Volume 3, Issue 3, June 2014, Page: 25-36
The Revenue Implications of Trade Liberalization in Tanzania
Manamba Epaphra, Department of Accounting and Finance, Institute of Accountancy Arusha, Arusha, Tanzania
Received: Jul. 19, 2014;       Accepted: Jul. 29, 2014;       Published: Aug. 10, 2014
DOI: 10.11648/j.jwer.20140303.12      View  2957      Downloads  189
This paper examines the argument that trade liberalization depresses the import duty revenue, and consequently adversely affects the total tax revenue. The study is thought to be significant because Tanzania experiences difficulty in replacing import duty revenue loss as a consequence of trade reform by strengthening its consumption tax system. In the course of analysis, cointegration analysis and error correction modelling are employed over the 1979/80-2009/10 period. The empirical results show that import duty revenue-to-GDP ratio is positively related to tariff rates, implying that a reduction in the tariff rates results in a significant loss of import duty revenue. The results also show that the removal of protectionist policies led to an increase in import-to-GDP ratio which in turn led to rising shares of import duty revenue in GDP. Finally, the results generate some policy implications. The proper issue in tax design under trade liberalization, Tanzania needs to strengthen the domestic tax system and raise tax revenue without increasing tax rates by reinforcing tax and customs administrations so as to maintain fiscal stability.
Imports, Import Duty Revenue, Trade Liberalization, Tanzania
To cite this article
Manamba Epaphra, The Revenue Implications of Trade Liberalization in Tanzania, Journal of World Economic Research. Vol. 3, No. 3, 2014, pp. 25-36. doi: 10.11648/j.jwer.20140303.12
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