Effect of digitization of tax services on revenue collection efficiency in Kenya

Abstract

Revenue collection efficiency remains a major concern for governments seeking to enhance domestic resource mobilization while minimizing administrative costs. Despite substantial investments in digital tax administration reforms, many developing countries continue to face challenges associated with tax compliance, revenue leakages, and administrative inefficiencies. In Kenya, the Kenya Revenue Authority (KRA) has implemented several digitization initiatives, including iTax, the Tax Invoice Management System (TIMS), eTIMS, and digital payment platforms, to improve efficiency within tax administration. However, empirical evidence regarding the effectiveness of these digital reforms on revenue collection efficiency remains limited. This study therefore examined the effect of digitization of tax services on revenue collection efficiency in Kenya. Specifically, the study assessed the effect of electronic tax filing, digital payment platforms, digital invoice management systems, and digital taxpayer education on revenue collection efficiency. The study was anchored on the E-Governance Theory and the Technology Acceptance Model (TAM). It adopted a positivist research philosophy and employed a longitudinal time-series research design. The study utilized secondary data obtained from KRA administrative records covering the period 2013–2025. Monthly data comprising 156 observations for each variable were analyzed using descriptive statistics, correlation analysis, diagnostic tests, and Generalized Least Squares (GLS) regression analysis. The data were log transformed before analysis to improve model stability and interpretation. The findings revealed that electronic tax filing, digital payment platforms, digital invoice management systems, and digital taxpayer education all have positive and statistically significant effects on revenue collection efficiency in Kenya. Among the variables examined, digital payment platforms exhibited the strongest positive influence on revenue collection efficiency. The study concludes that digitization of tax services significantly enhances efficiency, transparency, compliance monitoring, and accountability within tax administration systems. The study recommends strengthening digital payment infrastructure, enhancing integration among digital tax platforms, expanding taxpayer education programs, improving digital infrastructure, and investing in advanced technological innovations such as data analytics and artificial intelligence to further improve tax administration efficiency in Kenya. The findings provide important policy insights for KRA, policymakers, and development partners seeking to strengthen domestic revenue mobilization through digital transformation initiatives.

Key Terms: Digitization of tax services, revenue collection efficiency, electronic tax filing, digital payment, digital invoice, digital taxpayer education, Kenya revenue authority.