Determinants of tax Revenue Performance in the East African Countries

Abstract

This study explores the determinants of tax revenue performance in the East African Community (EAC) partner states of Burundi, Kenya, Rwanda, Tanzania, and Uganda. Using a panel dataset that spans over 10 years (2009-2018), the study specifically investigates whether administration efficiency impacts revenue performance. The study measures administration efficiency by using three indicators; a ratio of taxpayers to staff, a ratio of revenue generated to staff, and the cost of collection as a share of total collection. The estimated results from the random effect model show that administrative efficiency exerts a positive and significant effect on revenue performance. The pooled mean group (PMG) results show that in the short run, the administration efficiency indicators have a positive impact. However, in the long run the estimated results show that these variables have a negative impact on revenue collection. The study also shows that per capita income has a positive impact when interacted with the quality of institutional variable. This implies that in a short run revenue administration should consider increasing the number of staff to serve taxpayers and strengthen the quality of institutions by ensuring fairness in tax collection.