The Nexus between Tax Base and Tax Revenue Collection in Tanzania: A Vector Correction Model Analysis

Abstract

Tax income collection is critical to every government's economic prosperity. Tax base in Tanzania still is not archived well and hence leads revenue collection to drop frequently. The primary goal of this study is to determine the relationship between Tanzania's tax base and tax revenue collection. In this study, a quantitative research approach and a time series research design were used. The research population included economic data from 1990 to 2020. This research was based on 30 observations (Annual economic data) gathered from reliable sources such as the Tanzania Revenue Authority (TRA) and the World Bank (WB). According to the study's findings, tax base effects tax revenue collection in Tanzania since the variable cointegrates with tax revenue collection. The research shows that the variables, notably the tax base and tax revenue collection, are cointegrated and nearing equilibrium in the long term. According to the paper, a more functional tax structure should be established and implemented to expedite financial activities and increase tax revenue collection throughout the country.

Keywords: Tax base, Tax revenue collection, Tanzania