Impact of Tax Reforms on Tax Revenue and Economic Growth of Tanzania Between 1996 - 2019.

Daniel, Elinaza (2021) Impact of Tax Reforms on Tax Revenue and Economic Growth of Tanzania Between 1996 - 2019. Masters thesis, The Open University of Tanzania.

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Abstract

This dissertation study assessed the impacts that tax reforms have on tax revenue and consequently the economic growth of Tanzania. The specific objectives were to examine the effect of tax reforms on tax revenue in Tanzania, to examine the effect of total tax revenue on economic growth of Tanzania, and to examine the impact of other macroeconomic variables on economic growth of Tanzania. The study used time series data of Tanzania for the period of (1986 to 2018) collected from the Bank of Tanzania, National Bureau of Statistics, Tanzania Revenue Authority and the World Bank. The study used Vector error correction model for estimation of the time series since the data was not stationery in level I (0), and there was cointegration within the variables. Several econometric tests were carried out to ensure the validity and reliability of the data as well as the general robustness of the results; they included normality test, multicollinearity, autocorrelation, heteroscedasticity and unit root tests. The study revealed annual import increase rate has a positive effect on economic growth in Tanzania both in the short-run and in long run. It was further revealed annual export increase rate has a negative effect on economic growth both in the short-run and long-run. The study revealed that annual tax revenue increase rate has a positive effect on economic growth in Tanzania both in the short-run and in long run, therefore, recommends that the government and their policy making organs should design policies that ensure higher collection of revenue by encouraging tax compliance, the study further revealed foreign direct investment to negatively affect the economic growth of Tanzania in the short-run and positively in the long-run. Keyword: Taxation, Tax Reforms, Public Spending, Foreign Direct Investment.

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