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Forecasting Tax Revenue and its Volatility in Tanzania

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  • Chimilila, Cyril

Abstract

Forecasting tax revenue and its predictability is important for government budgeting and tax administration purposes. This study used monthly tax revenue data for a period of 182 months spanning January 2000 to February 2015. The study applied ARMA and combined forecast models, and GARCH models to forecast tax revenue and its volatility, respectively. Tax revenue was found to increase steady over the period, although with a persistent volatility which increases over time. The observed volatility was found to be associated with taxes from bases (income) which have high volatility. Based on various forecast accuracy evaluation criteria, the study recommends combined forecasts and GARCH(1,1) models for forecasting monthly revenue and its volatility, respectively. The study further recommends enhanced diversity of taxes through widening consumption tax base within the existing tax portfolio so as to enhance its contribution to revenue collection and reduce volatility.

Suggested Citation

  • Chimilila, Cyril, . "Forecasting Tax Revenue and its Volatility in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 5(01).
    • Handle: RePEc:ags:afjecr:264561
    DOI: 10.22004/ag.econ.264561
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    References listed on IDEAS

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    Cited by:

    1. Khatibu Kazungu & John R. Mboya, 2021. "Volatility of Stock Prices in Tanzania: Application of Garch Models to Dar Es Salaam Stock Exchange," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 9(1), pages 15-28, March.
    2. Yılmaz, Engin, 2018. "Vergi gelirlerinin tahminlenmesine yönelik ekonometrik model [Econometric model for forecasting tax revenues]," MPRA Paper 91192, University Library of Munich, Germany, revised 01 Dec 2018.

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