Impact of Value-Added Tax (VAT) Expenditure on VAT Effort and VAT Compliance Gap in Nigeria

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Impact of Value-Added Tax (VAT) Expenditure on VAT Effort and VAT Compliance Gap in Nigeria

Author: Alhasan Usman; Bilkisu Inuwa Jibril; Sha’awa Mohammed

ISSN: 2709-8575
Affiliations:Corresponding author, (PhD), Director Tax Operations Department; Department of Research and Statistics, Federal Inland Revenue Service Nigeria; (PhD) Department of Research and Statistics, Federal Inland Revenue Service Nigeria
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 151–177
https://doi.org/10.47348/AMTJ/V4/i1a7

Abstract

This study investigates the influence of value-added tax (VAT) expenditure on VAT effort (VEF) and the VAT compliance gap (VCG) in Nigeria. It uses quarterly time series data spanning 2011 to 2022. The analysis applies the autoregressive distributed lag (ARDL) model alongside the vector error correction model (VECM) to evaluate the relationships between the variables. Findings from the empirical analysis indicate that VAT expenditure significantly reduces VEF while increasing the VAT compliance gap, in both the short term and the long term. Additionally, per capita consumption (PCC) was found to exert a significant negative effect on VEF across both timeframes. The research concludes that VAT expenditure adversely affects VEF and compliance behaviour over time in Nigeria. Considering these negative implications for tax revenue and compliance, it is recommended that the Nigerian government and the Federal Inland Revenue Service should reassess the existing VAT expenditure framework. This reassessment should involve a comprehensive cost–benefit analysis to ensure that tax concessions are limited to cases where the anticipated benefits surpass the costs. Furthermore, efforts should be made to eliminate superfluous tax expenditures to enhance revenue mobilisation and improve compliance.

The Effects of Tax Expenditures on Economic Growth in the Common Monetary Area of Southern Africa

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

The Effects of Tax Expenditures on Economic Growth in the Common Monetary Area of Southern Africa

Author: Ziyanda Dlamini

ISSN: 2709-8575
Affiliations: MSc in Applied Economics, BA in Social Science obtained from the University of Eswatini; Former Economic Analyst at the Eswatini Revenue Service; currently, Economist at the Central Bank of Eswatini, Research Department
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 177–193
https://doi.org/10.47348/AMTJ/V5/i1a8

Abstract

In order to accomplish various macroeconomic goals, including a low unemployment rate, an improvement in balance of payments and enhanced economic growth, numerous countries have employed tax expenditures as one of their fiscal policy instruments over the years. This study examined the effects of tax expenditures on economic growth in the Common Monetary Area (CMA) of Southern Africa from 1985 to 2021. The study focused on the countries with monetary policies that are interlinked with that of South Africa. Tax expenditures, government expenditure, gross capital formation and inflation, and exports and imports data were used. Three models were used in the analysis and the Lagrange Multiplier test indicated that the suitable model was the pooled OLS over the random effects and fixed effects models. The empirical analysis of the research used the pooled OLS model to determine the relationship between the variables. The findings show a positive and significant effect of tax expenditures on economic growth and further suggest that economic growth in the CMA is positively influenced by gross capital formation, inflation and exports, while government expenditure and imports have a negative effect on economic growth. The researcher concluded that tax expenditures as a fiscal policy instrument is effective in promoting economic growth. The policy recommendation is that governments should continue with the tax expenditures subventions; in order to strengthen the usefulness of this fiscal instrument, it needs to be reviewed periodically to establish whether the desired goals are being achieved.

