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Author(s): Rosemary Peter Mwandu, Hamida Msofe, Tunu Mwiru, Pilly Marwa.

Volume/Issue: Volume 7 , Issue 1 (2024)

Abstract:

This study examines the relationship between capital structure and corporate effective tax rates using data from 25 randomly selected listed firms on the Dar es Salaam Stock Exchange over a ten-year span (2013–2022). We employed a random fixed effect panel regression model while controlling for firm-specific variables such as size, profitability, age, and growth. The study reveals a significant and negative relationship between capital structure and effective tax rates, implying that firms utilising higher debt financing tend to experience lower effective tax rates. Additionally, firm size and profitability exhibit a significant relationship with capital structure. These findings hold significant implications for Tanzanian businesses, suggesting that they may enhance tax efficiency through strategic capital structure decisions. For policymakers, the results provide empirical insights on potential tax policy reforms, potentially fostering a more favourable business environment in Tanzania. This research contributes empirical evidence on the financial and tax dynamics of listed firms in Tanzania.

Keywords:

Capital structure, effective tax rates, listed firms, Tanzania.

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