Tax reform and tax revenue performance in Tanzania, 1970-2001.
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Date
2003
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Publisher
University of Dar es Salaam
Abstract
This study investigates the impact of tax reforms on tax revenue productivity in Tanzania, by estimating the buoyancy and elasticity of the overall tax system and major taxes for the period from 1970 to 2001. The hypotheses that guided the study were that productivity of the Tanzanian overall tax system is neither buoyant nor income elastic and that the productivity of major individual taxes is neither tax-to-base elastic nor base-to-income elastic. The Engle-Granger two step and OLS techniques are applied in this study using time series data of the variables. Results of the empirical analysis confirm that the overall tax system of Tanzania and individual taxes are all inelastic. Results of buoyancy analysis show that the tax system is not buoyant; while except international trade taxes, all other taxes had buoyancies of less than one during the period under study. Moreover, the tax-to-base elasticities of all taxes except PAYE are very low thus justifying the hypothesis that individual taxes are tax-to-base inelastic. The empirical findings imply that discretionary tax measures undertaken over the period of the study enhanced revenue productivity and that the existing tax system, left alone, has a limited potential for revenue generation. The policy implication of these findings is that there is a need for a continued tax reform if economic growth has to have any meaning in terms of government revenue generation. Therefore, efforts should be made to design a revenue productive tax system, which is capable of sustaining the financing of government activities without recourse to frequent discretionary policies.
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Keywords
Taxation, Revenue, Tanzania
Citation
Kimaro, S. J. (2003). Tax reform and tax revenue performance in Tanzania, 1970-2001. Masters dissertation, University of Dar es Salaam. Available at (http://41.86.178.3/internetserver3.1.2/detail.aspx?parentpriref=)