Author(s) :

Moza Omar, Ali Mwadini, Salama Yusuf.

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Abstract :

The purpose of this paper was to examine the relationship between tax collection and economic development in Zanzibar using the annual time series secondary data from the period 1990–2019. The study employed the Dynamic Ordinary Least Square (DOLS) to achieve the intended purpose. The estimation result showed that the entire three variables that were chosen as the proxy of taxation namely; VAT, CIT and CED had positive significant relationship with the economic development. The results also showed that there is existence of a bidirectional causality relationship between CED and economic development at 5% level of significance also bidirectional relationship between labour forces and capital formation with economic development at 5% level of significant. In addition, the results revealed unidirectional causality relationship from both VAT and CIT to economic development. The study then recommends among others, that the government of Zanzibar should re-visit and review some custom and excise tax laws and regulations that are repugnant to the performance of the custom and excise tax system, so as to block and discourage the loopholes that are being exploited by taxpayers to either evade or avoid tax payments. Keywords: Dynamic Ordinary Least Square, Zanzibar, Tax

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