Can Remittances Boost Tax Revenues in Zimbabwe? A Secondary Quarterly Time Series Analysis

Michael Takudzwa Pasara () and Michael Zuze ()
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Michael Takudzwa Pasara: North-West University, South Africa

Eurasian Journal of Economics and Finance, 2021, vol. 9, issue 2, 128-144

Abstract: The study applied the ordinary least squares (OLS) technique on quarterly time-series data to analyze if remittances can boost tax revenue in Zimbabwe. The main challenge faced in Zimbabwe is the insufficient tax revenues to finance growing public spending needs. Results indicate that the share of remittances both in the current and lagged period significantly influenced income tax revenue and the volume of manufacturing. Trade openness was found to be insignificant. Similar results were also observed for the variables when value-added tax to total revenue was the dependent variable. When lagged variables were taken into account, results showed that only remittances were significant. Thus, increased remittance inflows have significant potential to generate more taxes for the government through income and consumption taxes. The study recommends the creation of platforms, which stimulate and attract more remittances, such as reducing costs of sending remittances through formal channels. Secondly, good governance and quality institutions provide appropriate economic environment and growth policies. Economic growth fosters increased and sustainable tax due to an increased tax base.

Keywords: Monetary Policy; Optimal Currency Areas; Exchange Rate; Franc Zone (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ejn:ejefjr:v:9:y:2021:i:2:p:128-144

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