DETERMINANTS OF TAX REVENUE MOBILISATION IN LESOTHO
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Date
2020-12-11
Authors
Jabari, Refiloe
Journal Title
Journal ISSN
Volume Title
Publisher
UNIVERSITY OF BOSTWANA
Abstract
The study's objective is to examine the determinants of total tax revenue, VAT and IPCG taxes.
Another aim is to investigate the effects of the Lesotho Revenue Authority (LRA) on these tax
revenue categories. The empirical results are estimated using the autoregressive distributed lag
(ARDL) estimation technique using the data for the period 1982 to 2017. The results show that the
establishment of the Lesotho Revenue Authority has a significant positive effect on tax revenue
and its categories, that the total tax is positively affected by per capita GDP, agricultural and
services sectors, and remittance inflows. In contrast, official development assistance (ODA)
negatively determines tax revenue. When analyzing the determinants of direct taxes represented
by IPCG taxes, it is found that only per capita GDP has a positive effect in the long run.
Remittances and ODA have a negative long-run effect. In the short run, LRA and GDP per capita
have a significant positive effect on IPCG tax revenue. The VAT model findings show that services
hinder the VAT revenue while agriculture and ODA boost it in the long run. The short-run
dynamics reveal that VAT revenue is affected positively by the share of agricultural value-added
and negatively affected by the share of services value-added and remittances. Policies improving
agricultural sector and enhancing economic growth are recommended because these variables have
the potential to broaden the tax base in Lesotho