Tax revenue and service delivery in the government institutions : A case study of the education sector

Abstract

This study examined Tax Revenue and Service Delivery in Government Institution with a bias into the Education Sector; its specific objective was to establish the impact of revenue collection on service delivery in the education sector; examine the relationship between tax revenue and service delivery in the education sector; and to draw policy implications from the findings. The study applied Vector Auto Regression (VAR) estimation technique together with annual time series data for the period 1987 to 2018 to evaluate the empirical effects of tax revenue on service delivery in the education sector. Data was obtained from word bank data (WDI, 2018) base. The study used the Johansen co-integration technique to estimate the relationship between tax revenue and service delivery in the education sector and then employed the Granger causality test to analyse the direction of causality while the VAR model was employed to examine the impact of the independent variable on the dependant variables. The co-integration test results indicated a long-run relationship between tax revenue (TAXREV), official development assistance (ODA), and service delivery in the education sector. The VAR model results revealed that both high tax revenue (TAXREV) and official development assistance (ODA) improves service delivery in the education sector. Finally the Granger causality test results showed unidirectional causality between all other variable service deliveries in the education sector. Basing on the above findings this study recommended and proposed that the government should come up with policies to widen the tax base so as to increase tax revenue that will in turn increase the quality of service delivery in the education sector because it is the only way through which government raises income to facilitate and fund all its activities like service delivery in all the major service sectors. While on official development assistance the study recommends that the government should adopt a strong policy to regulate all funds it receives especially those intended to fund the education service delivery. Since mismanagement of such funds will affect education service delivery negatively while using it in a proper way would restore the confidence of the donors in the country. Finally basing on the empirical results this study concludes that utilization of tax revenue into education service delivery is very important for the improvement of the education sector in Uganda.