TO MAINTAIN COMPETIVENESS, SUSTAIN LONG TERM GROWTH AND CREATE EMPLOYMENT KENYA NEEDS TO SHIFT FROM HIGH DIRECT TAXES TO INDIRECT TAXES (VAT)

Abstract

Although Kenya had embarked on massive tax reforms in 1986, little has been achieved in terms of obtaining the tax revenue structure as that of developed countries. It is not known how the reforms have affected each tax source. VAT is the tax for the future because it is the tax based on the expenditure. Most countries are striving to have the VAT revenue income as the greater contributor of its revenue. The effectiveness of the tax revenue depends on the design and implementation of the tax policies. To achieve this high future tax revenue, favorable economic policies need to be put in place. Policies that will economically empower the majority of nation’s citizens. In Kenya various effect efforts have been put in place to achieve this. Among these policies include the regionalization and trade free barriers that enable the member states free movement of factors of production and goods and services.

The broad objective of the study was to examine Kenya’s tax revenue structure in light of the developed countries’ structure and come up with ways in which Kenya could achieve similar tax revenue structure to those of the developed countries. The independent variables of the study were policy framework and environmental dynamism. The dependent variable was strategy implementation gaps.

This study was a comparison study to other countries that have adopted high VAT policies. The study used data collected in Kenya and compared to some of the European countries that have a high VAT collection. Data analysis was done using inferential statistics with Correlation and regression analysis. Collected data was analyzed using Statistical Package for Social Science (SPSS) and results presented in form of tables and figures.

Key Words: High Direct Taxes, Indirect Taxes, Policy Framework, Environmental Dynamism, Strategy Implementation Gaps