Implication of 4th Industrial Revolution on Tax Revenue Collection in Tanzania: A Case of Manufacturing Industries

Abstract

The study assessed the implication of the Fourth Industrial Revolution (4IR) on tax revenue collection in Tanzania. Specifically, the study set out to establish the causality of investment in 4IR technologies, on manufacturing industries’ Value Added Tax (VAT); determine the influence of investment in 4IR technologies on manufacturing industries’ Corporate Tax and examine the effects of investment in 4IR technologies on manufacturing industries’ Employment Tax (PAYE). To achieve the research objectives, the study used a quantitative descriptive design to generate the required data. Moreover, the study used structured questionnaires for cross-sectional survey, administered with 225 production managers of manufacturing industries in Tanzania. It used probability sampling in the form of cluster sampling. Additionally, the study used the Least Square method to analyse the objectives of the study in addition to testing the hypotheses. The study found a positive and statistically significant causal effect between investment in modern technology, VAT, Corporate tax and Employment Tax (PAYE) of manufacturing firms in Tanzania, for the period under study. Implicitly, the emergence of 4IR does not necessarily occasion a decline in tax revenue collections (VAT, PAYE, and Corporate Tax) on the part of manufacturing firms in developing countries endowed with resources, like Tanzania, but rather complements and accelerates its growth. Thus, the study calls on the Tanzania Government to review and improve its Sustainable Industrial Development Policy of 2020 and the Integrated Industrial Development Strategy of 2025 to embrace, promote and support not only resource-based industries, but also technological based industries, to speed up industrialization within the country and ultimately improve and increase tax revenue collection. The government should also improve its investment policies and align them with technological changes brought by 4IR, to attract more foreign direct investments, importation and adaptation of 4IR technologies from developed countries that enhance productivity, turnover and tax revenue collections from the manufacturing sector.