Memoire Online - Impact of tax revenue on economic growth in Rwanda from 2007-2017

Rwanda is working tirelessly to achieve economic growth and development. Taxation effective is the one tool to promote and to accelerate economic growth and development, several studies analyses the impact of tax on economic growth and economic development.

The objective of this study is to investigate the impact of tax revenue on economic growth in Rwanda from 2007-2017. Secondary data were sourced from Rwanda Revenue Authority (RRA) and National Institute of statistics of Rwanda (NISR) for the period spanning from 2007Q1-2017Q4. Descriptive data analysis was used and the variable considered here are: Gross domestic product (GDP) as proxy for economic growth, direct tax (DT), Tax on goods and services (TGS) and Tax on international trade and transaction (TITT). Significant literature review for this study is available.

The results of the unit root and the co-integration tests revealed that all variables are integrated of order one, I(1) and Johensen cointegration test indicate existence of a long-run equilibrium relationship among variables included in the model and we use also Vector Error Correction Model (VECM) estimation method for data analysis to estimate for short run result. The empirical findings showed that direct tax(DT)and tax on goods and services(TGS) variables have positive at 0.1631 to 0.60 31 respectively impact on economic growth, while Tax on international trade and transactions(TITT) variable has negative at -0.005913 and it impacts on economic growth.

This study recommends that the policymakers within government of Rwanda must improve both direct tax and tax on goods and services (domestic tax) and increase Taxes on international trade transactions (customs duties), it will harm economic growth of Rwanda therefore custom duties must be rationally reduced or abolished and free trade zones like Africa continental free trade area (AfCFTA) must create to foster increased exchange of goods and services across borders.

Key Words: Tax Revenue, economic growth, Gross domestic product, direct tax, tax on goods and services, tax on international trade and transaction, VECM, Rwanda.

1.1. BACKGROUND OF STUDY

Rwanda embraced economic growth, the power of any country in economic growth and development is mainly depends on level of amount of tax revenue generated to make economy more advanced.

Bruce et al (2006) point out that generating sufficient revenue to finance government service delivery is the most important function of a tax system. The government has to provide many goods and services to its citizens such as health, education, and defense of the country, maintenance of law and order and management of the economy.

Mustafa (2000) observes that as the economy grows, more people and companies derive higher income and would therefore be liable to pay higher taxes. Tax elasticity is an indicator of measuring the efficiency and responsiveness of tax revenue mobilization in response to growth in the tax base, GDP or national income. A tax is said to be elastic if tax revenues increases more than proportionately in response to a rise in the tax base. If the tax revenue shows less responsiveness to tax base, that type of tax base fails to generate enough revenue for the government in the long run.

In line with its mandate of assessing, collecting, and accounting for tax, customs and other specified non tax revenues, assisting taxpayers in understanding and meeting their tax obligations thus raising their compliance, Rwanda Revenue Authority also analyses long-term tax elasticity of tax in relation to changes in GDP in order to highlight tax gaps within a sector .

It is also in this framework that profitability benchmarking based on business activities has to be done in order to identify areas of irregularities in tax compliance hence taking actions for tax collection optimization.

According to Azubike (2009), tax is a major player in every society of the world.Taxation is most way to reduce foreign aid by mobilizing internal government resource which lead to favorable conductive environment which lead to economic growth promotion.

Nzotta (2007) argues that taxes constitute key sources of revenue to the federation account shared by the federal, state and local governments.

That is why taxation system in Rwanda is divided into decentralized tax and fiscal tax and others administrative fees from Rwanda online known as Irembo.

Oxford Dictionary of Accounting (1995) defined taxation as a levy on an individual or corporate body by the central or local government to finance the expenditure of that government and also as a means of implementing its fiscal policy.

Abomaye-Nimenibo(2017) is of the view that tax is a compulsory contributions made by animate and inanimate beings to government being a higher authority either directly or indirectly to fund its various activities and any refusal is meted with appropriate punishment. He went on to say that Tax is an involuntary payment made by a resident of a state in obeisance to levy imposed by a constituted authority of a sovereign state at a particular period of time; and that Taxation is the process put in place by government (which ever tier) to exercise authority on and over the imposition and collection of taxes based on enacted tax laws with which projects are financed. Taxation is therefore seen as the transfer of resources as income from the private sector to the public sector for its utilization to achieve some if not all the nation's economic and social goals such as provision of basic amenities, social services, educational facilities, public health, transportation, capital formation etc.

However ,one of main function of government is to infrastructure service development generation such as roads, schools, hospitals ,defense, pipe-borne water,... as well as ensure the rise of per capita income and to achieve other macroeconomic factors such low unemployment, inflation, Balanced of problem balance ,Economic growth, to reduce income inequality,..

For above service and argument to be efficient at optimum level, government need sufficient resource to finance them. The task of financing government expenditure and allocating national resource is main responsibilities and challenges due to limited government resources .therefore individuals, companies and government body must provide tax based on Rwanda taxation law. Government always think how to modernized tax revenue by reforming law . These law aim to ensure to promote tax compliance and to discourage tax evasion and tax

avoidance. The purpose of this study is to show the impact of aid on economic development of Rwanda

1.1. THE PROBLEM STATEMENT

Rwanda and others countries globally especially in Africa are nowadays facing series of challenges when it comes to optimizing tax revenue and tax to GDP ratio for economic growth and development .While aiming to reach sustainable development objectives. The most obvious difficult challenge is how to find the optimal balance between a tax regime that is employees, business and investment friendly while at the same time leveraging enough revenue for public service delivery which in turn makes the economy more attractive to financiers.

In addition, tax compliance in Rwanda is doubtable as many prefer not to pay tax. As a result of the unwillingness to pay tax as well as evading tax, the economy therefore continues to lose huge amount of revenue. If this lost tax revenue came back into the economy and well utilized, can change the wealth of the nation. In developing countries like Rwanda, this problem has been persistent for so long which requires serious attention and solution.

Therefore, assessing the impact of tax revenue on development in Rwanda from during 10years from 2007 to 2017 is a research work carried out at the right time as there is an urgent need to examine more deeply and to look into the relationship between direct tax , tax on goods and services and tax on international trade and transaction on economic growth and development of Rwanda in Rwanda. This study will not only guarantee improved revenue base for the Rwanda but also take full advantage to African Tax Administration Forum members and global economies. Therefore, this research work examines the impact of tax revenue on economic growth in Rwanda by analyzing the tax gap in the system over the years and so revealing the critical challenges that needs to be outgrowth. Hence, the need for further study of the tax performance and its influence on the economic development of Rwanda.

