanzania. Masters thesis, The Open University of Tanzania.

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Abstract

This study aimed to investigate the effect of introducing EFD machines on domestic VAT collection in Tanzania. The study combined both quantitative and qualitative design. The quantitative part used a time series data covering the period of 20 years from 1998 to 2017 inclusive. Qualitative information involved key findings from Key Informant Interviews (KIIs) with tax-payers and tax collectors. The Descriptive analysis as well as regression analysis was used to analyze key findings of the study. Findings on the mean difference between the period before EFD and the period after EFD showed a significant effect of TZS 1,087,141 of domestic VAT per annum. The Hedge’s and granger effects size revealed an effect size of about 3% domestic VAT per annum. Further, the Johansen test for cointegration revealed both short run and long run relationship between EFD and Domestic VAT collection. Despite significant effect of EFD on domestic VAT, the study also identified some challenges of EFD which include high cost of purchase device, breakdown of the system, and personal attitude toward EFD usage, maintenance costs and fairness on tax estimation. Thus, the study recommended for the Authority (TRA) to address those challenges in cooperation with tax-payers. Since EFD has proven a significance effect on revenue collection especially VAT, it is a recommended system for tax collection.

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