Effect of Value Added Tax Collection on Gross Domestic Product in Rwanda (2012-2022)

This study investigated the impact of VAT collection, encompassing VAT collected on goods, services, and imports, on the GDP of Rwanda 2012-2022 using a multiple regression model. VAT plays a pivotal role in the fiscal policies of countries worldwide, and its efficient collection can significantly influence a nation’s economic performance. In the Rwandan context, where VAT is applied comprehensively, understanding how these diverse components of VAT affect GDP growth is essential for evidence-based policymaking and economic planning. Employing a multiple regression model, this research examines the relationship between VAT collection and GDP while controlling for other relevant factors that might influence economic growth. The study utilizes both time-series and cross-sectional data to capture the intricate dynamics at play. By analyzing the impact of VAT collected on goods, services, and imports separately and collectively, this study provides a nuanced perspective on the contribution of VAT to Rwanda’s economic development.The results of this research have significant implications for Rwanda’s policymakers, offering insights into the effectiveness of VAT as a revenue-generation tool and its role in fostering economic growth.This result indicate : Tax on Importation has a positive and statistically significant effect on GDP (Beta = 0.475, p = 0.010), suggesting that an increase in importation taxes is associated with an increase in GDP. Similarly, Tax on Goods shows a positive and statistically significant relationship with GDP (Beta = 0.309, p = 0.033), implying that higher taxes on goods are linked to higher GDP. This study suggests that taxation policies, particularly taxes on importation and goods, may have a significant influence on a region or country’s Gross Domestic Product. However, further research and consideration of other economic factors are necessary to fully understand the complex dynamics.