1.2. OBJECTIVE OF STUDY

The general objective of this study is to find out how extend tax revenue impacts on economic growth in Rwanda from 2007 to 2017. The specific objectives of the study are to:

1.4. RESEARCH QUESTIONS

The research question of this study is concern about what is impact of tax revenue on economic growth in Rwanda from 2007 to 2017?

1.5. HYPOTHESIS

This research work is guided to know if tax revenue components impact positively or negatively by developing null and alternative hypotheses below: i. H0 : There is no positive significant relationship between direct tax and economic growth in Rwanda

H1: There is positive significant relationship between direct tax and economic growth in Rwanda

ii.H0: There is no positive significant relationship between tax on goods and services and economic growth in Rwanda

H1:. There is positive significant relationship between tax on goods and services and economic growth in Rwanda.

iii..H0: There is no positive significant relationship between tax on international trade and transaction and economic growth in Rwanda.

H1: There is positive significant relationship between relationship between tax on international trade and transaction and economic growth in Rwanda.

1.6 SCOPE OF THE STUDY:

The scope of this study covers critical examinations on the impact of taxation on economic development. In order to analyze the relationship between tax revenues and Gross Domestic

Product, Quarterly data for the period of 2007Q1 to 2017Q4 were used for these two variables from RRA and NISR.

1.7 SIGNIFICANCE OF THE STUDY:

One of the most frequently discussed issues in Rwanda is how to solve the economic hardship in the country and how Tax revenue induces economic development. Also many elite people around the world wonder reason why a country which is landlocked as Rwanda it's economy is green and it is not heavily indebted country.

The study afforded us the opportunity to know the impact of tax revenue in economic growth of Rwandan economy in 10 years

1.9 DEFINITION OF KEY CONCEPTS

Development economics is a branch of economics which deals with economic aspects of the development process in low income countries.

Direct tax is set of Pay As You Earn (PAYE), Taxes on Corporations & Enterprises and Tax on property (Property tax on Vehicles)

Economic development is the process by which the well-being of a nation improves because of progress in technology, progress in science and also because of general economic growth and innovation for country including Rwanda; it is the process by which a nation improves the economic, political, and social well-being of its people.

Excise tax is a tax that is measured by the amount of business done (not on property or income from real estate) excise. Indirect tax, it is a tax levied on goods or services rather than on persons or organizations. nuisance tax, sales tax.

Gross domestic Product (GDP) is a monetary measure of the market value of all the final goods and services produced in a period (quarterly or yearly) of time

Income per capita is a measure of the amount of money earned per person in a certain area.

Macro environment includes trends in gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy.

MINECOFIN is Ministry of finance and economic planning; it was formed in March 1997 from the joining of the Ministry of Finance and the Ministry of Planning. This was done in order to improve the co-ordination between the functions of finance and planning. In the ministerial re-structuring of February 1999, the Ministry took on the function of development cooperation from the Ministry of Foreign Affair.

Monetary policy is the macroeconomic policy laid down by the central bank like national bank of Rwanda. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.

National Bank of Rwanda, established by the Law of 24th April 1964, came into force from 19th May 1964 with the aim of fulfilling one of its main missions, namely the issuing of currency on the Rwandan territory. Vision of national bank of Rwanda is to become a World-Class Central Bank

Nontax means it is government revenue not generated from tax such fine, fees, licenses, government rent, concession, royalties,...

PAYE: A pay-as-you-earn tax or pay-as-you-go is a withholding tax on income payments to employees.

PIT: It is tax imposed on individuals or entities (taxpayers) that varies with perspective in come or profit

Profit Tax is composed by corporate income tax (CIT) and personal income tax(PIT)

RRA is Rwanda Revenue Authority. It is government body under Ministry of finance and economic planning (MINECOFIN) which is responsible for Tax revenue matters.

Socioeconomic status (SES) is an economic and sociological combined total measure of a person's work experience and of an individual's or family's economic and social position in relation to others, based on income, education, and occupation.

Tax Avoidance: This can be describe as the arrangement of tax payers' affairs using the tax shelters in the tax law, and avoiding tax traps in the tax laws, so as to pay less tax than he or she would otherwise pay. That is, a person pays less tax than he ought to pay by taking advantage of loopholes in a tax levy (Samuel and Tyokoso, 2014).

Tax Base:Total of taxable assets, income, and assessed value of property within the tax jurisdiction of a government. To assess tax base we normally look at GDP, Population and taxpayer.

Tax Evasion: Tax evasion is a deliberate and willful practice of not disclosing full taxable income so as to pay less tax. In other words, it is a contravention of tax laws whereby ataxable person neglects to pay the tax due or reduces tax liability by making fraudulent or untrue claims on the income tax form, (Samuel and Tyokoso, 2014).

Tax Incidence: It offers to the effect of and where the burden is finally rested.

Tax Rate The percentage rate at which tax is charged. It can be Consumption Tax is a tax on the money people spend, not the money people earn, Progressive Tax is a tax that is higher for taxpayers with more money, A regressive tax is one that is not progressive, Proportional Tax is the same as a flat tax.

Tax: A compulsory levy by the government on its citizen for the provision of public goods and services.

Taxes on goods and services is the set of Value Added Tax (VAT), Excise Duty, Road Fund, Mining Royalties, Strategic reserves levy)

Taxes on international trade and transactions is the set Import Duty, Other Customs Revenues, Infrastructure development levy and others regular tax

Tax-to- GDP ratio is an economic measurement that compares the amount of taxes collected by a government to the amount of income that country receives for its products (GDP).

The African Tax Administration Forum (ATAF) is a platform promoting cooperation, knowledge sharing and capacity building among African tax administrations. This is achieved, among other approaches, through conducting and making available applied tax research that can be used fruitfully by African tax administrations, policy makers, researchers and other stakeholders.

The Fiscal Policy is the decisions taken by the government with respect to its revenue collection (through taxation), expenditure and other financial operations to accomplish certain national goals.

VAT: Value Added Tax is a multistage tax levied and collected on transactions at all

Withholding Tax: This is tax charged on investment income namely: rents, interest,

1.10. ORGANIZATION OF THE STUDY

This study was divided into five chapters: Chapter one is general introduction and it is composed by the background of the study, Statement of the problem, Research hypothesis, Objectives of the study, Rationale of the study, and the Scope of the study, crucial definition of taxation and finally organization of this study.

Chapter two presents the literature in relation to the topic under study, this chapter deals with the historical background of taxation in general and Rwanda context, Conceptual framework, Theoretical framework and studies related to this study.

