Abstract:
This study revealed that there is a significant relationship between Economic Growth of Tanzania
and Direct tax from 2000 to 2017 with the main objective of assessing the direct taxation on the
growth of Tanzania Economic on the effectiveness Personal Income Tax, Corporate Income Tax
and Parastatals Income. The data assessed were collected from World Bank (WB) and Tanzania
Revenue Authority (TRA) websites and gives the following output: - R square result of 95.46%
validate the model significant at 5% level of significant. This result means that direct tax collected
can be used to predict the economic growth in Tanzania.
The model predicted were assessed Shapiro-Wilk W, Breusch-Pagan / Cook-Weisberg test,
Breusch-Godfrey LM test, test of Multicollinearity with VIF and Dickey-Fuller test for unit root to
check its significance at 5% level and found to be valid.
The study found that direct taxation is positively related with economic growth, this mean the
increase in direct taxation lead to increase in economic growth and vice versa.
Based on the results, government should create conducive tax environment in order to enhance
mechanism that encourage investments and entrepreneurs to increase tax collection and reduce
tax evasion and avoidance. Government has to formulate a policy decision on how direct tax can
be used to influence the level of economic growth. In this way the country will boost the level of tax
compliance hence, economic growth of Tanzania.
