Tax Revenue Instability In Tanzania From 1996 To 2015 - Causes And Consequences

ABSTRACT

This study examined tax revenue instability, and its consequences in Tanzania from

1996 to 2015. To identify the determinants of revenue stability, this study adopted

case study analysis. The study mainly based on secondary data maintained by the

Tanzania Revenue Authority (TRA) and World Development Indicators (WDI). The

dependent variables in this study are Public spending and Public Investment which

have regressed against revenue instability as an independent variable. Overall tax

instability was calculated among tax variables using the standard deviation approach.

Eventually, the study found that there have been oscillations of revenue against the

level of Government spending during the period under review. The total tax revenue

oscillated from 2.62 in years 1996/1999 to 2.42 in years 2012/2015; while the

Government spending as well oscillated from 3.1 to 3.09 over the same period.

Corruption among tax officers, tax exemptions to some tax payers, negative

perception on taxes by some tax payers and inadequate tax knowledge among tax

payers have been identified as reasons for tax revenue instability. Hence, the study

established that the instability of tax revenue results to the instability of public

spending and public investment thus, with low revenue collection, public goods and

services as well as public investment will be inadequately financed. Finally, the

Government through policy makers is advised to set out policies that will enhance

stable revenue collection through establishing corruption free movements,

disseminating knowledge among tax payers and reviewing tax laws to minimize

avenues for tax exemptions; these measures altogether will minimize revenue

instability and enhance adequate and sustainable public spending and investment

level.