Chapter three briefly highlights the various research methods, simply this chapter indicates Data Collection, Sources of Data, Data Collection Procedure, Data Processing and Data analysis. Chapter four presents data analysis and interpretation of the results. It shows the index of data analysis in a scientific way using software and various tools such as tables, graphs, charts, etc.

Chapter five revealed summary of findings, conclusion and recommendations. In this study, researcher will combine, both qualitative and quantitative, so as to gain an insightful analysis of the relevant facts and figures in explaining impact of tax revenue on economic growth in Rwanda.

The study observes the ideas or views of various authors who took keen interest in the subject matter. Basically, the review was done on the following sub-headings of historical background, conceptual framework, theoretical framework, related case studies and summary of the literature reviewed.

2.2 HISTORICAL BACKGROUND OF TAXATION IN GENERAL AND RWANDA

Taxation is said to have come into existence «from time immemorial» without a specific mention of when exactly it evolved. However, the origin of tax levies can be traced to the ancient cities of Greek and Rome in modern literature; but from the Bible account, it has been as old as the world. In these so called cities of Greek and Rome, taxes were levied on consumption, saving, investment and properties (Abomaye-Nimenibo, 2017). From the account of St. Mark's gospel (chapter 12:14-16), a disciple of Jesus Christ precisely St. Peter was reported in the Holy Bible was confronted by the tax authorities and he met Jesus Christ who commanded him to get money with which Peter paid for himselve and the Lord Jesus Christ. St. Mathewgospel chapter 17:24-27 of the Holy Bible, stated that our Lord Jesus Christ Himself paid tax. Furthermore, in Matthew 19:21 we see tax money having its functions to perform in the society which enables government authorities to use in providing social services that will be enjoyed by all the citizens of a country. Such social services include the provision of health and education, maintenance of law and order, provision of basic amenities and infrastructures etc. Tax payment is therefore part of the price to be paid by sound members of an organized and orderly society

In Rwanda, The history of taxation in Rwanda indicates that the first tax legislation was inherited from colonial regimes. This tax legislation included the Ordinance of August 1912, which established graduated tax and tax on real property. There was another Ordinance on 15thNovember 1925 adopting and putting into application the order issued in Belgian Congo on 1stJune 1925, establishing a profits tax. This law was amended by law of 2nd June 1964 establishing Direct tax on profit. A substantive law governing customs was ratified on 17th July 1968 accompanying the Ministerial Order of 27th July 1968, putting into application the

Customs Law. This law was amended from time to time in order to comply with the changing economic environment. Such other legislative instruments include the 1973 law governing property tax, the tax on license to carry out trade and professional activities, the Law No. 29/91 of 28th June 1991 on sales tax (turnover tax) now repealed and replaced by the Law No. 06//2001 of 20/01/2001 on the Code of Value Added Tax (VAT). In 2005, the parliament adopted law number No25/2005 of 04/12/2005 on tax procedures, amending Decree-Law of December 28, 1973 relating to Personal Tax, Law No 06/2001 of January 20, 2001 on the Code of Value Added Tax and Law No 9/97 of June 26, 1997 on the Code of Fiscal Procedures. Similarly, Law No 16/2005 OF 18/08/2005 2005 on direct taxes on income was adopted replacing Law No 8/97 of 26/6/1997 on Code of Direct Taxes on Different Profits and Professional Income, and Law No 14/98 of December 18, 1998 establishing the Rwanda Investment Promotion Agency, especially in its Articles 30, 31 and 34.

The parliament also adopted Law No. 21 of 18/04/2006 establishing the customs law, replacing the Law of July 17th 1968 concerning the Customs law as amended and completed to date. However, on July 1, 2009, Rwanda adopted the EAC Customs Management Act 2004, An Act of the Community to make provisions for the management and administration of Customs and for related matters

2.3. CONCEPTUAL FRAMEWORK

The diagram below represents the independent and dependent variables. Since there are many variables, the researcher shall concentrate on three most important variables such as Independent variable, Dependent variable, and Intervening variables. This conceptual framework interlinks those three types of variables following their interdependence. It is clear that direct tax, Tax on goods and services and international trade and transaction as independent variable impact on the economic growth as a dependent variable.

2.4. Theoretical framework

This study review three theories of taxation: the cost of service theory, the benefit theory and the socio - political theories of taxation. According to the cost of service theory, the cost incurred by government in providing certain services to the people must collectively be met by the people who are the ultimate receivers of the service (Jhingan, 2009). This theory believes that tax is similar to price. So if a person does not utilize the service of a state, he should not be charged any tax. Some criticisms have been leveled against this theory. According to Jhingan (2009), the cost of service theory imposes some restrictions on government services. The objective of government is to provide welfare to the poor. If the theory is applied, the state will not undertake welfare activities like medical care, education, social amenities, etc. furthermore, it will be very difficult to compute the cost per head of the various services provided by the state, again, the theory has violated the correct definition and tenets of tax, finally the basis of taxation as propounded by the theory is misleading.

The limitations inherent in the cost of service theory led to the modernization of the theory. This modification gave birth to the benefit received theory of taxation. According to this theory, citizens should be asked to pay taxes in proportion to the benefits they receive from the services rendered by the government. The theory assumes that there is exchange relationship or quid pro quo between tax payers and government. The government confers some benefits on tax payers by providing social goods which the tax payers pay a consideration in the form of taxes for using such goods. The inability to measure the benefits received by an individual from the services rendered by the government has rendered this theory inapplicable (Ahuja, 2012).

The socio-political theory of taxation states that social and political objectives should be the major factors in selecting taxes. The theory advocated that a tax system should not be designed to serve individuals, but should be used to cure the ills of society as a whole (Bhartia, 2009). This study is therefore anchored on this theory.

According to Bhartia (2009), a tax revenue theory may be derived on the assumption that there need not be any relationship between tax paid and benefits received from state activities. We shall accordingly lookatsome of such theories as discussed below.

2.4.2. Socio-Political Theory

This theory of tax revenue states that social and political objectives should be the major factors in selecting taxes. The theory advocated that a tax system should not be designed to serve individuals, but should be used to cure the ills of society as a whole.

2.4.3. Benefit Received Theory

This theory is based on the assumption that there is basically an exchange relationship between tax-payers and the state because the state provides certain goods and services to the members of the society, therefore, members of the society should contribute to the cost of these supplies in proportion to the benefits received (Bhartia, 2009). Anyanfo (1996),supports this postulation by saying that taxes should be allocated on the basis of benefits received from government expenditure.

2.4.4 Faculty Theory

According to Anyanfo (1996), this theory states that one should be taxed according to the ability to pay. It is simply an attempt to maximize an explicit value judgment about the

distributive effects of taxes. Bhartia (2009), shares this same view by arguing that a citizen is to pay tax just because he can, and his relative share in the total tax burden is to be determined by his relative paying capacity.

