THE IMPACT OF TAX REVENUES ON ECONOMIC GROWTH: A TIME SERIES EVIDENCE FROM KENYA

ABSTRACT
The study examines the effect of tax revenue and economic growth of Kenya, from
1980 to 2007. In order to attain this objective, relevant time-series secondary data
were collected from the Central Bank of Kenya (CBN) Statistical Statement, Federal
Inland Revenue Service (FIRS) and previous works done by scholars. The collected
data was analyzed using the ordinary least square method. The results display that
tax revenue has a positive significant effect on economic growth. That is, it highpoints
the channels through which tax revenue impacts and economic growth in Kenya. The
study also tells that grants and other revenues has no a negative result on growth.
However, tax revenues can only appear its full potential on the economy if
government can come up with fiscal laws and legislations and support the existing
ones in line with macroeconomic objectives, which will check-mate tax offenders in
order to minimize evasion, corruption, and tax avoidance. These will get about
improvement on the tax management and responsibility and transparency of
government officials in the management of tax revenue. Above all, these will increase
the tax revenue base with resulting increase in growth.
Keywords: tax revenue, GDP, grants, foreign aid, other revenues