Taxation Potential and Implications of Tax Reforms in Kenya 1968-1998

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University of Dar es Salaam
The purpose of this study is to assess the potential of the tax system as a tool for raising government revenue in Kenya paying particular attention to intensive reforms that were undertaken in the context of structural adjustment programmes initiated in the 1980s and 1990s. the modified version of the model developed by prest in 1962 and adopted in Mansfield (1972) is employed in this study. The proportional adjustment technique is utilized to eliminate the discretionary changes from the tax data before estimating elasticities. To test the hypotheses, two sets of equations are estimated. In the first set, tax revenue (gross of discretionary, changes) is regressed on GDP to establish the tax buoyancy. Second, tax revenues (net of discretionary effects) are regressed on GDP to obtain tax elasticity. Tax elasticity was analysed at three levels; Income elasticity, tax-to-base elasticity and base to income elasticity. On the basic of econometric analysis, the total tax system and the individual taxes are marginally buoyant. In the case of elasticities, the overall tax system and most of the individual taxes are inelastic at all levels. These findings reveal that the Kenyan tax system is not revenue productive with respect to the growth of national income or of the particular tax bases. Therefore, tax authorities should embark on methods that can promote compliance among taxpayers as well as improving on tax collection. Weak administration and corruption are singled out as common tumbling blocks against revenue productivity. Thus, the authorities should institute subtle measure to curb the menace and promote tax compliance
Available in print form, East Africana Collection, Dr.Wilbert Chagula Library, class mark (THS EAF HF5681.T3K4M89)
Taxation, Kenya
Mugabi, Paul Joshua (1999) Taxation Potential and Implications of Tax Reforms in Kenya 1968-1998, Masters dissertation, University of Dar es Salaam