2.4.5 Expediency Theory

This theory asserts that every tax proposal must pass the test of practicality. It must be the only consideration weighted by the authorities in choosing a tax proposal. Economic and social objectives of the state and the effects of a tax system should be treated as irrelevant (Bhartia,2009). Anyafo (1996) and Bhartia (2009) explained that the expediency theory is based on a link between tax liability and state activities. It assumes that the state should charge the members of the society for the services provided by it. This reasoning justifies imposition of taxes for financing state activities by inferences, which provides a basis, for apportioning the tax burden between members of the society. This proposition has a reality embedded in it, since it is useless to have a tax which cannot be levied and collected efficiently.

Pressures from economic, social and political groups abounds in every economy. Every single group tries to protect and promote its own interests and by extension, authorities are often forced to reshape tax structure to accommodate these pressures. In totality, the administrative set up may not be efficient enough to collect taxes at a reasonable cost of collection. Tax revenue therefore, provides a powerful set of policy tools to the authorities and should be effectively used for remedying economic and social ills of the society such as income inequalities, regional disparities, unemployment, and cyclical fluctuations and so on.

Adolph Wagner advocated that social and political objectives should be the deciding factors in choosing taxes. Wagner did not believe in individualist approach to a problem. He stated that each economic problem be looked at in its social and political context and an appropriate solution found thereof. Accordingly, a tax system should not be designed to serve individual members of the society, but should be used to cure the ills of society as a whole. This theory relates to a normal development process and represents a benchmark against which,a country's specific empirical evidence may be compared.

This study therefore focuses on the expediency theory which enables us to assess the extent to which the Rwanda tax system conforms to this scenario where the link between tax liability and economic activities are linked. Where applicable, such a characterization will enhance accurate tax revenue projection and targeting of specific tax revenue sources given an ascertained profile of economic development. It will also assist in estimating a sustainable revenue profile thereby facilitating effective management of a country`s fiscal policy, among others. This is because the expediency theory focuses on the fact that taxes are collected to achieve economic objectives which enhances the growth and development of a society in all its spheres. The socio-political, benefit and faculty theory are relevant also but they lay more emphasis on political relationship and ability to be objectives.

2.4.6 Concept of Economic Growth

Beardshaw et al (2001) define economic growth as an increase in the overall output of an economy over a given period of time; the overall output of an economy is also called national product. Growth of an economy in a given year is measured by the change in national output as a percentage of the national output achieved in the previous year.

The Keynesian four sector expenditure approach model of determination of national income explains how the equilibrium level of national income is determined by adding up all expenditures made on goods and services during a year. Income can be spent either on consumer goods or capital goods. Again, expenditure can be made by private individuals and households or by government and business enterprises. Further, people of foreign countries spend on the goods and services from other countries. These various expenditures are added up to obtain national income (as shown in Equation 3.1 below).

C = Final private consumption expenditure (expenditure on consumer goods and services by individuals and households).

I = Gross domestic capital formation or gross domestic investment (expenditure by productive enterprises on capital goods and inventories or stocks). This is divided into two parts: Gross fixed capital formation and addition to the stocks or inventories of goods.

G = Government final consumption expenditure (government's expenditure on goods and services to satisfy collective wants).

X = Export expenditure (expenditure made by foreigners on goods and services of a country)

M = Import expenditure (expenditure by people, enterprises and government of a country on goods and services produced in other countries)

The simple Keynesian model of income determination treats government final consumption, gross domestic capital formation (investments) and exports as autonomous expenditures. Private final consumption expenditure and import expenditures on the other hand have a constant exogenous component and that level of expenditure that depends on income (as shown in equations 3.2 and 3.3 below):

Where C is private final consumption expenditure; a is autonomous consumption; and b is marginal propensity to consume.

Where ?? is autonomous imports and m is marginal propensity to import. The equilibrium level of income in a three sector model is thus given by:

Differentiating equation 3.5 with respect to lump-sum tax T will give us the effect of a change in T on income Y

Equation 3.7 shows that tax multiplier, is negative meaning an increase in lump-sum tax by

Incorporating proportional income tax (tax levied as a fixed percentage or proportion irrespective of the level of income) into the three sector Keynesian model of income determination, then proportional income tax would mathematically be expressed as tY where tis the rate of proportion of income which is payable as a tax. In a real economy, proportional income tax may be imposed along with any lump-sum tax. Thus, the total tax

Equation 3.10 shows that proportional income tax has a negative multiplier effect on income.

Exports less imports (X - M) estimates net exports of a country in a four sector model of income determination. The exports and imports of a country depend to a great extent on the level of economic activity (that is, the level of output and income of a country) in such a way that, as a country's industrial output grows, it will generate greater demand for imported materials and also cause the country's exports to rise provided there is adequate demand for the output in foreign markets.

marginal propensity to consume (b) and marginal propensity to import (m). Note that change in any autonomous factor of the model such as a, I, G, X andM will cause a change in national

Incorporating proportional income tax in the four sector model of income determination, then only the term of foreign trade multiplier will change, the other terms of the model remaining the same. Thus, if income tax is of form where is constant lump-sum tax, is the proportion of income that is taken as tax. With the incorporation of proportional income tax, the value of trade multiplier becomes: T= T +Ty where T is constant lump-sum tax, t is the proportion of income that is taken as tax. With the incorporation of proportional income tax, the value of

Where t is the proportional income tax rate. With this proportional income tax, the equilibrium income equation can be written as

Equations 3.16 and 3.17 shows that proportional income tax and constant lump-sum tax have a negative multiplier effect on income.

2.4.7. ECONOMIC DEVELOPMENT

Rwanda embrace economic development since our nation is experienced dramatic improvement in the sector of the economic, political, and social well-being of its people. Economic development can also be referred to the quantitative and qualitative changes in the economy

Dafionone (2013), noted, «that for the country to lay claim on growth and development through taxation, there must be an improvement of the quality of life of the citizens, as measured by the appropriate indices in economic social, political and environmental term.

2.5 RELATED CASE STUDY

In an attempt to evaluate tax revenue and economic development of Rwanda, we are prone to utilizing regression analysis for the period of 2007 - 2017. It will therefore be worthwhile to look at the empirical literature.

Engen and Skinner (1996),also carried out a study of taxation and economic growth of U.S. economy, using large sample of countries and evidences from micro level studies of labour supply, investment demand, and productivity growth. Their findings revealed modest effects on the order of 0.2 to 0.3 percentage and pointed differences in growth rates in response to a major reform. They stated that such small effects can have a large cumulative impact on living standards.

