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Uganda Revenue Authority, Uganda

ISINGOMA, NALUKWAGO MILLY. "DETERMINANTS OF VALUE ADDED TAX IN UGANDA (FINANCIAL YEARS 1999/00 TO 2010/11)." Int. j. of Social Science and Economic Research, vol. 3, no. 11, Nov. 2018, pp. 5753-5798, Accessed Nov. 2018.
ISINGOMA, N. (2018, November). DETERMINANTS OF VALUE ADDED TAX IN UGANDA (FINANCIAL YEARS 1999/00 TO 2010/11). Int. j. of Social Science and Economic Research, 3(11), 5753-5798. Retrieved from
ISINGOMA, NALUKWAGO MILLY. "DETERMINANTS OF VALUE ADDED TAX IN UGANDA (FINANCIAL YEARS 1999/00 TO 2010/11)." Int. j. of Social Science and Economic Research 3, no. 11 (November 2018), 5753-5798. Accessed November, 2018.

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The study was undertaken to establish the determinants of VAT in Uganda with an overall objective of establishing which macroeconomic indicators that had an impact on the VAT trends. This was because of a need to expand the revenue take in light of the declining share of Aid in the government finances. This would require improvement of Uganda's VAT productivity by understanding the factors affecting its performance and thus inform policy measures. The macroeconomic indicators considered were government consumption, private consumption, inflation, imports, population density, share of agriculture in GDP and monetary GDP. These variables were transformed in order to improve the normality. Structure stability tests and stationary tests taken revealed that there was no structure break and the variables became stationery after the second differencing except population density. The cointegration tests showed that a linear combination of the variables was stationary hence the existence of a long run relationship. In the long run, population density, increase in VAT rate, and inflation had a positive effect on VAT, while private consumption, government consumption and imports had a negative impact. The Error Correction Model was then estimated and the over parametised model reduced to parsimony. The determinants of VAT in Uganda for the period under study were; private consumption, inflation and imports. Lagged VAT, private consumption and inflation were found to have a significant positive effect on current periods VAT in the short run. It was also established that imports had a significant and positive effect on current VAT after the second lag. Government consumption was found to be insignificant to VAT in Uganda for the period under study. This means that previous levels of tax bases (private consumption, imports and inflation) have a significant influence on the present levels of VAT. The study recommends that in order to improve VAT revenue, government should enhance growth of economic activities to support increase of imports and promote increase in private consumption. Inflation rate should also be considered when projecting VAT collections.