Tax elasticity and buoyancy of major taxes in Uganda: 1998 - 2019

Abstract

This paper aimed at estimating the tax elasticity and buoyancy of tax revenue and its major components in Uganda. Tax revenues are a major source of government revenues in Uganda and continue to play a major role in funding government expenditures. However, despite the tax reforms in Uganda aimed at boosting the tax revenue, the budget deficit has persistently increased. This paper estimated the buoyancy and elasticity of tax revenues spanning the period 1998 to 2019, using the standard regression technique and the Dummy Variable (DV) approach to capture the discretionary tax changes in tax rates and tax structures that are applied. Quarterly time series data and the autoregressive distributive lag (ARDL) model augmented by the bounds test were estimated. The results revealed that government expenditure, Excise duty, and Import Duty have a positive impact on the tax revenues in the long run therefore policies like government expenditure towards productive areas, enhancing the efficiency of the customs administration, and introduction of new goods in the excise tax net should be embraced in order to increase tax revenue.