Electronic Fiscal Device Effect on Revenue Collection in Tanzania

Abstract

An invention of the Electronic Fiscal Devices (EFDs) is viewed as a remedy to various challenges and setbacks facing an efficient operation and prosperity of Tanzania Revenue Authority (TRA) and the government of Tanzania in general. The researcher in this study applied secondary time series data from 1996 to 2015 in guiding the study. Set of data for all variables were collected from (TRA). The data record interval was recommended since it delivers data set which cover long period of time (20) annual basis, which influence to obtain clear analysis of the variables. Therefore the study comprise the sample size of 20 observations. With an intention of archiving the objectives preceding enumerated in the study, the researcher applied Ordinary Least Square (OLS) regression method to explore the effect EFDs on revenue collection in Tanzania. Hence after identifying the trend of the variable under consideration, the researcher estimated the model using a multiple regression analysis. The findings of the study shows that there is a positive and significant relationship between VAT collected through EFD and total revenue collection in Tanzania. Any unit increase in EFD will results to 5.5213 increase in average revenue collection in a year, holding other factors constant. To ensure the validity of the model, diagnostic test were carried out and there was no any problem encountered in estimation. The value of coefficient of determination helps us to find out how well the sample regression line fits the data. Based on this study, overall R-square of this model is 99.8% which implies that, about 99.8% of the variation dependent variable (Tax Revenue) was anticipated from the jointly of corporate tax and EFD, and also demonstrating that, other factors take for 0.2% of was unexplained in the model. The overall model was statistically significant at 5 per cent level since it has the probability value of 0.000 which is less than 5 per cent level of significance. The model stability test was ensured by Cusum plot which test whether the estimated parameters in the regression are stable or not. The findings shows that, the estimated parameters in the regression are consistence overtime, hence the model is stable. The study therefore recommended that, The government though monetary authority should ensure proper education is provided to the tax payers about the use of EFD since it may leads to increase in government revenue which ensure efficiency in provision of public goods and also the government should also put in place the guidelines, instructions as well as strategies for efficient implementation and enforcement of EFD.