Effect of Value Added Tax Reforms on Revenue Mobilization from Small Corporate Taxpayers In Kisumu County, Kenya

Abstract

Problems of taxation have been receiving special and increasing attention in recent years the world over. In Kenya, because of the limited amount of resources that can be obtained from offshore and from domestic borrowing, the government has focused on increase its tax revenues in order to meet its long term social obligations. VATvas a general tax on consumption applied to commercial activities involving the production and distribution of goods and the provision of services has been debated on leading to the question of its reforms. However, arguments and studies on the subject of tax reforms are deficient. They focus more on the VAT practices and rationale and leave out the joint effect of elements of tax reforms on revenue mobilization. How reform-based broadening of VAT base, corporate compliance with VAT reforms and VAT reforms administration affect revenue mobilization p amongst small corporate taxpayers Kisumu County remains unknown. The objectives of this study were to examine effect of tax-base broadening, corporate compliance to VAT reforms and VAT reforms administration on tax revenue mobilization. Conceptually, the study was designed to investigate a functional relationship between VAT reforms and tax revenue mobilization. The research was correlational survey. The population was 1356 financeand tax officers of -smallcorporate tax payers operating in Kisumu. Sample size was 309 derived through cluster and simple random sampling techniques. Both primary and secondary data collected from respondents and KRA and other publications respectively were used. Semi -structured questionnaire reliable at Cronbach's Alpha=0.73 was used. Validity was ascertained through expert review. The objectives were analyzed using percentages,mean, standard deviation and multiple regression. Results showed broadening of tax base, tax compliance and VAT administration had significant coefficients of ~=0.031, 0.052 and 0.113 respectively. This means that the three contribute to unit change in revenue mobilization by 3.1%, 5.2% and 11.3% respectively. The conclusion is that VAT administration has highest effect on revenue mobilization, followed by corporate compliance and lastlyVAT bas broadening. It is recommended that the tax collector emphasizes on these - areas as they contribute to revenue collection. The study benefits Revenue collector and the tax payer alike through reforms that may emanate from it. Future researchers are advised to study other contexts.