Abstract

Single Customs Territory (SCT) is a trade facilitation framework to enhance intra East African Communities (EAC) trade. The implementation of a Single Customs Territory (SCT) framework in Kenya is meant to ease movement of goods and cut cost and time. This is done by harmonization and simplification of customs procedures, documentation and automation of customs systems. Introduction of SCT framework in 2013 has facilitated trade flows among the EAC partner states: Kenya, Tanzania, Uganda, Rwanda, Burundi and South Sudan (Kamau A. and Odongo M.2020). Some researchers have investigated the effectiveness of SCT in a given geographical area. A few of the researchers have analyzed the impact of SCT in the East African Community. Nevertheless, little is known on its impact on the customs revenue generated in Kenya. The main objective of this study is to establish the impact of Single Customs Territory framework on Kenyan customs revenue. The specific objects were to determine the effect of SCT on imports volumes and value in Kenya and exports volumes and value in Kenya. This was captured in a panel econometric model using customs data in Kenya Revenue Authority (KRA) spanning from the year 2010 to the year 2020. To determine the impact of SCT framework on customs revenue in Kenya, this study utilized regression discontinuity (RD) and difference-in-differences (DiD) study designs. The regression discontinuity and difference in difference designs are quasi experimental approaches. These methods are the most effective in estimating the impact of policy reforms when implemented. RD measures the effect of the size of the discontinuity in regression. The regression discontinuity (RD) and difference-in-differences (DiD) study model analyzed the trend before and after the introduction of the SCT framework. To determine whether SCT really facilitates trade, a gravity model was used to estimate the effect of the framework on imports and exports from countries trading with Kenya. The results show that import values (CIF) increased by an average of Kshs. 1.104 while import volumes increased by an average of Kshs. 1.062 following the introduction of SCT framework. However, introduction of SCT framework led to a decline of exports values (FOB) by an average of Ksh. 2.128 and export volumes by an average of Ksh.1.917.