The Moderating Effect of Virtual System Upgrades in The Effect of Electronic Fiscal Devices on Value Added Tax Collections in Tanzania: The Case of Kinondoni Tax Region

Abstract

Tanzania Revenue authority introduced the virtual electronic fiscal devices as part of the modernization on top of existing fiscal devices (EFDs), however there a scant information on their effect. This study examined the moderating effect of virtual electronic fiscal devices in the relationship between electronic on Value Added Tax (VAT) collections in Kinondoni Tax Region, Tanzania. The study collected primary data from a randomly selected sample of 59 tax officers, 90 taxpayers and 21 tax consultants from TRA Kinondoni Tax Region, making a total of 170 respondents. The questionnaires with Likert scale questions was used to collect this data. Additionally, the study used secondary monthly time series VAT collection data from January 2005 to August 2022, a total of 212 months. The primary data was analyzed descriptively (using percentages) and secondary data inferentially (using ordinary least squared (OLS) regression analysis). From descriptive results majority of respondents (over 70 percent) agreed and strongly agreed that EFDs had positive effects on VAT collections and that Virtual EFDs have positive enhancing effect to the role of EFD in VAT collections. The univariate OLS regression analysis shows that EFDs had a positive and statistically significant effect on revenue collections (coefficient = 37.9 billion and p-value = 0.0073), the 1 percent level of significance and that the moderation of VEFD to EFD introduction has a positive and statistically significant impact on revenue collection (coefficient of 8.63 billion, p-value =0.000), at 1 percent level of significance. It is recommended that the government improves EFD and VEFD electronic systems, promote taxpayer education and awareness to use the systems. Future studies should use countrywide data, qualitative analysis and compare the VEFD-VAT collection relations across tax Regions.