Lobbying in tax policy making: The case of VAT-reform in Tanzania

This chapter explores the role of interest groups in revenue bargaining in Tanzania. It examines the bargaining over the 2014 VAT Act and shows that the relative bargaining power of the various involved parties affected the outcome of the reform. Business associations and other lobby groups worked purposefully and managed to shape the VAT Act in accordance with their own interests. Our analysis contributes to the literature on revenue bargaining by documenting bargaining over tax policies and its effects on the reform outcome.  The bargaining around the VAT Act confirms a central claim in the fiscal contract theory that revenue bargaining may lead to responsive and accountable institutions. However, it could also be argued that the VAT bargains instead demonstrate that uncoordinated public policy and lack of regulation on lobbyism challenged the initial technocratic approach to the reform and resulted in outcomes that are sub-optimal from a revenue perspective.