Effect of Taxation on Economic Performance: A Case of Kenya

Abstract

"The purpose of this study was to investigate the casual relationship between income tax, Excise duty, customs duty and VAT on economic performance. Correlation between taxation and economic performance exist as the most important issue in economic since independence. The level of taxation of taxation affects the level of country’s GDP, using regression model (Y =a+ βx+ β1X1 + β2X2 + β3X3+ ᵦ4X4 + ẹ) Where y=economic performance X1=Total Income tax/GDP X2=Total VAT/GDP X3=Total Excise duty/GPD X4= Total Custom Duty/GDP e= GDP We also use descriptive statistics to find mean and standard deviation for each variable. In our view we find out that indirect tax increase consumption and reduce savings in Kenya. The implication of this is that policy maker should focus more on enhancing international relation. Income tax revenue has been increasing in recent years at a higher proportion than the other taxes in Kenya, making it an important factor in economic decision making."