Empirical Examination of the Link between Value Added Tax and Total Tax Revenues in Zimbabwe

Governments in most developing nations heavily rely on tax revenue to sponsor government expenditure, and Zimbabwe is not an exception. Tax revenue is supposed to be used to grow or develop an economy. This study seeks to analyse the relationship between value-added tax (VAT) and total tax revenues for the Zimbabwean nation. The study uses a time series analysis for period 2011-2017, regressing total tax revenues against various tax heads. Appropriate data tests have been made, rejecting the use of the error correction model, and the study results drawn on an OLS regression model using STATA 11.1 statistical software. The study results indicate that both VAT on local sales and VAT on imports have a significant impact on total revenue. VAT on imports however, have a negative impact while that on local sales has a positive impact. The study recommended that efforts to improve tax compliance should be made to local firms so that more VAT could be collected. The study acknowledged the recent introduction of Automated Teller Machines by the revenue authority. Individual taxes and carbon tax have a positive impact to tax revenue, while company tax was marginally insignificant calling for increased measures to be exercised, and customs duty, mining royalties and excise tax were insignificant to explain total revenue