Effects of Corruption on Tax Revenues in Zimbabwe (1998-2018)

Abstract – The study sought to establish the effects of corruption on tax revenues in Zimbabwe. Using the robust Ordinary Least Squares (OLS) regression methodology, annual time series data ranging from 1998 up to 2018 was used. During the period under review, the Zimbabwe Revenue Authority (ZIMRA) missed revenue collection targets on numerous occasions especially due to inefficiencies in revenue collection. Corruption has been identified to be one of main causes leading to inefficient collection of revenue in Zimbabwe. As a result, the variable tax revenue was used as the depended variable whilst the variable corruption was included amongst explanatory variables together with other control variable which are fiscal deficit, inflation and Gross Domestic Product. The results from the empirical findings revealed that an inverse relationship exists between tax revenue and corruption. Stated differently, a rise in the level of corruption in Zimbabwe negatively affects tax revenues. The study concluded by recommending the government of Zimbabwe to reduce corruption through modernisation and simplification of the entire tax system. The study also encouraged the government to impose stiffer penalties to the perpetrators of corruption and to arrest every public official engaging in corrupt activities despite one’s political muscle.

Keywords: corruption, corruption perception index, tax revenue, tax system

[Cite as: Nyabunze, A., and Siavhundu, T. (2020). Effect of Corruption on Tax Revenues in Zimbabwe (1998-2018). Diverse Journal of Multidisciplinary Research, Vol. 2, Issue 2, Pages 18-23.]