Assessment of Direct Tax on Economic Growth of Tanzania

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.