Key determinants of tax revenue in Zimbabwe: assessment using autoregressive distributed lag (ARDL) approach

The study investigates the determinants of tax revenue in Zimbabwe using the ARDL approach for the period 1980 to 2022. This study aims to offer a thorough summary of the different factors that influence tax revenue within the framework of economic and social factors. The variables included in the analysis are GDP growth, the share of agriculture in GDP, private consumption expenditure, inflation, foreign direct investment, real interest rates, trade openness, shadow economy and population growth. The results indicate that private consumption expenditure and share of agriculture in GDP negatively and significantly impact tax revenue in the long run. GDP growth, inflation, foreign direct investment and real interest rates exhibit a positive but insignificant impact on tax revenue. Trade openness, shadow economy and population growth are negatively and insignificantly related to tax revenue. The short-run analysis indicates that lagged tax revenue, GDP growth, private consumption expenditure, inflation, and trade openness significantly impact tax revenue, while the share of agriculture in GDP and the shadow economy significantly hinder tax revenue. Real interest rates and population growth have positive but insignificant impacts on tax revenue. The study's findings provide valuable guidance to policymakers in formulating policies and strategies that enhance tax revenue collection and support the government's domestic resources mobilisation agenda by uncovering the relationships between tax revenue and its determinants.