research topics in taxation in kenya

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Taxation Without Principles: A Historical Analysis of the Kenyan Taxation System

2008, Kenya Law Review

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Tax can be defined as money contributed to a State/government for the main purpose of raising enough money (revenue) through which a State/government can render services to its people. Simply put, it is money levied by governments to support its functions. The process through which government realizes these taxes is called taxation. Taxation, which is the process of tax collection and administration entails the mechanisms put in place by government so as to ensure that the tax(es) is paid. In Kenya, paying tax is compulsory for every person that has attained the age of majority, that is any person above the age of 18 years, a process which culminates in the filing of annual returns at the end of each financial year. It is worth noting that failure to file returns attracts sanctions which include imposing penalties in any year defaulted, refusal to be cleared for a compliance certificate, freezing of your personal and business accounts held in any bank, institution of criminal proceedings against the taxpayer, preventing one from travelling outside the country and a possibility to block/suspend your KRA PIN. All these sanctions are geared towards fostering compliance with paying relevant taxes by individuals – and this further buttresses the point that paying tax is compulsory/mandatory as opposed to being voluntary. This paper examines the methods that the Kenya Revenue Authority (KRA) employs in order to achieve its tax collection and tax administration mandate. The paper will focus more on the legal and statutory framework with a touch on the administrative mechanisms and if necessary, highlight relevant court decisions and how they have affected tax collection and tax administration – negatively or positively. It mainly focuses on the Tax Procedures Act, Income Tax Act, Value Added Tax Act, Excise Duty Act and the East African Community Customs Management Act.

Historical Research Letter, 2015

The Kenyan tax system as we find today is a British colonial legacy that was closely bound up with the development of the system of political governance and the maintenance of law and order. Besides, taxation helped transform a subsistence economy into one where money and a market system determined the exchange process. In short, the introduction of taxation changed the mode of exchange and the entire fabric of African society and reordered it to meet the needs of a capitalist economy. Independence in 1963 did not alter the parasitic nature of the colonial state. Subtle and opportunistic ways continued to be used to extract taxes from the peasants and the working class. GPT impoverished the poorest members of society who had no definite source of income. In 1973, after slightly more ten years of implementation, GPT was abolished altogether as a source of revenue for both the central and local government. It had been a brusque form of direct taxation on Africans. The abolition releas...

This article analyses section 41(5) of the Kenyan Income Tax Act with a specific focus on the different categories of tax reliefs that are availed. I argue that, although the section provides for the methods of tax relief, they are not used. I also argue that the method of relief used is as provided for in the bilateral tax treaties negotiated in the country. There is thus, a disconnect between the law as is and the law as practiced within the country. Further, the bilateral treaties with Kenya that refer to taxation, are largely based on external models which may not favour developing countries. As a result, a binary system is created, and instances of double taxation continue to occur, and this affects taxpayers, investors and Foreign Direct Investment (FDI) in the country. This article argues for reform in the law on double taxation; including the methods of relief from double taxation used in Kenya.

Taxation provides principal lenses in measuring state capacity, state formation and power relations in a whole society at large. In the evaluation of tax reforms in the developing countries, it is important to first determine the unique role of the tax system in each particular country. The main reason for undertaking tax reforms in Kenya was to address issues of inequality and to create a sustainable tax system that could generate adequate revenue to finance public expenditures. In this respect, the tax modernization programme was introduced in the country for achievement of a tax system that was sustainable in the face of changing conditions locally and internationally. Policies were shifted towards more reliance on the indirect taxes as opposed to the direct taxes. Consumption taxes were seen to be more favourable to investments and therefore growth. Trade taxes, instead of being used for protection or revenue-maximization purposes, were seen to be more as instruments of fosterin...

Tax compliance in the informal economy is a matter of serious concern in many developing countries, and one of the biggest challenges of Taxation in Kenya. Kenya has one of the largest informal sectors in Africa employing approximately 77.9 per cent of the working population. The sector is estimated to have the potential to contribute 67.2 Billion Shillings of taxes per year, however, the highest achieved collection has been 136 Million in financial year 2008/09 which continue to dwindle year after year. Attempts by the government to introduce the presumptive turn over tax have also been futile. Owing to the size of the sector and its continued growth, its therefore important for the government to understand ways of bringing the informal sector into the tax net. Research on the challenges of taxing the informal economy in Kenya remains blurred therefore it was the focus of this study to subject tax compliance to empirical analysis in informal sector in the Kenyan context and the fac...

The several tax administration reforms undertaken in Kenya do not exhibit a discernible methodology. There is no clear, deliberate and integrated reform mechanism to avoid haphazard implementation of reforms. With this background, implementation of county tax administration is bound to be haphazard, and without measurable expectations. The problems at the national tax administration will inevitably be devolved to the counties. A number of the past tax administration reform efforts have mainly been donor-led (IMF, World Bank, DFID, etc.), largely intended to tackle neopatrimonialism in governance in Kenya, as in the rest of sub-Saharan Africa. The devolved system of government is a creation of the Constitution of Kenya, 2010. As such, the legal regime for county tax administration is lacking. There is no literature specific to the Kenyan situation. There is no history to learn from. Towards solving the problem, this study conducted research on national level tax administration reform...

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