The Effects Of Tax Reforms On Tax Productivity In Kenya
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Date
2006-11Author
Kieleko, Pauline M
Type
ThesisLanguage
enMetadata
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The key role of tax reforms in Kenya was to ensure that the tax systems put in place
could achieve revenue mobilization and reduce fiscal imbalances persistent in Kenya.
This was to be achieved through tax laws and policies intended to facilitate
responsiveness of individual and overall tax system to national income.
This study evaluates tax revenue productivity in Kenya for the period 1973 -2003. The
productivity is measured through buoyancy and elasticity. The coefficients are measured
through log regression of the taxes to the Gross Domestic Product. The analysis of this
study was carried out using the Proportional Adjustment Method (PAM) that was
considered appropriate due to its superiority in capturing the effects of tax reforms on
discretionary tax measures and tax productivity.
The analysis shows that there has been a considerable improvement of the tax revenue
productivity and that the reforms made in this period had significant effect on the
responsiveness of the tax system. Thus, the 1986 Tax Modernization and 1987 Budget
Rationalization programmes had a positive impact on the Kenya's tax productivity
especially on income and import taxes. The findings reveal that reforms had greater
impact on the elasticity than buoyancy. This implies that the growth in tax revenue during
the reform period was accounted for by the automatic changes rather than the
discretionary policy.
This study notes that the most rigid tax system was VAT. The empirical analysis
indicates that reform raised the productivity of the tax system with the exception of the
sales tax/VAT. This implies that significant review and rationalization of the rates under
VAT is also important. Further improvements are required in the area of reduction of
rates and exemptions, and increasing VAT administration capacity through a higher
budgetary outlay.
Citation
Masters thesis University of Nairobi (2006)Publisher
University of Nairobi. School of Business Studies
Description
Degree of Masters in Business Administration (MBA)