Exploring the relationship between government tax revenue and economic growth in Tanzania from 1996 to 2024

This study explores the relationship between gross domestic product (GDP) and key tax revenue components in Tanzania, focusing on their impact on economic performance. Utilizing the ARMA model, the research highlights how GDP is influenced by its own past values and various tax sources, including domestic value-added tax (VAT), VAT on imports, and domestic excise duty. The results revealed that these consumption-based taxes significantly contribute to GDP growth, underscoring their vital role in driving economic performance. In contrast, Pay-As-You-Earn (PAYE) and excise duties on imports show limited or insignificant effects, suggesting that direct and trade-related taxes have a less pronounced impact. The study’s approach effectively captures the interactions between tax revenue and economic growth, providing valuable insights into their contributions. Key findings showed the importance of strengthening tax compliance systems and enhancing domestic production to maximize the benefits of VAT and excise duties. The study advocates for policies that broaden the tax base, improve trade facilitation, and modernize tax administration to support sustainable economic growth. Additionally, it underscores the necessity of adapting fiscal policies to evolving economic conditions, contributing to the discourse on effective tax policy and economic development in Tanzania.