Browsing by Author "Nguvava, Heriel E."

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Influence of Transaction Cost Determinants on Credit Customer Category of Commercial Banks in Tanzania
(TIA, 2022-06) Nguvava, Heriel E.
The provision of credit services in rural areas is a challenge as agriculture and other rural economic activities have unique characteristics of dependence on natural resources, long production cycles and vulnerability to multiple risks. This paper aims to analyse transaction cost as the determinants of the choice of credit customer category for commercial bank’s credit business scale-up in Tanzania. Primary data for this study were collected from 37 registered and licensed commercial banks in January 2018 through structured questionnaires. The main sources of secondary data were peer-reviewed journal articles on transaction cost economics and rural financing. Data were analysed quantitatively through the logistic regression method. Key findings revealed that commercial banks have failed to scale up their credit operations to rural-based customers due to high transaction costs. This fact emanated from commercial banks’ preference of transacting credits directly with individual borrowers instead of using intermediaries, thus multiplying transaction costs, especially when dealing with rural-based borrowers. Therefore, commercial banks believe to be better off with few urban-based credit customers. This study recommended that commercial banks should use multiple credit governance structures (CGSs)\ (methods for credits delivery) to mitigate transaction costs when giving credits. Direct channels should be opted for when dealing with urban-based borrowers since low transaction costs are involved. Indirect channels with intermediaries should be opted for when scaling-up credit operations to rural-based borrowers since they allow the spreading of credit transaction costs throughout the credit supply channel. AJASSS Volume 4, Issue No. 1, 2022 page 245 Keywords: Credit, Transaction Cost, Commercial bank
Performance of Vat System in Tanzania Since Enactment of The Vat Act in 2014
(TIA, 2022-12-31) Nguvava, Heriel E.; Athanas, Noah N.
The 2014 Value Added Tax (VAT) reforms focused on reduction of the base alterations and broadening the tax base and also dealt with several legal drafting issues to enhance the effectiveness of the new VAT law with hopes of enhancing revenue collection. The objective of this article is to assess the performance of VAT system in Tanzania in terms of tax payer’s registration and collection efficiencies. This study adopted a quantitative paradigm whereby data were analysed quantitatively through descriptive statistics and ratio analysis for efficiency measurement. Only secondary data were used in this study. The sources of data were reports from the Tanzania Revenue Authority (TRA), the National Bureau of Statistics (NBS), the World Bank (WB), IMF and peer-reviewed journal articles on relevant subject matters. The study revealed a total of 4,575 taxpayers who were eligible to be registered for VAT but who were not captured by the VAT tax system by January 2022. As a result, the government is estimated to have lost about TZS 23,350.09 billion during that period. Furthermore, it was found that the contribution of VAT to GDP is 3.6 per cent which is below the country’s expectation threshold of 6 per cent annually and is below the East African Community member states’ average of 4.4 per cent. Both the VAT Efficiency and C-efficiency ratios were not performing well; their averages were 21.9 and 20.7 per cent respectively, below the EAC regional average of 25 per cent. It is recommended to the government to increase VAT registration threshold and reduce the VAT rate. TRA is urged to decentralize the registration of VAT taxpayers to regions so as to improve compliance and administrative efficiency. The study further recommends to TRA to audit the 4,575 taxpayers whose turnovers are above TZS 100 million but are not yet registered and captured within the VAT tax net.