Can Remittance Boost Tax Revenue Collections: A case study of Zimbabwe

Abstract РThe study investigates whether remittances can help developing countries increase their tax revenue collections. For the period from the second quarter of 2009 through the fourth quarter of 2017, the study used quarterly secondary time series analysis. The study used the Ordinary Least Squares (OLS) methodology to construct two basic regression models that take into account two major tax heads that are linked to remittances: income tax and value-added tax. Remittances are measured using three different methods: current period remittances, one period lagged remittances, and remittance squared. Remittances boost both income tax and VAT, according to empirical evidence derived using the OLS approach. As a result, increased remittance inflows have the potential to generate significant additional revenue for the government in the form of income and consumption taxes. The results of both models also showed that tax revenue responds to economic growth in a significant and beneficial way. According to the report, if the government can build a platform that draws more remittances, the Zimbabwe Revenue Authority can generate more revenue. This can be accomplished by lowering the expenses of sending remittances through official channels.

Keywords: Remittance, Tax Revenue, Value Added Tax, Income Tax, Economic Growth

[Cite as: Hamudi, S. (2021). Can Remittance Boost Tax Revenue Collections: A Case Study of Zimbabwe. Diverse Journal of Multidisciplinary Research, Vol. 3, Issue 5, Pages 1-12.]

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