Determinants of tax revenue collection in Uganda

Abstract

The low tax revenue is a problem for economic growth, development and one major explanation of high budget deficits in Uganda. The main objective of this study is to empirically examine the major determinants of tax revenue collections in Uganda for the period ranging from 1990-2021, using the autoregressive distributed lag (ARDL) approach. The results reveal that in the long run Gross Domestic Product (GDP) per capita income and share of services positively and significantly affect tax revenue. However, exchange rate and urbanization exerted a negative and significant influence. In the short run, the lag of GDP per capita and lag of urbanization have a positive effect on tax revenue in Uganda while the differenced lag of urbanization has a negative effect on tax revenue. Finally, the study recommends measures such as a boost in per capita income growth through increase in education and job skills and building of good infrastructure including telecommunications to make it possible to massively expand the economy.