The impact of sales taxes on demand for beer in Kenya

Abstract

The objectives off sales taxes include; raising revenue to the government, protecting local manufactures and controlling local manufactures and controlling cree consumption of those commodities believed to be non- essential. The paper invesitigate the impact of sales taxes on the demand for beer which is a non- essential commodity. This commodity is subjected exercise tax and manufacturer sales tax/ VAT. These factors are GDP, CPI, sales taxes and its own price. Due to lack of data on general sales tax and VAT, the study has assumed that the impact of these sales can be approximated by the impact of gross price. [ -p(1+T) ]. Three econometric tests were carried out on the data formality, stationarity, and co- integration) using PC – GIVE ( personal computer generalized instrumental variables estimation). They have revealed that all the data was normally distributed and non stationary. The data was made stationary by differencing. The results of the study reveal that the demand for beer is highly responsive to changes in nominal income and its own price. This suggest that sales taxes achieve one of its objective.