MACHIRI, Nyasha Nigel2025-09-292025https://research.unilus.ac.zm/handle/123456789/615Master of Science in Public Finance and Taxation - DissertationTaxation plays a crucial role in economic development, yet its impact on economic growth remains a subject of ongoing debate. In Zambia, limited research has explored the relationship between taxation and fiscal development, particularly in relation to key economic indicators. This study aims to narrow this gap by examining the effects of direct taxation on Zambia’s economic growth, with a specific focus on labor force participation rate (LFPR), gross fixed capital formation (GFC), and real interest rates (RIR). To achieve this, the study employs a cross-sectional annual dataset covering the period from 1990 to 2021. Data is sourced from the Zambia Revenue Authority (ZRA), the Bank of Zambia (BoZ), and the World Bank (WB). Real GDP at current market prices serves as the dependent variable, while the independent variables include taxation, LFPR, GFC, and RIR. The study applies the Cobb-Douglas production function as the primary analytical framework, complemented by three additional secondary models to enhance robustness. Methodologically, the study employs the auto-regressive distributed lag (ARDL) model to estimate both short term and long-term relationships between the variables. The error correction model (ECM) is further used to assess the speed of adjustment towards equilibrium in response to economic shocks. Standard diagnostic tests, including serial correlation and stationarity tests, are conducted to ensure the reliability and validity of the models. Findings indicate that while taxation is not the primary driver of economic growth, it contributes positively to Zambia’s economic development. Regression analysis highlights that capital formation significantly influences GDP in both the short and long run, while interdependencies exist between labor force participation and population levels. Additionally, a U-shaped relationship is observed between the real exchange rate and real interest rates, suggesting initial negative effects before long term adjustments stabilize the economy. The study also identifies inefficiencies in Zambia’s tax collection system and emphasizes the need for broader revenue sources to support sustainable development. Key policy recommendations include restructuring the tax system to enhance efficiency, optimizing tax revenue utilization, and ensuring that tax policies do not impose excessive economic burdens. By contextualizing taxation’s role within Zambia’s economic framework, this research contributes to global discussions on the relationship between taxation and economic performance, providing insights for policymakers and researchers alike.enThesis