Brian (2007), analyzed the effects of tax revenue on economic growth in Uganda`s experience for the period 1987 to 2005. From the study, tax revenue was found to have had an impact on the economic growth level of the country, with direct taxes having a positive effect while indirect taxes had a negative impact. However, he stated that due to time, financial and data constraints, not all essential issues could be analyzed. The issue arising from this work is the fact that indirect taxes are not easily evaded when it comes to payment because they are paid either at the time of consumption of the very good or service and at source and so one expects that they should have a positive impact on a country's' economic growth not negative as reported.

Babalola and Aminu (2011), also investigated the impact of taxation on economic growth in Nigeria over the period 1977- 2009. They examined the Unit roots of the series using the Augmented Dickey - Fuller technique after which the co-integration test was conducted using the Engle - Granger Approach. Error correction models were estimated to take care of short-run dynamics. The overall results indicated that productive expenditure did positively impacted on economic growth during the period of coverage and a long-run relationship exists between them as confirmed by the co-integration test.

Ikem (2011), investigated the interaction between tax structure and economic growth in Nigeria during the period 1961-2011. He made his analysis using two different econometric models: the neoclassical growth framework and Granger causality test in examining the level of impact and direction of causality respectively. The growth model was decomposed during the analysis into long run static equation and short run dynamic error correction model. The results revealed that income and CIT is statistically significant in promoting economic growth in Nigeria.

The impact of tax revenue on economic growth has been examined severally by different researchers. The empirical studies of Anyanwu (1997), Engen and Skinner, (1996), Tosun and Abizadeh, (2005) and Arnold (2011), were used as the basis for different explanations of taxes on economic.

According to Karran (1985) the tax revenue raised by the government depends to a large extent on the state of the economy; therefore the relationship between tax revenue and economic growth is an issue of great importance. Economic growth entails an increase in gross domestic product overtime and is mainly linked to tax revenue through its effect on tax base. If tax revenues are not sufficient to meet expenditure needs, the government must resort to borrowing, printing money, selling assets, or slowing down the implementation of development programs. All these actions generally damage the economy, especially the poorest segment of the society.

Mansfied (1972) observes that high tax elasticity is a desirable characteristic of a tax system since it allows growth in expenditure to be financed by raising tax revenue without the need for politically difficult decisions to raise the taxes.

Karran (1985) identifies three models of tax revenue change: (i) Macroeconomic determination model, (ii) consumer preference model and (iii) policy initiative model. Macroeconomic determination model holds that changes in tax revenues are brought about by economic growth and inflation. Economic growth may lead to increase in tax revenue by increasing the real value of the tax base. Economic growth can also change purchasing patterns, thus altering the revenues raised by particular taxes. Inflation has a direct effect on the revenue yield of taxes.

If a tax base is measured in money terms and levied on a percentage basis it is buoyant with respect to inflation; the increase in the money value of the base increases the revenue yield.

According to Heinemann (2001) tax revenue may be linked to changes in national income through fiscal drag. Fiscal drag describes the phenomenon whereby inflation and economic growth push more tax payers into higher tax brackets. This has the effect of raising tax revenue without explicitly raising tax rates, or changing tax bases.

2.6 Relationship between Economic Growth and Tax Revenue evolution from 2007 to 2017

2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

During the past decade spanning from 2007Q1 to 2017Q4, Nominal GDP was 484billion to 1985billion from 2007Q1 to 2017Q4 and Total tax revenues was 54billion to 306 billion from 2007Q1 to 2017Q4.During the 2007Q1 to 2017, the tax-to-GDP ratio has increased from 11.5 percent to 15.4 percent respectively.

2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3

Looking at different components of each tax revenue, the figure 2 above shows that the taxes on goods and services from is the biggest contributor with 28 billion to 166 billion from 2007Q1 to 2017Q4, direct taxes is second with 19 billion to 126 billion from 2007Q1 to 2017Q4 and lastly tax on international trade and transaction with 7 billion to 26 billion from 2007Q1 to 2017Q4

3.1. Introduction

This chapter describes the methodology was done on the following sub-headings of introduction, research design, theoretical framework, Related case studies and summary, data collection techniques and tools, data processing, methods of data analysis, limitation, ethical consideration and model specification

3.2. RESEARCH DESIGN

A research design is a master plan specifying the methods and procedures for collecting and analyzing the required information. Research design is the plans and the procedures for research that span the decisions from broad assumptions to detailed methods of data collection and analysis. The overall decision involves which design should be used to study a topic. Informing this decision should be the worldview assumptions the researcher brings to the study; procedures of inquiry (called strategies); and specific methods of data collection, analysis, and interpretation.

The selection of a research design is also based on the nature of the research problem or issue being addressed, the researchers' personal experiences, and the audiences for the study. ( Creswell,2008,P .3) According to Grinner and Williams (1990,P.279), research design is the entire process of the study, the problem formulation through dissemination of findings. It sometimes used to refer to graphic presentation of the independent variables. According to Churchill (1992:39), «a study design is simply the frame work or plan for the study used as a guide in collecting and analyzing data». The research design related to this study was based on the techniques set at each objective to have all the objectives achieved.

3.2.2. DATA COLLECTION TECHNIQUES AND TOOLS

Data collection was done through the secondary Data. Rwanda Revenue Authority(RRA) provides independent variable data as tax revenue and National institute of statistics of Rwanda(NISR) provides nominal Gross Domestic product spanning from 2007Q1 to 2017Q4.

3.2.3. DATA PROCESSING

This thesis investigates the impact of tax revenue on economic growth in Rwanda between 2007Q1 and 2017Q4. Many of economic and social changes have been taken place in Rwanda during this period. It is very important to analyze and evaluate the factors that affected the economic growth over this period. The data for the study have been collected from Rwanda Revenue Authority(RRA) and National institute of statistics of Rwanda( NISR). To find out the impact of tax revenue on the GDP and to test the study hypotheses, regression model were used to test the relation between the dependent and independent variables. Therefore, multiple regression model were developed to achieve the above objectives. In our model, GDP is the in dependent variable while direct tax, tax on good and service and tax on international trade and transaction are the independent variables. In this study we can analyze the impact of tax revenue on the economic growth in Rwanda. The study covers Rwanda Revenue Authority(RRA) and National institute of statistics of Rwanda(NISR) quarterly data spanning from 2007Q1 to 2017Q4.

In this empirical study, data have been processed and information related to the hypothesis and objectives of the study was taken into account and transformed into meaningful data for easy interpretation and understanding. This has been carried out by the use of e-Views package 8.

