Impact Of Real Estate Sector Growth On The Tax Revenue Growth In Kenya

Abstract

This study sought to examine the impact of the growth of the real estate sector on the tax revenue growth in Kenya. The study was based on secondary time series data collected for the period 1984-2017. An OLS regression model was employed in the assessment of interrelations between the variables of interest. The results of the regression model revealed that 1% growth in real estate sector significantly increased tax revenue growth by 0.12%. A 1% growth in the manufacturing sector produced 0.98% significant increase in tax revenue. It also emerged that a 1% growth in the agricultural sector caused the tax revenue growth to slow down by 0.69%. In addition, the results showed that 1%increase in the growth of real estate sector and tax reforms resulted in a 0.12% and 3.09% significant increase in tax revenue, respectively. The results further established that growth in GDP and the external sector did not have a significant effect on tax revenue growth. The study thus recommends that the Kenya Revenue Authority (KRA) should continue innovating on measures for continued increase of tax revenue from the real estate sector since the impact is positive and significant. In this regard, KRA should pursue awareness programs and campaigns to encourage and remind citizens to pay their taxes. In the same light, the government should offer tax incentives to property owners.