Statistical analysis of the impact of taxation on labour force participation and youth unemployment in Uganda

Abstract

Taxation is one of the means used by the government to finance its expenditure through the tax revenues collected both directly and indirectly, it is considered a major source of government’s revenue in the country. There also exists other sources of government revenue except taxation such as printing of money, collection of money through penalty and other means, but those solutions lead to other problems. The revenue collected from taxes is the best solution since it does not affect any social variables in the country; this also aims at job creation especially for the youths which can in turn reduce on youth unemployment and increase on their opportunities to work hard and also pay the taxes. The study sought to find out the impact of taxation on labor force participation and youth unemployment in Uganda. The study used data from World Bank data for a period of 20 years spinning from 2001 to 2020. A software application of STATA was used and the data was analyzed at univariate, bivariate and multivariate levels. Findings from the study revealed that, foreign direct invest is one of the major contributors to Uganda’s tax revenue, this is through the larger investments which widens the tax base of the country. Furthermore, the results of the study showed that there was a significant relationship between taxation and Foreign Direct investment and also Youth unemployment rate this was evident with lower P-Values of 0.0318 and 0.048 respectively, whereas. Gross Domestic Product and Inflation Rate have a negative impact on the Tax revenue. Following the findings, the study recommended the government to provide conducive environment both politically, economically and socially as a way of attracting more investors, who in turn increase on the tax revenue of the Country and also providing of subsides. And also added that, the government should take a keen look at the inflation rate, as this not only affects the tax revenue, but also affects the living standards of the citizens and to a worst note, discourage potential investors.