3.2.4. DATA ANALYSIS

3.4 TECHNIQUES OF DATA ANALYSIS

In analyzing the data gathered regressions model was employed to establish the relationship between dependent and independent variables. The study made use of economic approach in estimating the relationship between tax revenue and economic growth. Vector error correction model (VECM) was employed in obtaining the numerical estimates of the co-efficient in different equation. The ordinary least square method was chosen because it possesses some optimal properties. Its computational procedure is fairly simple

3.8 LIMITATION

Like any other research, this research was encountered by the difficulties such as; Inadequate funds to carry out the project, Personal extremely effort to meet deadline.

3.9 ETHICAL CONSIDERATION

For those who interest to read Bible,Matthew 19:21 we see tax money having its functions to perform in the society which enables government authorities to use in providing social services that will be enjoyed by all the citizens of a country. Therefore, we must have attitude and ethics to pay to tax on time in order to build our nation.

3.10 MODEL SPECIFICATIONS

The method employed in this study, involves discussion of data collection analysis techniques. We adopted a quasi-experimental research which is purely analytical. In this study we used quarterly data covering the period from 2007 to 2017, from the Rwanda Revenue Authority (RRA) statistical bulletin and annual reports and National institute of statistics of Rwanda(NISR). The economic growth variable is nominal GDP at current basic prices. The study uses three independent variables: direct tax including tax on property, taxes on goods and services, taxes on international trade and transactions including others tax.

Authors such as Osoro (1993), Kusi (1998), Muriithi &Moyi (2003) and Bilquess (2004) used the following models to estimate buoyancy and elasticity:

Or Tax t = u0 + f3yt + et (3)
Where Tax t = log (Tt) and Yt = log (Yt) e: Stochastic disturbance term

In this this thesis, I am going to use the following models to estimate long run tax revenue and

economic development in Rwanda: LnGDP = É(LnDT, LnTGS, lnTITT,) (4)
The estimable econometric model is shown in equation as

Dummy Variable for Tax on international trade and transactions DM_TITT) f31, f32, f33 is regression parameters

Therefore,In order to capture short run dynamics, we estimate Vector Error Correction Models (VECM)

Definition of variables used, their estimation coefficients and expected signs of each

4.1 Introduction

In this chapter, the researcher used to apply the econometrics method in order to verify the research hypotheses of the study, the researcher has developed different points like: summary statistics, correlation matrix, specification of the model, expected signs, data processing, model estimation and diagnostic tests by using the data of Rwandan economy on the period from 2007Q1 up to Q42017Q4.

4.2 SUMMARY STATISTICS

The table below summarized quantitative data using mean, median, maximum, minimum,

standard deviation, skewness and kurtosis. The results are displayed in Table 1 below. Table 1: Summary Statistics

The statistics from Table 1 is based on 44 Quarterly observations from Q12007 to Q42017. Over the study period, natural logarithm of Nominal GDP which is the dependent variable ranged between a maximum value of 7.593374 and a minimum value of 6.182085, with an average of 6.975523. It recorded a standard deviation of 0.388659, indicating that the data cluster scatted away the average. The natural logarithm of DT has a mean of 4.043814, with sample ranging between 4.835751 and 2.937524. LDT had a higher standard deviation of 0.546176 in the series. natural logarithm of TGS, recorded the mean of 4.282138 with standard deviation of 0.499604 and a minimum and maximum value of 3.322205 and 5.043064 respectively. natural logarithm of TITT obtained the mean value of 2.590486 and the standard deviation of 0.386691, a minimum value of 1.933846 and a maximum value of 3.243469.

Correlation matrix showed the Relationship between FDI dependent and independent variables

Table 2 shows the relationship between the dependent variable GDP with independent variables DT, TGS and TITT.The correlation between GDP and DT, TGS and TITT is positive and significant. It is noted that the highest relationship of 99.45% is exhibited by the correlation between GDP and TGS. This implies that TGS is the most important variable correlated with GDP for the period under consideration from Q12007 up to Q42017. TGS in correlation with GDP is followed by DT and TITT respectively. That is to mean that there is a relationship between independent variables with GDP in Rwanda during the period of study. However, these preliminary results are insufficient for reaching a conclusion, and further tests will be carried out in the following subtopics.

4.4 UNIT ROOT TEST (TEST FOR STATIONARITY)

Unit Root Test is done to ascertain whether the variables used in the model are normally distributed (stationary) or non-stationary (i.e. have a unit root). This is done using the Augmented Dicker-Fuller (ADF) Test as shown in Table 4.

All variables have unit roots (i.e. non-stationary) at 5% and 10% levels of significance (as shown in Table 4) and are therefore are subjected to 1^st differencing to meet the condition that there should be no unit roots at 5 % and 10% levels of significance. .

After subjecting all the non-stationary variables to 1^st differencing, they all become stationary at 5% and 10% levels of significance (as shown in Table 5). They are therefore integrated of order 1 meaning they are stationary at the 1^st difference. The null hypothesis that the variables

have unit roots at first difference is thus rejected and conclusion made that the variables have no unit roots at 1^st difference.

4.5 COINTEGRATION TESTS

Cointegration tests facilitate to establish if there is a long-term relationship between the

variables. Subject to proof of cointegration, that will be an indication that the variables share a certain type of behavior in terms of their long-term fluctuations. However before testing for cointegration, the lag length to incorporate in the model will be selected empirically. This will ensure that the model avoids spurious rejection or acceptance of estimated results and to have standard normal error terms that do not suffer from non-stationary, autocorrelation or heteroscedasticity, the results are reported in Section 4.4.1.

4.6 LAG LENGTH SELECTION CRITERIA

The selection of optimal lag length is used in the estimation of vector autoregressive (VAR)

model. This is important to avoid spurious rejection or acceptance of estimated results. Table 3: Lag length criteria

Table 5 Lag length criteria revealed that researcher should use a maximum of 1 lag in order to

permit adjustment in the model and accomplish well behaved residuals. Table 5 confirms the lag lengths selected by different information criteria such AIC, SIC, Hannan-Quinn Information Criterion (HQI), FPE and the Likelihood Ratio Test (LR) selected three lags, therefore the information criteria approach produced agreeing results to adopt three lags. therefore, the Johansen Cointegration Test is conducted using one lags for the Vector Auto Regression.

4.7 JOHANSEN COINTEGRATION MODEL SELECTION

Table 6 shows the results of the Johansen Cointegration test used to investigate whether there exists long-run relationship among the cointegrating variables

Table 6 revealed that Trace test indicates 1 cointegrating equation at the 0.05 level of significant

Table 7 revealed that Maximum Eigenvalue test indicates 1 cointegrating equation at the 0.05 level of significant.

