IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 4 NO. 4 2019

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Responsiveness of Tax Revenues to Tax Reforms in Kenya: A Dummy Variable Approach

Kevin Wanjala

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Abstract

Tax reforms play a vital role in the economy of any country by improving its tax systems. Kenya has experienced significant changes in its economy over the last four decades. The government felt the need to increase its tax revenues to meet social obligations. Despite the undoubted good intentions of the Kenya Revenue Authority and a general increase in capacity within the organization as a whole, tax revenue has failed to show any signs of the dramatic anticipated increase. The study sought to establish the responsiveness of tax revenue to tax reforms in Kenya. In particular, the study examined how changes have affected revenue collected in Kenya by focusing on four significant reforms, i.e., the introduction of Simba system, Electronic Tax Registers (ETR), I-tax system and the reintroduction of capital gain tax. The general objective of the study was to establish the effects of tax reforms on tax revenue. The study adopted the elasticity approach to analysing the data using secondary data. The study found that Capital Gain Tax has a significant and positive impact on income tax, ETR has a positive and significant influence on VAT, and I tax a positive and significant effect on Total revenue. However, the study failed to establish a positive impact of the Simba system on customs duties.

keywords:

Tax reforms, I-tax, Capital gain tax, Simba system, Kenya

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