Compliance management strategies and revenue performance at Kenya Revenue Authority

Abstract

Despite revenue collection at Kenya Revenue Authority increasing for the past five years, it still is not at its optimal. The revenue growth has been minimal, given an 11.1% growth in 2024 from 2023, 6.7% growth in 2023 from 2022 and a decline of 4.8% in 2022 from 2021. This study focused on compliance management strategies in the Kenya Revenue Authority and assessed how the strategies impact revenue performance in the Authority. The research objectives are to assess the effect of taxpayer registration, tax compliance monitoring, tax debt collection, tax penalties and tax amnesty on revenue performance. The Ability-to-pay theory and the Economic Deterrence theory guided the study. Additionally, this study adopted a positivist research philosophy and employed a causality research design. The population of the study was Kenyan countrywide and time series data was used for 10 years from 2014 - 2024. The study used secondary data obtained from published KRA & Treasury reports for the period of 10 years from 2014 - 2024. The study adopted a quantitative approach to collecting and analyzing data. Descriptive statistics revealed moderate variability across the variables, with notable fluctuations in Tax Amnesty and Taxpayer Registration levels. Correlation analysis demonstrated significant positive relationships between Revenue Performance and both Tax Amnesty and Taxpayer Registration, while Tax Penalty was found to have a significant negative correlation with revenue outcomes. The Granger Causality test results showed that all independent variables Taxpayer Registration, Tax Compliance Monitoring, Tax Debt Collection, Tax Penalty, and Tax Amnesty Granger cause Revenue Performance, indicating that past values of these variables significantly influence future revenue outcomes. The regression model further affirmed that Taxpayer Registration, Tax Compliance Monitoring, Tax Debt Collection and Tax Amnesty had positive and statistically significant effects on Revenue Performance, whereas Tax Penalty had a significant negative effect. The study concluded that the results indicate a significant and positive relationship between the independent variables (Taxpayer Registration, Tax Compliance Monitoring, Tax Debt Collection and Tax Amnesty) and the Revenue Performance. Further, Tax Penalty had a significant and negative relationship with Revenue Performance. The study recommended strengthening taxpayer registration, investing in compliance monitoring, enhancing taxpayer education and strategically implementing and publicizing tax amnesty programs to boost participation and compliance. The study also recommended integrating fairness (Ability-to-Pay Theory) and deterrence (Economic Deterrence Theory) into tax policy. Future research recommended that future studies employ panel data across different tax regions or sectors to enhance generalizability and policy relevance.