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This study intended to establish the effects of tax-breaks on economic growth of
Tanzania. The study’s specific objectives were to determine the tax-breaks that have
been available for businesses, to determine the rate of economic growth of the
country from 2006 – 2018, and to determine the relationship between tax-breaks and
economic growth of Tanzania. The study employed a quantitative approach to
research; the study collected only secondary data from four government agencies.
The collected data were then analysed using statistical software known as Gretl
which provided descriptive, correlation and regression analysis findings. The study
identified over 80 tax breaks available in Tanzania, and being enjoyed by
government institutions, parastatal organizations, religious organizations, NonGovernmental Organizations (NGOs), Donor Funded Project (DFP), private
companies and individuals, mining sector, oil/gas exploration, military duty free shop
and Tanzania Investment Centre (TIC) in addition the study determined that the
economy of Tanzania has been growing at an average rate of 6.7% over the period
between years 2006 – 2018. Furthermore, the finding indicates an existence of an
insignificant negative relationship between tax breaks and economic growth.
The study concludes that too many tax breaks are been given, some do not even
relate to business or investment of any sort. The government offices and international
communities enjoy too much tax breaks. The fact that so many government offices
have such benefits could lead to misuse of that privilege leading to the country losing
more revenues, and recommends that rather than focusing on tax breaks as the main
investor attraction criterion, the country should focus on creating a conducive
business environment whereby there are good infrastructure such as affordable and
reliable electricity, transport, high level education, unnecessary bureaucracies due to
corruption practices, and political stability. Because other countries such as
Mauritius, Costa Rica, Ireland and Malaysia have managed to attract huge number of
investors with none or very little tax breaks OECD (2007), so why not in Tanzania.
Furthermore, because there are other countries that have had a positive economic
growth out of granting tax breaks as an investors’ attraction strategy (UNCTAD,
2012). This study recommends the government seeks to learn how others have
managed to do it successfully, and then model their success. |
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