Effect of Double Taxation Agreement on Revenue Collection from Multinational Enterprises in Kenya
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Date
2020-01
Authors
Kung'u, Simon Njoroge ; Mumia Benn MINCU, CPA.K
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
Double Tax Agreements play a crucial role in providing certainty for the taxation regimes for foreign investors in foreign countries. It was in this regard that the researcher sought to establish the effect double tax agreements on revenue collection. The following objectives were used: To evaluate the effects of mutual agreement procedures on revenue collection from multinational enterprises in Kenya, to find out the effects of exchange of information on revenue collection from multinational enterprises in Kenya and to assess the effects of tax harmonization on revenue collection from multinational enterprises in Kenya. The study will be of great value to Kenyan government, scholars and researchers and multinational organisations. To provide the basis of the study, the researcher relied on: Lindahl’s Theory of Tax Treaties, Bowen’s Tax Incentives Theory and Evolutionary Theory of Tax Treaties. The study adopted. The study adopted descriptive research design, where 75 KRA officers were targeted, out of which a sample of 63 officers were used as the study respondents. The study used structured questionnaires where SPSS version 24 was used for data analysis. Mean and
Standard Deviations were used to describe the variables in the study while Regression
Analysis was conducted to determine the strategic effects of Double Taxation Agreements on the Revenue Collection from the Multinational Enterprises in Kenya. Out of 63 questionnaires which were distributed by the study researcher, 46 were returned which represented a response rate of 73%. The correlation and regression analysis indicated that there exists a positive and significant relationship between the study variables except for tax harmonization, which the anlysis indicated that the relationship was statistically insignificant. Coefficient determination indicated that the variables can only explain 74.8% of revenue collection. Study findings revealed that MAPs enables the government to solve double tax issues and also allows resolution on the inconsistencies in the interpretation and application of a tax treaty. It was further determined that there exists a moderate positive relationship between exchange of information between DTAs and revenue collection. Accordingly, Mutual Agreements Procedures, Tax Harmonization and Information Exchange affects revenue collection with t=0.914; p=0.003; t=2.289; p=0.004 and t=0.932; p=0.364 respectively and collectively with R-Square value of 0.765.From the findings, the study recommends that countries in the Double Taxation Agreements should review their domestic tax legislation. Finally it was further recommended that KRA should incorporate double tax agreements in their tax education.
Description
Tax Administration
Keywords
Double Tax Agreements, Multinational Enterprises, Mutual Agreement Plans, Exchange of Information, Tax Harmonization, Revenue Collection