Effect of Corporate Governance on Revenue Collection a Study of Kenya Revenue Authority

Abstract

Since taxes are the primary source of income for the Kenyan government, discussions of corporate governance are now important since they affect how taxes are collected. Increased government spending and the Kenya Revenue Authority's failure to reach revenue collection goals account for Kenya's fiscal deficit. The government has had to make difficult financial decisions, including borrowing from other governments, issuing floating-rate Eurobonds, and also borrowing internally by issuing infrastructure bonds. Despite the numerous reforms the nation has implemented, KRA has been unable to collect enough tax income to address the fiscal deficit. This study sought to establish the effect of corporate governance on revenue collection at KRA. The study was guided by three theories namely; agency theory, stewardship theory and stakeholder theory. A descriptive research design was adopted. The population of the study was the 240 top level managers, middle level employees and assistant managers at KRA. The sample size was 150 arrived at using Yamane formula. The study relied on primary data collected using structured questionnaires. Data analysis involved descriptive, correlation as well as regression analysis. The independent variables for this study were board independence, board meetings and board size while the dependent variable was revenue collection. The regression results revealed that 50.9% of the variation in revenue collection can be attributed to the 3 selected variables in this study. It was evident from the Anova table that the degree of significance was 0.000. This value was less than the p value of 0.05. Consequently, the model was therefore statistically significant for predicting revenue collection based on corporate governance. Individually, board independence, board meetings and board size were found to be significant determiners of revenue collection at KRA. This study concluded that corporate governance practices are essential for KRA to use in its endeavor to improve revenue collection. The study recommends that management of KRA should ensure their boards are independent, there is adequacy of board meetings and number of board memebers as this will enhance revenue collection. It is further recommended that policy makers should come up with sound policies to guide government agencies such as KRA on corporate governance practices. Future researchers can focus on the effect of corporate governance on revenue collection among county governments in Kenya.