Impact of ICT Adoption, Economic Growth, and Internet Connectivity Phases on Tax Revenue in Tanzania

Abstract

This study analyses the mixed evidence surrounding the impact of ICT adoption on tax revenue in Tanzania, focusing on ICT investments, ICT imports, internet usage, and broadband penetration. Drawing on the Technology Organization Environment (TOE) framework and Production Theory, the study adopts a positivist philosophy and deductive approach, using 25 years of time-series data. Employing Regressions, Autoregressive Distributed Lag (ARDL) modeling, and Structural Equation Modeling (SEM), it investigates long-term effects, mediation, and moderation. The findings reveal that ICT investments, ICT imports, and broadband penetration positively influence tax revenue over the long term, while internet usage has a negative effect. Economic growth is found to partially mediate the relationship between ICT investments and tax revenue and fully mediate the effects of ICT imports, broadband, and internet usage. Furthermore, internet connectivity phases significantly influence the relationship between broadband penetration and tax revenue, with 3G and 4G technologies amplifying the positive impact, while 2G exhibits no significant effect. The study affirms the long-term impact of ICT on tax revenue and introduces economic growth and internet connectivity phases as mediating and moderating variables respectively. It challenges assumptions about the positive role of internet usage, offering nuanced insights into ICT’s fiscal implications. It offers practical insights for policymakers aiming to leverage digital transformation for more effective and inclusive tax systems, particularly as countries transition toward advanced technologies like 5G.