Since both tests reveal that the variables under study are cointegrating. therefore, these results reveal the existence of a long-run equilibrium relationship between the variables.

4.8 ESTIMATED LONG-RUN MODEL

The estimation of the Long-run model helps in discussing some classical tests like t-Test and

F-test, discussing about Adjusted R-squared (coefficient of determination), but also in making a deeper analysis.

Variable	Coefficient	Std. Error	t-Statistic	Prob.
C	3.748438	0.05855	64.02121	0.0000
LDT	0.163171	0.052121	3.130639	0.0033
LTGS	0.603103	0.061307	9.837459	0.0000
LTITT	-0.005913	0.034365	-0.172055	0.8643
R-squared	0.991228	Mean dependent var		6.975523
Adjusted R- squared	0.99057	S.D. dependent var		0.388659
S.E. of regression	0.037741	Akaike info criterion		-3.629615
Sum squared resid	0.056976	Schwarz criterion		-3.467416
Log likelihood	83.85154	Hannan-Quinn criter.		-3.569464
F-statistic	1506.693	Durbin-Watson stat		1.333763
Prob(F- statistic)	0.00000

Table 8 Shows the results of long run relationship between dependent variable and the independent variables and it is interpreted as follows:

The DT and TGS are two variables which were statistically significant to influence GDP in Rwanda during the period of study.

The DT has been significant at 5% level of significance and possesses expected positive sign in long run model, however the positive cointegrating coefficient of 0.163171 shows a positive relationship between GDP and the DT in that a 1% increase in DT would increase GDP to 0.163171 %. The results confirm the expected sign, and this positive sign may mean that in the long run, the biggest of host's country market is likely to encourage GDP. DT is statistically significant in explaining changes in GDP, suggesting that DT is an important factor in influencing Rwandan GDP.

The effects of TGS on GDP: TGS has a positive effect on GDP and significant relationship with GDP in Rwanda at 5% level of significance. the results show that increase in TGS by 1% leads to 0.603103% increase to GDP in Rwanda.

TITT has a negative effect on GDP and not significant relationship with GDP in Rwanda. TITT is statistically insignificant in explaining changes in GDP during the period of Q12007 to Q42017.

The coefficient of determination: the coefficient of determination (R2) is 0.99057. This means that 99.06% of variations in the dependent variable GDP are explained by the independent variables considered in the model.

The P-value of the F-statistic is 0.000000, which means the overall model is statistically significant at 5% level of significance.

4.9 VECTOR ERROR CORRECTION MODEL

As the variables were non stationary at their levels integrated of order I(1),stationary at first difference and cointegrated ,we analyzed the short run relationship among them by formulating an error correction model. The logic behind that model is to recover the long run information lost by differencing variables by introducing an error correction term gives the proportion of shocks accumulated in the previous period that are corrected in the current period. The results of VECM are presented in the following table.

Table 6 shows the findings of VECM and the results confirm that only the speed of adjustment of the model is 14.2% with error correction of -0.142323 and it is statistically significant at 10%. This implies that 14.2% of errors realized in the previous Quarter are corrected in the current one. This means that each quarter 14.2% of disequilibrium errors will be corrected due to any change from the equilibrium.

4.7 GRANGER CAUSALITY TESTS

Granger Causality tests clarified how the variables affect (drive) each other. The results are

Null Hypothesis:	Obs F-		Prob.	CONCLUSION
LDT does not Granger Cause				LDT does not Granger Cause
LGDP	43	c 2.74474	0.1054	LGDP
LGDP does not Granger Cause			1.00E-	LGDP does Granger Cause
LDT		25.5152	05	LDT
LTGS does not Granger Cause				LTGS does not Granger Cause
LGDP	43	1.81716	0.1852	LGDP
LGDP does not Granger Cause				LGDP does Granger Cause
LTGS		9.12791	0.0044	LTGS
LTITT does not Granger Cause				LTITT does not Granger Cause
LGDP	43	0.00221	0.9627	LGDP
LGDP does not Granger Cause				LGDP does Granger Cause
LTITT		5.68013	0.022	LGDP

In this section, the study seeks to establish if there is evidence of a causal relationship between the variables of interest.

? Since P-value=1.00E-05 or 0.001% is less than 5%, we reject null hypothesis of LGDP does not Granger Cause LDT in order to accept alternative hypothesis of LGDP does Granger Cause LDT. therefore, the results reflect that there is evidence of uni-directional causality from LGDP to LDT.

? Since P-value=0.0044 or 0.4% is less than 10%, we reject null hypothesis of LGDP does not Granger Cause LTGS in order to accept alternative hypothesis of LGDP does Granger Cause LTGS. therefore, the results reflect that there is evidence of uni-directional causality from LGDP to LTGS.

? Since P-value=0.022or 2.2% is less than 10%, we reject null hypothesis of LGDP does not Granger Cause LTITT in order to accept alternative hypothesis of LGDP does Granger Cause LTITT, therefore, the results reflect that there is evidence of uni-directional causality from LGDP to LTITT.

4.8 DIAGNOSTIC TESTS

In econometrics analysis the diagnostic tests are important to check whether the assumptions of tradition regression are confirmed.

These tests included Normal distribution test, Heteroscedasticity test, Autocorrelation test and Stability test.

4.8.1 NORMALITY TEST

Since the p-value 0.3462811 is greater than 10% level of significance, we fail to reject the null hypothesis that the error term is normally distributed at 95 % confidence interval and conclusion made that the error term is normally distributed.

4.8.2 SERIAL CORRELATION LM TEST

Table 4.10 reports the results of the first diagnostic test of autocorrelation. The null hypothesis (Ho) claims that there is no autocorrelation while the alternative hypothesis (H1) claims the opposite. The decision rule states that the null hypothesis (H0) should be rejected if the p-value of observed R-squared is less than the 0.05 level of significance. Hence, there is no presence of serial correlation in the estimated model, since the p-value of the observed R-squared is 0.2402 which is greater than the 0.05 level of significance.

4.8.3 HETEROSCEDASTICITY TEST

Table 4.13 shows the results of the second diagnostic test of serial correlation. the null hypothesis (Ho) claims that residuals are homoscedasticity and the alternative hypothesis claims that the residuals are heteroscedastic and thus the variance is not constant. The rejection rule states that the null hypothesis should be rejected if the probability value of observation R-squared is less than the 0.05 level of significance. Since the probability of Chi-Square of 0.2402 is greater than 0.05, the test fails to reject the null hypothesis of constancy of variance among the residuals in the model, and thus are deemed to be homoscedastic.

