The Effect Of Tax Compliance Strategies On Government Tax Revenue In Kenya

Abstract

This study sought to establish the effects of tax compliance strategies on government tax revenue. The specific objectives of the study is to: establish the effect of taxpayer education strategy on tax revenue, determine the effect of improved tax payer services strategy on tax revenue, and assess the effect of law enforcement strategy on tax revenue as well as determine the effect of technology adoption strategy on tax revenue. The study is pegged on three theories namely; the economic deterrence theory, fiscal exchange theory and the regulatory compliance theory. Revenue data between 1980 and 2020 was used in the study. Ordinary Least Squares technique (OLS) was employed to establish the long run relationship between expenditure on taxpayer education, tax payer services, law enforcement and technology on government tax revenues. Breusch-pagan test was used to test for heteroscedasticity and multi-collinearity, Variance Inflation Factor method was used. The study tested for serial autocorrelation since the data was time series nature. The Jarque-Bera test was conducted to test normality for the error term. The relationship between variables was established through correlation analysis and regression analysis. The results indicated a positive and significant relationship between taxpayer education strategy and tax revenue in Kenya (β= 1.128, p=0.012). There was a positive and significant relationship between law enforcement strategy and tax revenue in Kenya (β= 0.429, p= 0.007). Technology adoption strategy had a positive and significant relationship with tax revenue in Kenya (β= 0.199, p= 0.003). Lastly, taxpayer services strategy revealed a positive and significant relationship with tax revenue in Kenya (β= 0.490, p= 0.002). The study concluded that taxpayer education strategy, law enforcement strategy, technology adoption strategy and taxpayer services strategy affected tax revenue in a positive and significant way. The study recommends that the government should continue providing taxpayer education. Further, the government should continue to up its tax compliance enforcement efforts. The government should spend more on technology usage which will help in the administration of the tax system and lastly it should pursue alternative measures in its quest to improve on the level of tax efficiency and effectiveness.