Assessment of the Effectiveness of Tax Administration Reform on Tanzania’s Tax System Productivity

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Assessment of the Effectiveness of Tax Administration Reform on Tanzania’s Tax System Productivity

Author: Amos James Ibrahim

ISSN: 2709-8575
Affiliations: Lecturer at the Institute of Tax Administration Tanzania
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 194–207
https://doi.org/10.47348/AMTJ/V5/i1a9

Abstract

This study assesses the effectiveness of tax administration reform on Tanzania’s tax revenue productivity by evaluating how the reforms have influenced the buoyancy of individual taxes using yearly time series data for 1996 to 2017. This period is associated with the introduction of massive reform in the Tanzanian tax administration. The study compares its results with those of Osoro, who evaluated the Tanzanian tax system productivity for 1960 to 1990. To ensure the comparability of results, this study used a similar methodological approach to that used by Osoro. The main objective of this study is to investigate if the reform that took place managed to generate enough tax. The results show that both the tax system and individual taxes are buoyant for the period under review. Our results suggest that the administrative tax reforms that took place have had a significant impact on revenue generation in Tanzania. Thus, we recommend that the government should continue conducting tax administrative reform to cope with the ever-changing business environment.

Implementation of Cooperative Compliance Programme in Africa: Which Way Forward for Kenya?

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Implementation of Cooperative Compliance Programme in Africa: Which Way Forward for Kenya?

Authors: Alex Oguso, Adrian Gitamo

ISSN: 2709-8575
Affiliations: Corresponding Author: Research Economist and Manager, Research and Tax Modelling Unit, Kenya Revenue Authority; Researcher, Surveys and Business Analysis Unit, Kenya Revenue Authority
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 208–234
https://doi.org/10.47348/AMTJ/V5/i1a10

Abstract

This study aims to establish the way forward for designing and implementing a cooperative compliance programme (CCP) for Kenya. Specifically, the paper seeks to examine the current relationship management framework in Kenya through the lens of a cooperative compliance framework and explore the strategic options for Kenya in designing a CCP to meet its specific needs. The study adopts a mixed research approach: desk research, key informant surveys and focus group discussions. The study identifies gaps in the current relationship management framework that need to be addressed. These included the need to fully understand the unique characteristics of large taxpayers and the context in which tax planning occurs; proper planning and coordination of tax audits by various departments; better handling of tax disputes (which should be centralised and well-coordinated); prompt refund payment; and effective engagement of taxpayers in the formulation of new tax policies and amendment of tax laws. Further, the study proposes strategic initiatives for the design and implementation of a cooperative compliance programme in Kenya. The study concludes by providing a way forward for Kenya, which includes a multi-stakeholder approach to designing a cooperative compliance programme, piloting the programme before full adoption, and implementing the programme through a phased approach.

The Impact of Tax Lottery Design on Tax Compliance: A Lab Experiment in Tanzania

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

The Impact of Tax Lottery Design on Tax Compliance: A Lab Experiment in Tanzania

Authors: Cyril Chimilila; Remidius Ruhinduka; Vincent Leyaro

ISSN: 2709-8575
Affiliations: Lecturer, Institute of Tax Administration, Tanzania; Senior Lecturer, School of Economics, University of Dar es Salaam; School of Economics, University of Dar es Salaam
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 235–253
https://doi.org/10.47348/AMTJ/V5/i1a11

Abstract

Low tax compliance undermines tax revenue mobilisation in developing countries. Various countries have adopted tax lotteries and rewards as alternative strategies to promoting tax compliance. However, there is limited empirical evidence on how best to design tax lotteries. This study used a lab experiment to study the effect of tax lottery design on compliance. The study used two lottery designs – a lottery of high reward and low probability and a lottery of low reward and high probability. The study found that there was higher compliance (85.2%) for the high reward, low probability lottery compared to the 81.9% for the low reward, high probability lottery; compliance in the control group was 69.8%. Using logistic regression, the study estimated the treatment effect. A lottery of high reward and low probability has a higher treatment effect: 0.1554 compared to 0.1341 for the low reward, high probability lottery. This study concludes that the design of lottery rewards has a significant effect on compliance. It contributes to the literature on the effect of tax lottery design on tax compliance and highlights the need for strategically designing tax lottery rewards to encourage higher compliance.

