Abstract:
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ABSTRACT
The main objectives of this study is to investigate the effect effect of tax revenue on private sector
growth in Tanzania. The study was guided by several specific objectives which were; one to
examine the short-run relationship between tax revenue and private sector growth in Tanzania. Second was to investigate the long-run dynamics between tax revenue and private sector growth
in Tanzania and lastly was to assess the grander causes between tax revenue and private sector
growth in Tanzania. The researcher employed time series data with a sample of 32 observations
from 1990 to 2021. The researcher started by examining the unit root characteristic of the variables
using ADF and PP test for unit root. The findings indicated that, all variables are integrated of order
1, follows 1(1) process. ARDL bound test were employed to determine the existence of long-run
relationship and the result indicated by F-bound and t-bound revealed that, there is a long run
relationship among the variables. The findings of the long-run coefficient have indicated that, there is negative and significant relationship between TAX Rev and private sector growth in
Tanzania. In such a way that, in the long-run, a 1 unit increase in in tax revenue %GDP (tax burden)
in Tanzania will leads to 1.969 unit decrease in private sector growth in the country, holding other
factors constant. The short-run relationship was investigated using ECM and the result shows
that, the
negative and significant short-run relationship exist between private sector growth and tax revenue
(tax burden). The Granger causality was employed to determine the order of the directional
relationship and the findings indicated a uni-directional causal relationship from private sector
growth to tax revenue. The researcher recommended that, government of Tanzania, through
revenue authority should consider widening tax base and at the same time ensuring the tax revenue
doesnot hinderthe private sector development and growth.