4.8.4 STABILITY OF THE MODEL

By analyzing the above graph, it was clear that the model is stable because the navigating blue line of graph does not cross the borders (the straight lines represent critical bounds at 5% significance level); this indicates that the GDP of Rwanda have been moving in a stable way from 2007 to 2017

4.9 IMPULSE RESPONSE FUNCTION

The impulse response function IRF shows the dynamic properties of the model .it facilitates to test the response of dependent variable to unit shock of independent variables.as it is presented in the following tables of IRF, the vertical axis shows the deviation from the baseline of the target variable in response to a change in one of the regressors,the horizontal axis also indicates the number of years under which the explained variable tends to be affected after any shock from one of the independent variables.

Figure 4.6. Impulse response of GDP to independent variables. Figure 4.6 revealed that:

5.1 INTRODUCTION

This chapter presents the summary, Conclusions and Recommendations for further research 5.2 SUMMARY

The study examines tax revenue and economic development of Rwanda from 2007to 2017. The theoretical literature upon which this work hinged on included, socio-political theory, expediency theory, faculty theory and benefit received theory.

Therefore, to achieve our objectives, data were collected on gross domestic product (GDP), direct tax (DT), tax on goods and services (TGS) and Tax on international trade and transactions (TITT) from Rwanda Revenue Authority(RRA) and National Institute of statistics of Rwanda(NISR). The study adopted the Johensen co-integration , The results of the unit root and the co-integration tests revealed that all variables are integrated of order one, I(1) and cointegrated indicating the existence of a long-run equilibrium relationship among variables included in the model and we use also Vector Error Correction Model (VECM) estimation method for data analysis to estimate for short run result. The empirical findings showed that direct tax(DT)and tax on goods and services(TGS) variables have positive at 0.1631 to 0.60 31 respectively and it impact on economic growth, while Tax on international trade and transactions(TITT) variable has negative at -0.005913 and it is insignificant impact on economic growth.

5.3 CONCLUSION

As conclusions , Johensen co-integration in analyzing the data collected on gross domestic product (GDP), direct tax(DT),tax on good and service(TGS) ,Tax on international trade and transaction(TITT) through secondary source namely Rwanda Revenue Authority(RRA) and National Institute of statistics of Rwanda(NISR), our result shows direct tax(DT),tax on good and service(TGS have positive impact on the gross domestic product(GDP) in Rwanda Whereas Tax on international trade and transaction(TITT) have negative impact on the gross domestic product(GDP) in Rwanda.

5.4 RECOMMENDATIONS

This study recommends that the policymakers within government of Rwanda must improve both direct tax and tax on goods and services (domestic tax) and increase Taxes on international trade transactions (customs duties), it will harm economic growth of Rwanda therefore custom duties must be rationally reduced or abolished and free trade zones like Africa continental free trade area (AfCFTA) must create to foster increased exchange of goods and services across borders.

Government of Rwanda should ensure that taxation is properly managed in a manner that will accelerate economic growth, reduce inflation rate and generate employment in the country.

Government should ensure that tax revenue is judiciously used in the provision of basic Education, social security Schemes, Agriculture development, Transportation, Primary Health Care, adequate Power Supply, Construction of Roads and Bridges, National defense and security, among others that will help the various sectors of the economy to grow and function very well thereby enhancing the growth and development of the economy.

If economic growth and development has to be achieved in Rwanda, then government revenue from tax should also be properly managed and judiciously be expended to provide basic facilities to the taxpayers of Rwanda.

i Government should use the revenue generated from tax especially that of tax on goods and services to develop the domestic sector of the economy especially in agriculture, health, education and national security sectors

ii Government should sensitize the citizenry through awareness campaign and enlightenment on the need to pay tax and not to evade it.

iii Government to encourage and also maintain on taxes remittance to Government account via the e-payment system with will improves tax on international trade and transaction components but also supporting the cashless economy.

iv Rwanda Revenue Authority needed to implement policies that will reduce the loop holes in tax laws which tax payers capitalize on to evade tax. Like prohibiting tax

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1. QUARTERS DATA USED FROM 2007Q1 to 2017Q4 in Rwandan francs billion

Years	Nominal GDP	DT	TGS	TITT	Total taxes
2007Q1	484	19	28	7	54
2007Q2	519	25	30	8	63
2007Q3	547	21	30	8	59
2007Q4	571	22	34	7	63
2008Q1	575	25	35	9	68
2008Q2	653	36	36	10	82
2008Q3	715	30	43	11	84
2008Q4	750	32	47	14	94
2009Q1	753	31	46	14	91
2009Q2	741	36	43	13	92
2009Q3	776	32	47	8	87
2009Q4	828	36	49	9	94
2010Q1	819	43	50	9	101
2010Q2	818	37	50	7	94
2010Q3	866	39	56	9	104
2010Q4	908	43	61	9	113
2011Q1	930	49	61	11	121
2011Q2	968	49	65	9	123
2011Q3	1038	45	69	10	124
2011Q4	1055	54	69	11	134
2012Q1	1074	61	72	12	145
2012Q2	1109	68	72	13	153
2012Q3	1175	56	78	17	151
2012Q4	1205	65	76	13	154
2013Q1	1186	82	77	12	172
2013Q2	1224	79	84	12	175
2013Q3	1225	71	89	15	175
2013Q4	1293	78	91	15	185
2014Q1	1321	77	94	18	189
2014Q2	1354	86	112	17	215
2014Q3	1396	82	106	17	205
2014Q4	1395	84	100	17	201
2015Q1	1422	95	101	17	212
2015Q2	1457	102	120	19	240
2015Q3	1522	85	120	18	224
2015Q4	1567	92	129	23	244
2016Q1	1596	109	121	20	250
2016Q2	1636	107	139	22	269
2016Q3	1689	98	129	21	248
2016Q4	1751	108	129	22	259
2017Q1	1820	122	138	23	283
2017Q2	1869	122	148	26	296
2017Q3	1927	109	144	23	276
2017Q4	1985	126	155	26	306

SOURCE: Rwanda Revenue Authority( RRA)-Planning and Research department and National Institute of Statistics in Rwanda(NISR)

DT : Direct tax (Pay As You Earn (PAYE)), Taxes on Corporations & Enterprises and Tax on property(Property tax on Vehicles)

TGS: Taxes on goods and services (Value Added Tax (VAT), Excise Duty, Road Fund, Mining Royalties, Strategic reserves levy)

TITT: Taxes on international trade and transactions (Import Duty, Other Customs Revenues, Infrastructure development levy) and others regular tax

Impact of tax revenue on economic growth in Rwanda from 2007-2017

E-mail: etienne.nzabirinda@gmail.com

ABSTRACT