FINANCIAL DEVELOPMENT AND TAX REVENUE IN TANZANIA: ANALYZE THE IMPACT OF FINANCIAL DEPTH ON TAX REVENUE

Abstract

The purpose of this research was to consider the influence of financial development on Tanzania’s tax revenue. To accomplish the intent of this study, the main specific objective was concerned about the effect of financial depth on tax revenue in Tanzania. Design/methodology: This study adopted quantitative approach and time series as research design, this study was conducted in Tanzania. Because of the accessibility of the data for the time of 1996-2020.The annual time series data for the Tanzanian financial development and tax revenue were obtained from secondary sources which include the World Development Indicators (WDI) and Tanzania Revenue Authority (TRA). The method was employed to make the estimation is the Dynamic Ordinary Least Square (DOLS). Findings: The financial characteristics were considered to be relevant tax revenue parameters based on the study’s aims. As a consequence, the examination of the estimation findings revealed that financial depth had a beneficial influence on increasing tax revenue in Tanzania. As a result, this paper recommends that the government place a greater emphasis on financial development, as it may be a vital instrument for increasing tax revenue for social welfare, poverty reduction, and macroeconomic stability. The Bank of Tanzania has maintained its monetary policy stance, which aims to increase lending to the private sector to encourage economic activity.