| dc.description.abstract | One of the most significant dynamics impacting on Kenya's public
revenue is the issue of taxation. Taxation is essentially concerned
with restructuring the balance between current consumption and
current investment, transfer purchasing power from one section of the
community to another, besides raising revenue for national
development. It thus becomes essential to monitor the progress of tax
revenue in relation to changes in the Gross Domestic Product.
The purpose of this study was to empirically analyse the likely
behaviour of tax receipts in relation to changes in the tax base in
Kenya, taking into account both the automatic and discretionary
changes over a period of 30 years. It emphasizes that both buoyancy
and elasticity are key analytical tools for designing tax policy and
serve to explain the overall tax structure. The study used the
Proportional Adjustment method for data analysis because it yielded
better estimates of tax elasticity than the Divisia Index method,
Dummy Variable approach me.th~od, or the Constant Rate Structure
which required disaggregated data.
The findings of the study revealed an elasticity estimate of 0.82, which
is less than unity, indicative of an inelastic tax structure. It is also a
pointer that incomes could be lagging behind GDP growth. Buoyancy
estimates on the other hand were 1.0, which is an optimal or fairly
buoyant rate.
Policy recommendations based on these findings amongst others
include reviewing the tax bases, limiting .exemptions in consumption
policies and evaluation of non- tax policies that have impacts on
bases such as GDP, interest rates, consumption, imports and
inflation. The overall macro-economic environment could be improved
through increased standards of literacy, predominant money
economy, prevalence of honest and reliable accounting system, degree
of voluntary compliance and a political system not dominated by
wealthy groups who are acting m their own self interest. | en |
