An Empirical Investigation Of Tax Buoyancy And Tax Elasticity In Zimbabwe, 1983 – 2014

May 2015
This study makes a revisit to the studies carried out earlier to measure tax buoyancy and tax elasticity in Zimbabwe, in the context of the structural changes that have taken place in the tax system in recent years. The main objectives of the study are to measure the elasticity and buoyancy of tax and to ascertain whether or not the tax system in Zimbabwe is elastic. Using the time series regression approach and annual time series data, this study reveals that the tax system in Zimbabwe was buoyant, albeit inelastic (less than unity) during the period 1983-2014, thus reflecting that the bulk of revenue collection emanates from discretionary changes in tax policy, rather than from automatic responses. The study recommends incorporation of the informal sector into the tax net, limiting the number of tax exemptions, and enforcing compliance by ZIMRA in order to improve the productivity of the tax system.