Effects of Tax Reforms on Revenue, a Study of Kenya Revenue Authority

Abstract

The research focused on the effects of tax reforms on tax revenue in the 40 quartiles between the financial years 2012/13 and 2021/22. It took the form of a country case study and thus focused only on Kenya’s tax collection agency, the Kenya Revenue Authority. Five chapters were used to present the research with chapter one focusing on the introduction, two on literature review, three on research methodology, four on data analysis, results and discussion, and five on summary conclusion and recommendations. The study variables included tax revenue for the dependent and tax reforms, exchange rate, GDP and inflation for the independent variables. Significant theories of tax reforms like the Optimal and Second best theories, and several empirical research outcomes were utilized in the study. Secondary data was sourced from reliable government entities like KRA, KNBS, CBK, the World Bank and so forth. The regression model alongside correlation was used in data analysis. The findings indicated that of the four predictor variables, the GDP had a more significant effect in determining changes in tax revenues. Tax reforms led to insignificant increases in tax revenue for the 40 quartiles studied. Increases in exchange rate, though positively correlated with tax revenue, had an inverse regression relationship with tax revenue hence an increase in Kshs. to the USD lowered tax revenue. The findings further indicated that increases in inflation decreased tax revenue. The research wrapped up by providing recommendations like the need to make continuous revision and moderation of tax reforms, limitations of the study like the focusing only on one agency (KRA), and suggestions for further studies like the need to incorporate tax elasticity and buoyancy measures in further likewise studies.