Leveraging Artificial Intelligence for Enhanced Tax Collection in Developing Nations: A Systematic Literature Review

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Leveraging Artificial Intelligence for Enhanced Tax Collection in Developing Nations: A Systematic Literature Review

Authors: Joy Mudome; Joshua Rumo A. Ndiege

ISSN: 2709-8575
Affiliations: Senior Business Systems Analyst, Kenya Revenue Authority; Assistant Professor, Information Systems at United States International University (USIU)-Africa
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 254–275
https://doi.org/10.47348/AMTJ/V5/i1a12

Abstract

The integration of artificial intelligence (AI) into tax collection processes has emerged as a transformative approach in improving efficiency, accuracy and compliance for national governments. Despite its potential, literature on AI’s role in tax collection, especially in developing countries, remains scarce. This paper makes a contribution to this area by conducting a systematic literature review aimed at investigating the current state of AI implementation in tax collection in developing nations and identifying future research opportunities. The review synthesises findings from twenty selected studies published between 2014 and 2024. The findings indicate that AI facilitates tax compliance through its capacity to automate repetitive tasks, enhancing data processing capabilities and detecting anomalies for targeted enforcement efforts. Moreover, AI tools offer potential in reducing tax evasion by enabling real-time transaction analysis and value chain analysis, closing taxation loopholes and improving fraud detection mechanisms. However, responsible AI use remains paramount, necessitating the establishment of ethical frameworks, transparency measures and mechanisms for accountability to ensure user data protection and adherence to societal norms and legal standards. By compiling insights from diverse studies, this work presents a unique perspective and paves the way for additional research in this emerging field.

Optimising Eswatini’s Value-Added Tax (VAT) Threshold: Balancing Revenue Efficiency and Compliance Costs

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Optimising Eswatini’s Value-Added Tax (VAT) Threshold: Balancing Revenue Efficiency and Compliance Costs

Authors: Masuku Phindile T; Mamba Lwemvelo

ISSN: 2709-8575
Affiliations: Manager Research – Research, Strategy and Statistics Division at the Eswatini Revenue Service; Senior Analyst – Research, Strategy and Statistics Division at the Eswatini Revenue Service
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 276–295
https://doi.org/10.47348/AMTJ/V5/i1a13

Abstract

Value-added tax (VAT), a consumption tax levied on value added at every stage of production in the value chain, was introduced in Eswatini in April 2012 to replace general sales tax (GST). At its introduction, it was set at a rate of 14%, and since 2012, the VAT registration threshold has been set at E500 000. However, due to inflation and the time value of money, E500 000 in 2012 is no longer the equivalent of E500 000 in 2024, hence the need to review and determine the optimal VAT threshold. This study uses a method based on the idea of collecting the most amount of VAT revenue from the least number of taxpayers to approximate the optimal level of a VAT threshold for Eswatini. This optimal level creates administration and compliance cost-efficiencies for both the tax administration and the taxpayer, respectively. The findings from the study show that the marginal changes to the number of registered taxpayers and the VAT to be collected from them converge at a VAT threshold in the range of E800 000 to E900 000 for Eswatini; at this level, 99% of VAT revenue collected comes from only 54% of VAT-registered taxpayers. Therefore, based on the methodology, the study recommends that the VAT threshold should be revised from E500 000 to E900 000 to allow for the cost-efficient collection of VAT in the country.

