The Effects of Trade Openness, Exchange Rate and Per Capita Income on Tax Revenue Collection in Tanzania: Co-integration Approach.

Abstract

To sustain economic progress in any nation, tax income collection is absolutely essential. This study's main goal is to investigate how Tanzania's tax revenue collection is impacted by trade openness, the exchange rate, and per capita income. While using a time series research design, this study applied a quantitative research strategy. Data on the economy from 1996 to 2020 were included in the study. The Tanzania Revenue Authority and the World Bank provided the secondary data for this study's 25 observations. The study's results demonstrate that, while all other independent factors remain unchanged, trade openness increases along with the amount of tax income collected. The findings provide a favorable long-run relationship between GDP per capita and tax revenue collection, demonstrating that under Ceteries Paribus, tax revenue collection rises as GDP per capita rises. The findings demonstrate that there is a positive long-term relationship between the exchange rate and tax revenue collection; when the exchange rate rises, taxes are collected more money while other factors have no impact. Four variables per capita income, trade openness, exchange rates, and tax revenue collection were presented in the study and were shown to be cointegrated and to be advancing in tandem over time towards equilibrium.