Economic Growth and Tax Revenue in Burundi From 2001-2016

ABSTRACT The purpose of this study was to evaluate Economic Growth and Tax Revenue in Burundi from 2001-2016. The study was guided by three research objectives; to determine the level of tax revenue, to determine the level of economic growth and establish the relationship between tax revenue and economic growth. The data collection was based on secondary sources especially statistics from the Central Bank of Burundi, ministry of finance and economic planning in Burundi in addition to internet sources. In analyzing data, time series graph, scatter plot, simple linear regression model and Pearson’s correlation coefficient were employed to establish the relationship between tax revenue and economic growth. The findings revealed that there is an increase in the GDP in Burundi in the year 2001; 2004 to 2012, however in the years of 2002- 2003, 2013-2014 it slowly decreased and made worse in the year 2015. Later in 2016, the GDP gained its growth rate again. Tax revenue of Burundi is seen to be increasing from the years 200 Ito 2008 and 2010-2014 respectively. However, it slowed down in 2009 and in between 2015-2016. In analyzing the relationship between variables, a Pearson’s correlation coefficient was used and was found to be 0.740 1 whereas the coefficient of determination was 0.5478 which implies that 54.8% of variations in tax revenue are explained by the variations in GDP. The null hypothesis that there is no significant relationship between Tax revenue and GDP was rejected since the p-value of 0.001 was less than the significance level of 0.05, indicating that tax revenue and economic growth have a strong positive relationship. The model (Tax Revenue =402000000 USD+4.5% GDP) means that Tax revenue while holding GDP constant is 402000000 USD and that a unit increase in GDP leads to 4.5% increase in the Tax revenue of Burundi hence found to be statistically significant. The study concluded that there is a general increase in the tax revenue base of Burundi over the fifteen years irrespective of variables like political instabilities and changes in climate hence the country has slightly achieved economic growth. In order to boost more taxes for economic growth, the government is recommended to embark on exportation of goods and services to ensure balance of payments which is healthy to the economy in terms of tax collection of such labour hence leading to economic growth.