Abstract

The enduring theme of tax regime is at the core of debate in a vast majority of economies as they adopt legislations that are perceived to suit their existential fiscal obligations. Notwithstanding the fact that Kenya’s tax revenue performance has been on the upward trend in terms of revenue growth, concern has been raised that in the past few years; the East African nation has not been meeting its set revenue targets. The pressure has been exacerbated by the perennial ballooning budget deficits coupled with the slow growth in the country’s gross domestic product (GDP). The study evaluates the effect of the country’s multiple tax regime on its revenue performance in comparison to other tax jurisdictions. Underpinned by benefits theory, economic deference theory and expediency theory, the study adopts explanatory design to highlight the relationship between the predictor, tax regime and the expected outcome, tax revenue performance. Secondary data was gathered from empirical studies relating to 16 randomly selected developing and developed economies, recorded over a period of 15 years. Diagnostic test results are presented in tables, whereas trend analysis results are presented in graphical charts. Inferential statistics is analyzed through correlation and multiple regression analysis, and results presented in tables in tandem with study objectives for purposes of interpreting the hypotheses tests results. Primary data was also collected using structured questionnaires and administered using survey monkey to respondents across the globe. The findings are presented in tables and charts. The results from the findings reveal that of the developing economies, Kenya has been posted the second highest variation of 34.50% in terms of the effect of tax rates of domestic taxes on tax to GDP ratio. The relationship between tax rates and revenue performance was statistically significant with p- value of 0.008. Consequently, the null hypothesis relating thereto was rejected. On the other hand, the findings reveal that Kenya had the least number of cases resolved through dispute resolution mechanism, and also the lowest tax administration staff compared with the other countries studied.   Based on the results of the inferential statistics, the study was able to establish that there was a positive and significant relationship between tax structure and revenue performance in developing countries. This is underpinned by the correlation and regression findings where the study showed that for any unit increase in Corporate tax, Individual income tax, VAT and Capital Gains Tax rates, Tax to GDP Ratio (Revenue performance) increases for a number of developing countries including Kenya (β1=0.621, p= 0.008), India (β1= 0.645, p= 0.005) and Rwanda (β1= 0.684, p= 0.002). The study therefore recommends pro rata adjustments to tax rates for the various tax heads as this is expected to augment the tax base, and consequently enhance tax revenue performance for sustainable economic development.


Key words: Tax Regimes, Fiscal years, Revenue performance, developing economies, GDP.