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VOL. 7, ISSUE 2 (2025)
Estimating and comparing tax efforts among selected East African Community member states
Authors
Patrick Mwanza Nzula, Dr James Murunga, Dr. David Musimbi
Abstract
This study focuses on tax effort, the gap
between mobilized and predicted tax revenue in the East African Community
(EAC). The EAC countries exhibit significant disparities in tax performance
despite their similar economic structures. The study employs self-constructed
panel of 5 nations from 2013–2023 for Kenya, Tanzania, Rwanda, Uganda, and
Burundi; the first step involved the estimation of a stochastic frontier tax
capacity model based on structural determinants (GDP per capita, manufacturing
share, trade openness, agriculture, financial depth, inflation, and exchange
rates). The succeeding step was computation of tax effort scores as the ratio
of actual tax revenue to this estimated capacity. The results reveal pronounced
heterogeneity in tax effort, with Kenya operating above capacity at 1.12,
Uganda and Rwanda near capacity, 0.95 and 0.92, respectively, while Tanzania
and Burundi show significant underperformance, 0.78 and 0.85, respectively.
These findings suggest that revenue shortfalls in the region are not solely due
to structural economic limitations but are significantly influenced by
disparities in tax administration efficiency, compliance cultures, and policy
implementation. The study concludes that policymakers must prioritize
institutional reforms, digitalization, and targeted formalization strategies to
close the effort gap, particularly in underperforming nations, to achieve the
domestic revenue mobilization goals of EAC Vision 2050 and Agenda 2063.
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Pages:76-80
How to cite this article:
Patrick Mwanza Nzula, Dr James Murunga, Dr. David Musimbi "Estimating and comparing tax efforts among selected East African Community member states". International Journal of Management and Economics, Vol 7, Issue 2, 2025, Pages 76-80
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