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Tax reforms and revenue mobilization in Kenya

Author

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  • Moses Kinyanjui Muriithi
  • Eliud Dismas Moyi

    (Kenyatta University, Nairobi)

Abstract

One of the key objectives of tax reforms in Kenya was to ensure that the tax system could be harnessed to mitigate the perpetual fiscal imbalances. This would be achieved through tax policies intended to make the yield of individual taxes responsive to changes in national income. In addition, it was expected that the predominant taxes in the revenue would be those with highly elastic yields with respect to national income (or proxy bases). This study applies the concepts of elasticity and buoyancy to determine whether tax reforms in Kenya achieved these objectives. Elasticities and buoyancies are computed for the pre-reform period as well as the post-reform period. Evidence suggests that reforms had a positive impact on the overall tax structure and on the individual tax handles. In fact, the elasticity of indirect taxes was low and that of direct taxes was high, especially after the reforms. Despite this positive impact, the reforms failed to make VAT responsive to changes in income, although VAT was predominant in the tax structure

Suggested Citation

  • Moses Kinyanjui Muriithi & Eliud Dismas Moyi, 2003. "Tax reforms and revenue mobilization in Kenya," Working Papers 131, African Economic Research Consortium, Research Department.
    • Handle: RePEc:aer:wpaper:131
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    Cited by:

    1. Imtiaz Arif, Lubna Khan, Faheem Hussain, 2017. "Impact of Semi-Autonomous Revenue Authority on Tax Revenue and Buoyancy: Evidence from Pakistan," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 2(2), pages 164-174, October.
    2. James Murunga & Nelson W. Wawire & Moses K. Muriithi, 2021. "Tax Revenue Productivity of Tax Reforms in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(12), pages 1-42, December.
    3. Winter-Nelson, Alex & Argwings-Kodhek, Gem, 2007. "Distortions to Agricultural Incentives in Kenya," Agricultural Distortions Working Paper Series 48521, World Bank.
    4. Mwakalobo, Adam B. S., 2015. "Dynamics of Revenue Generation in Tanzania, Kenya and Uganda: A Co-integration and error-correction modeling approach," African Journal of Economic Review, African Journal of Economic Review, vol. 3(2), July.
    5. Nelson WAWIRE, 2017. "Determinants of value added tax revenue in Kenya," Journal of Economics Library, KSP Journals, vol. 4(3), pages 322-344, September.
    6. Cyrus MUTUKU, 2015. "Assessing Fiscal Policy Cyclicality and Sustainability: A Fiscal Reaction Function for Kenya," Journal of Economics Library, KSP Journals, vol. 2(3), pages 173-191, September.
    7. repec:gei:journl:v:2:y:2017:i:2:p:165-175 is not listed on IDEAS
    8. Jochimsen, Beate & Wanyagathi Maina, Anne, 2019. "Consumption taxes, income distribution and poverty: Evidence from Kenya," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 19-06, University of Cologne, FiFo Institute for Public Economics.
    9. Kodjo Adandohoin & Vigninou Gammadigbe, 2022. "The revenue efficiency consequences of the announcement of a tax transition reform: The case of WAEMU countries," African Development Review, African Development Bank, vol. 34(S1), pages 195-218, July.
    10. Usman O. A. & Adeoye M. A. & Alimi A. A, 2023. "Impact of Tax Reforms on the Liquidity of Nigerian Stock Market (1982-2021)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(2), pages 607-617, February.
    11. Hussein Salia, 2016. "The Effect of Value Added Tax on Corporate Cash Flow in Ghana," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(7), pages 303-303, June.
    12. Brima Ibrahim Baimba Kargbo & Adegbemi Festus O. Egwaikhide, 2012. "Tax Elasticity in Sierra Leone: A Time Series Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 432-447.

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