Contribution of revenue enhancement plans to fiscal performance: A study of Local Government Authorities in Tanzania

Abstract

This study investigates the effects of revenue enhancement plans (REPs) on revenue collection performance in Tanzanian local government authorities (LGAs), focusing on Mwanza City Council, Manyara Urban Council, and Mbeya City Council. The research adopts a mixed approach, collecting data from 400 respondents using a multistage sampling technique. The data were analyzed using a multivariate ordered probit model. The results reveal that reducing revenue leakage and improving revenue forecasting accuracy significantly enhance revenue collection performance. Specifically, the coefficient for revenue leakage was -1.221 for effectiveness (p<0.01) and -1.59 for increment (p<0.01), indicating a strong negative impact on performance. In contrast, accurate revenue forecasting positively impacted effectiveness (1.390, p<0.01) and increment (0.516, p<0.01). The model also showed that high implementation costs negatively impacted revenue growth (increment: -1.634, p<0.05). Compliance was found to positively influence reliability (1.533, p<0.01) and efficiency (1.029, p<0.01), underlining the importance of adherence to regulations. The results also highlighted the need for cost management strategies, as implementation costs and leakages hinder revenue growth and efficiency. The study recommends policy measures such as adopting digital solutions to reduce revenue leakages, investing in forecasting tools, and strengthening compliance mechanisms to optimize revenue collection and improve financial sustainability.

Authors & affiliations

Dennis Hyera
Affiliation not supplied

Michael Kadigi
Affiliation not supplied

Daniel Wilson Ndyetabula
Affiliation not supplied

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