The Role of Electronic Tax Stamps System on Revenue Collection in Tanzania

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

The Role of Electronic Tax Stamps System on Revenue Collection in Tanzania

Authors: Innocent Nyamfulula; Cornel Joseph; August O. Kessy; Elly H. Mloso

ISSN: 2709-8575
Affiliations: Institute of Tax Administration, Tanzania Revenue Authority; Mkwawa University College of Education, University of Dar es Salaam; Institute of Tax Administration, Tanzania Revenue Authority; Institute of Tax Administration, Tanzania Revenue Authority
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 296–310
https://doi.org/10.47348/AMTJ/V5/i1a14

Abstract

This study examined the Electronic Tax Stamps (ETS) System’s role in revenue collection in Tanzania with a focus on cigarettes, beer and spirits. The results from a trend analysis show an increase in respective revenue in the immediate period after the introduction of the ETS system. Moreover, the estimated results from the regression with Newey-West standard errors show that the coefficient associated with the ETS is positive and statistically significant. Thus, the study concludes that ETS plays a critical role in improving excise revenue performance and fostering a more transparent and efficient fiscal system in Tanzania. The government and policymakers should continuous improvement of the ETS system so that it can contribute significantly to revenue collection. Also, the ETS System should be backed by a well-designed system of enforcement so as to realize a more positive contribution to revenue collection.

Digitalising Tax Compliance and Elevating Revenue Forecasting in Rwanda: Evidence from Statistical Modelling and Machine Learning

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Digitalising Tax Compliance and Elevating Revenue Forecasting in Rwanda: Evidence from Statistical Modelling and Machine Learning

Author: Clement Uwizeye

ISSN: 2709-8575
Affiliations: Wageningen University & Research (WUR)
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 311–330
https://doi.org/10.47348/AMTJ/V5/i1a15

Abstract

This paper explores the dual role of digitalisation and advanced forecasting models in enhancing tax compliance and revenue prediction in Rwanda. It investigates the impact of electronic billing machine (EBM) adoption on tax performance, the comparative accuracy of traditional econometric models (Bayesian VAR) versus machine learning models (NNAR and Ensemble), and the policy implications of these findings. Using data from 2010 to 2023, the analysis reveals that while EBM usage has expanded significantly, its impact on tax revenue is limited due to enforcement and implementation challenges. Regression results indicate that trade openness, financial development and effective governance positively influence tax revenue, whereas corruption and remittance inf lows pose challenges. Forecasting models indicate a moderately optimistic outlook for tax-to-GDP and trade integration, with NNAR outperforming other models in predictive accuracy. The study concludes with key policy recommendations focused on strengthening digital compliance infrastructure, addressing corruption, supporting financial sector development and leveraging machine learning for more accurate fiscal forecasting. These insights are vital for designing evidence-based tax reforms and achieving sustainable domestic resource mobilisation in Rwanda.

Forecasting Tax Revenue Using Arima and Vector Autoregressiive (VAR) Modelling in Tanzania

by | Jul 3, 2025 | AMTJ, AMTJ 2025 I1

Forecasting Tax Revenue Using Arima and Vector Autoregressiive (VAR) Modelling in Tanzania

Author: Masoud Mohammed Al-biman

ISSN: 2709-8575
Affiliations: Lecturer, Institute of Tax Administration (ITA), Dar-es-Salaam, Tanzania
Source: African Multidisciplinary Tax Journal, Volume 5, Issue 1 (2025), p. 331–352
https://doi.org/10.47348/AMTJ/V5/i1a16

Abstract

This article intends to examine whether times series approaches of ARIMA and VAR are effective in forecasting tax revenue. It also compares the two approaches to evaluate which is the more effective forecasting method. Quarterly data from 1996Q1 to 2016Q4 (21 years or 84 observations) are used to forecast the tax revenue for the period 2017Q1 to 2017Q4. Five common types of taxes are selected due to their significant contributions to Tanzania’s total tax revenue collected by the Tanzania Revenue Authority (TRA). Generally, the results reveal that both time series approaches are effective and demonstrate strong predicting power in short-horizon tax revenue forecasting. However, in most cases that the VAR model outperforms ARIMA modelling, especially based on forecasting criteria. However, we suggest that both methods to be applied by the TRA in forecasting tax revenue as their forecasting errors differ only slightly.