| dc.description.abstract | Kenya has in the past implemented tax amnesties in its tax regimes in the years 1993, 1998 and 2004 to improve compliance among the taxpayers. The objective of this study was to examine the effect of the year 2004 tax amnesty on VAT compliance in Kenya. The key research question was: 'Did tax amnesty of the year 2004 affect the VAT compliance?' The study utilised secondary data obtained from the KRA data base for the financial years 1995/6 to 2006 providing sufficient dataset for the use of an event study methodology for analysis.
The analysis result showed that VAT collections and taxpayer base have continuously grown in the past decade despite some observed seasonality in the data. The study indicated that tax amnesty has the following effects: First, the tax amnesty impacted positively on both short and long run compliance. This was evident by an upward trend after the amnesty event and further confirmed by high positive abnormal VAT collections. Secondly, the amnesty duration allowed the taxpayers to pay their overdue tax. This helped the government to manage its debt portfolio as shown by high collections during amnesty period associated with past transactions.
The empirical findings in this study support the proponents of tax amnesty. Studies have shown mixed results on the impact of amnesties on both short and long run compliance but all agree on its effect on debt management (Laborda and Rodrigo, 2003). This study confirms this scenario by showing collection of overdue tax as noted by AIm and Beck (1993). The study further supported Laborda and Rodrigo (2003) that amnesty improves short and long term compliance. | en_US |
