Macroeconomic determinants of domestic revenue in Uganda for the period 1999 to 2017

Abstract

This study investigated the macroeconomic determinants of domestic tax revenue in Uganda from 1999 to 2017. It applied Johansen cointegration approach and ECM. The stationary behavior of variables included in the model is tested using ADF test, and the test result showed all variables were not stationary at first difference. While the cointegration test showed that the variables were co-integrated. The error correction model also showed that the determinants had short run impact on the Tax Revenue and therefore there is short run relationship between the study variables the long run and short run relationship established between tax revenue and its determinants implied various empirical findings. Error Correction Model results revealed that 53% of the errors in the model can be corrected within a quarter; the ECM further found that GDP, exports, and PSC have positive impact on tax revenue. While imports, EXR and CPI all have a negative effect on tax revenue both in the long and short run. The study recommends that monetary authorities should focus on maintaining inflation at single digit but and ensure it‟s at a competitive rate that encourages production while at the same time not disingenuous to consumers through strengthening the operations of policies that stabilize inflation in order to minimize variations in current account balance