| dc.description.abstract | This study examined tax buoyancy, tax elasticity and the determinants of revenue stability in
Kenya. To identify the determinants of revenue stability, this study was based on the portfolio
theory. Revenue instability, the dependent variable, was regressed against revenue
diversification, revenue capacity, economic base instability and the quadratic form of population
using the OLS method. The proportional adjustment method was used to calculate tax elasticities
of various taxes. Overall tax buoyancy was calculated using the double log method.
This study found that there was no short run relationship between the revenue instability and the
independent variables. Although in the long run the exogenous variables had an impact on
revenue instability, only economic base instability had a significant impact.
The study also examined tax buoyancy and tax elasticity in Kenya. In the long-run tax revenue in
Kenya was found to be highly buoyant (3.622). However there was no short- run buoyancy.
Income tax, tax on international trade, V AT, tax on other goods and services and non-tax
revenue were found to be highly elastic while property tax was inelastic in the long run.
The results reveal that revenue diversification does not necessarily result to improvement in
revenue stability in Kenya. The results also depict that most taxes are income elastic. Thus
combination of these taxes is likely to increase revenue instability in case of fluctuations in
national income. | en_US |
