iKESRA Repository
Find and retrieve publications, range of materials, such as legislation, journal articles, books, theses, and other materials, which are helpful for research and informational purposes, particularly for those with an interest in taxation, customs, and fiscal policy.
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Moderating the Effect of Taxpayer Engagement on the Relationship between Capital Gains Tax and Tax Compliance among Real Estate Businesses in Nairobi, Kenya
(Kenya School of Revenue Administration, 2023-11) Netia, Faith Opisa; Omwenga, Emma
Even though there has been a progression towards the realization of more taxes from CGT, the same is not commensurate with the size of the real estate market in Kenya. Consequently, there have been proposals to increase the CGT rate from 5% to 12.5% but the proposals have been met with resistance with some preferring stakeholders’ engagement to streamline the issues on compliance rather than increasing the rate. For this reason, the study sought to investigate the moderating effect of taxpayer engagement on the relationship between Capital Gains Tax and Tax compliance specifically among real estate property businesses in Nairobi, Kenya. The study adopted an explanatory research design with the targeted population being 467 real estate businesses from where a sample size of 216 was drawn. The specific objectives of the study were to investigate the effect of lock-in-effect on tax compliance among real estate businesses in Nairobi, the effect of capitalization effect on tax compliance among real estate businesses in Nairobi, and to determine the effect of taxpayers’ engagement as a moderating variable in the lock-in effect and capitalization effect on tax compliance among real estate businesses in Nairobi, Kenya. Data collection was done through a 5-point Likertscale questionnaire. Inferential statistics through the use of regression and correlation analysis was used to analyze variables. Regression analysis established a negative significant linear relationship between the lock-in effect and tax compliance among real estate businesses in Nairobi, Kenya with a beta coefficient of -0.119. Additionally, there was a negative significant linear relationship between the capitalization effect and tax compliance among real estate businesses in Nairobi, Kenya with a beta coefficient of -0.293 and lastly a positive but insignificant linear relationship between taxpayers’ engagement and tax compliance among real estate businesses in Nairobi, Kenya with a beta coefficient of 0.189. Also, there was a positive significant linear relationship between taxpayers’ engagement moderating on lock-in-effect and tax compliance among real estate businesses in Nairobi, Kenya with a beta coefficient of 0.521 and a negative insignificant linear relationship between taxpayers’ engagement moderating on capitalization effect and tax compliance among real estate businesses in Nairobi, Kenya with a beta coefficient of -0.258. The study concluded that the lock-in effect and capitalization effect had a negative and significant effect while tax engagement had a positive and insignificant effect on tax compliance among real estate businesses in Nairobi, Kenya. However, taxpayers’ engagement as the moderating variable was found to play a significant role in tax compliance among real estate businesses in Nairobi, Kenya. The study recommended that KRA should create more awareness among taxpayers on the impact of lock-in effects and capitalization effects on the economy and why it is a vital aspect for consideration.
Impact of Indirect Tax Policy Reforms on Revenue Performance in Kenya
(Kenya School of Revenue Administration, 2023-11) Kiara, Faith Gatwiri; Nekesa, Marion
The largest source of government revenue in Kenya is taxation. Domestic revenue mobilization is a key priority for providing governments with funds to deliver public services, for sustainable development agendas and investing in development. Tax and non-tax revenue are critical
components of domestic resource mobilization. Over the years, there have been major changes in the tax systems of various countries including Kenya. The motivation for these reforms has varied from country to country. For many developing countries, the impending fiscal crisis has provided the need for immediate tax reforms to enhance revenues. Kenya has undertaken massive tax reforms since the late 1980s under the Tax Modernization Programme. The significance of Indirect taxes over direct taxes as a means of raising government revenue has gained momentum and is viewed as more favorable for investment and growth. Little is known about the performance of the reforms in terms of revenue-raising capacity for each tax category. This study aims to examine the impact of tax reforms with respect to pre-and post-reform periods and the factors underlying the observed trends of indirect taxes as one of the revenue sources that is not fully utilized. The objectives of the study were to establish the effects of the introduction of Withholding VAT the introduction of EGMS and switching the tax system from hybrid to a uniform specific or ad valorem Excise tax regime on revenue collection in Kenya. Annual secondary data spanning the period 2010-2019 was used in the analysis. The source of the data was mainly the Kenya Revenue Authority and the Kenya National Bureau of Statistics. Impact evaluation techniques (regression discontinuity and difference-in-difference) also known as quasi-panel analysis techniques were used in the analysis. Stata software was employed in the analysis. From the difference-in-difference model, the analysis reveals that the introduction of EGMS led to an increase in excise revenue by 81.2%. This was significant at a 1% level of significance. VAT increased by 13.4 percent following the introduction of VAT withholding agents. This was equally significant at a 5a % level of significance. These findings are expected to shape policy direction that is aimed at enhancing domestic revenue mobilization. Based on the findings, the study recommends that the Commissioner of Domestic Taxes should map all Medium Taxpayers (MTO) based on risk assessment and enroll additional taxpayers who can serve as potential VAT withholding agents. Further, the study recommends the broadening of the scope of goods covered under the EGMS system, and amendment of the Excise Duty Act to revert to the hybrid system (Higher specific or ad valorem rates).
