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
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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
CIT: it is an assessment levied by government on
profit of the company.
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
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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.
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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
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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
stages of sales and distribution.
Withholding Tax: This is tax charged on
investment income namely: rents, interest,
royalties and dividends, presently it is charged as the tax
offset
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