INFLUENCE OF TAX REVENUE ON SELECTED ECONOMIC PERFORMANCE INDICATORS IN TANZANIA

Abstract

This study assessed influence of tax revenue on selected economic performance indicators in Tanzania, explicitly focused on inflation, unemployment and Nominal Gross Domestic Product. It employed a quantitative descriptive design where secondary data was used. Time series data for a period covering 2010 to 2022 was gathered from the Tanzania Revenue Authority (TRA), Bank of Tanzania (BOT), the National Bureau of Statistics (NBS), IMF and World Bank data bases. Data was analyzed quantitatively through descriptive statistics and linear regression model. Study findings revealed a strong positive and significant relationship of tax revenue and country’s GDP where R2= 0.9972 and increase in 1 unit of tax revenue collected led to increase in 0.67 unit of GDP. Further findings revealed a significant positive relationship between tax revenue and inflation where R2 =0.9762 and increase in 1 unit of tax revenue collected led to increase in 0.61 unit of inflation. It was revealed that tax revenue and unemployment have negative but statistically significant relationship (R² = 0.9835; p = 0.0000) where increase in 1 unit of tax revenue collected led to 0.5unit decrease in unemployment. This study recommends to the government of Tanzania to design and institute best and feasible mechanisms such as digital transformation through its tax revenue authority to ensure efficacy of collections and stimulate positive multiplier effect on economic performance indicators which accelerate country’s economic growth and employment generation. It is further recommended that, Investment in socio-economic services such as generation of cheap power, subsidization of key economic sectors including agriculture, technical education and infrastructure development will greatly suppress both production and transaction costs that ultimately suppress cost-push inflation from taxation.