Effect of Tax Incentives on Financial Performance among Manufacturing Firms in Kenya (A Case of Industrial Area, Nairobi)
(Kenya School of Revenue Administration, 2023-11-20) Kimeu Faith Mumbua; Nekesa, Marion
Tax incentive is a strategy employed by governments world over to attract investments in varied sectors of their economies. The main objective of this study was to examine the effect of tax incentives on financial performance of manufacturing firms in Kenya, taking manufacturing firms in Nairobi industrial area as a case study for 10 years. The study was guided by the following specific objectives: to find out how capital allowance affect financial performance of manufacturing companies in Kenya, to establish the effect of allowable deductions on financial performance of manufacturing companies in Kenya and to investigate effects of investment deductions on financial performance of manufacturing companies in Kenya. The study adopted deterrent theory, ability to pay theory, and agency theory. The study employed a descriptive research design, using stratified sampling methods. The study’s target population was manufacturing companies in Kenya specifically in the Nairobi Industrial Area across all the categories as listed by the Kenya Association of Manufacturers directory as at 2022. The study collected secondary quantitative data which was analysed using descriptive statistics (means and standard deviations) and inferential statistics (correlation analysis) to determine the relationships between the independent variables and the dependent variable. Tables and figures were used to present the analysis output. The findings indicated that tax incentives had a significant positive effect on financial performance, as they reduced the cost of capital for manufacturing firms, promoted innovation and competition, and led to increased productivity and efficiency. Based on these findings, the study recommended that the Kenyan government should continue to provide tax incentives to manufacturing firms and tailor them to the specific needs of each firm, while also encouraging innovation and competition in the sector through support for research and development, technology transfer, and training programs. Manufacturing firms are also encouraged to take advantage of the tax incentives to invest in capital-intensive projects and acquire capital assets. However, there is a need to review the current tax laws to make the tax incentives more flexible and attractive to potential investors, and to consider increasing the amount of tax incentives to further reduce the cost of capital for manufacturing companies.
Do regional economic disparities promote regional value chains? A case study of East Africa Community member states
(Kenya School of Revenue Administration, 2024-11) Kainga, Erastus Chokera; Muthoga, Samuel Dr.
Regional economic disparities in developing countries impact growth of regional value chains to compete in the global markets. Regional economic disparities are the difference in economic capabilities between states in a region. The objective of this paper is to explore the impact of regional economic disparities (RED) on growth of food and beverage regional value chains (RVCs) in the East Africa Community (EAC) manufacturing sector. The paper employs the New Economic Geography (NEG) model in investigating the dynamics of promotion of regional value chains in EAC’s manufacturing sector. By making use of secondary data from five member states, the author surveys labour in the manufacturing sector, total income of labourers and executives, taxes, intra-regional and extra-regional trade in foods and beverages, and gross value added as the regional value chain determinant. To answer the research questions, regression analysis was used to shed light on (i) the effect of regional economic
disparities on promotion of regional value chains in EAC and (ii) the effect of prices on regional value chains. The findings show disparities having a positive and significant effect on promotion of RVCs; price, intra and extra-regional trade, and executive salaries while labourers’ salaries and taxation have a negative and significant effect on the promotion of RVCs. Whenever EAC states imported from one another, it was noted that the GVA changed positively, similarly when trading with nations outside EAC. When employees in executive positions were well appreciated there was a positive effect on the GVA and a negative effect was observed whenever casual employees were paid more than average in their states as well as when taxes were increased. Future research work may look into Climate Changes, Export Controls and Politics as promoters of regional value chains as well as infrastructure, and technology. The results show need for labourers to acquire more skills necessary to remain relevant in the transforming manufacturing sector. Further, that technology absorption is crucial among producers and regional tax agreements are necessary in industry location decisions. Finally, wages were noted to determine production as the nations paying their workers more seemed to trade regionally more. The author therefore concludes that EAC member states need to increase intra-regional trade, apply some protectionist policies as well encourage increased budgets for education and building of institutions while also attracting foreign direct investments with tax reliefs.