Macroeconomic Variables, Trade Openness and Tax Revenue in Sub-Saharan Africa

Abstract

This study examined the impact of trade liberalization and performance tax revenue in the context of macroeconomic variables in 22 sub-Saharan African countries. The study covered the period from 2005 to 2014. The research conducted a unit root test in examining the stationarity of the variables. The panel co-Integration and the Vector Error Correction model were deployed to determine possible long or short run connection among the series. This was in addition to the Granger causality test. The Serial correlation, and Breusch-Godfrey Lm, and the Breusch-Pagan-Godfrey techniques were also employed to validate the robustness of the estimated model. The result showed short run nexus between inflation, interest rate and trade openness on the one hand and tax revenue on the other. In the long run, inflation rate, interest rate and unemployment rate were positively affiliated to the performance of tax revenue. The post-estimation tests confirmed the absence of heteroskedasticity and serial correlation. The study recommended efficient and transparent tax collection in order to bring more payers into the tax net and promote voluntary payment. Stable macroeconomic fiscal, monetary and trade policies should be deployed boost the standard of living and disposable income of its citizens. Trade liberalization and commercial policies should be intensified in order to harness the tax benefits derivable from international trade.

Keywords: Tax Revenue Performance, Exchange Rate, Interest Rate, Inflation Rate, Trade openness , Unemployment Rate