Structural Determinants of Tax Revenue in Zambia

Abstract

This study investigates the structural determinants of tax revenue in Zambia between 1991 and 2020. The ARDL bounds testing approach to cointegration is applied while robustness of long-run relationship is established by using a rolling window approach. We show that in the long run, tax revenue is largely influenced by the level of trade openness, inflation rate, exchange rate and GDP per capita. We find that trade openness and exchange rate have a positive impact on tax revenue while the inflation rate and GDP per capita have a negative influence. However, mineral rents and labour force participation rate are insignificant. Our findings are consistent with those of other studies conducted around the world, and they demonstrate the importance of a sound and stable macroeconomic condition, as well as favourable trade policies that may increase tax revenue inflows.

Keywords: Tax revenue, Zambia, Structural determinants, ARDL

JEL Classification: C32, E62, H20.

DOI: 10.7176/DCS/9-1-03

Publication date:March 31^st 2024