The Effect of Revenue Enhancement Strategies on Financial Performance of Kenya Revenue Authority

Abstract

The Kenya Revenue Authority plays a critical role of assessment of taxes, collection of revenue, administration and enforcement of Laws relating to revenue on behalf of the government of Kenya. In addition, according to the Act of Parliament Cap 469, KRA is also tasked with the role of enhancing and mobilization of government revenue, providing effective administration and sustainability of revenue collection. This noble objective can only be achieved if the authority lays down effective strategies. However, the current business environment is quite turbulent and as such risks abound in the realization of KRA objectives. The objective of the study was to establish the effect of revenue enhancement strategies on the financial performance of KRA. This study analyzed items that influence financial performance of KRA based on seven four namely; tax payer education, computerized operations, staff training and revenue collection points. This study relied on secondary data that was obtained from published annual reports and the fourth and fifth corporate strategic plans for thirteen (13) financial years from 2002-2003 up to 2014-2015 based on the study’s variables i.e. financial performance as affected by tax payer education, computerized operations, staff training and revenue collection points. The data was analyzed using descriptive statistics including frequencies, mean scores and correlation analysis. Regression models were used to determine the existence, if any, of the relationship between financial performance and the strategies adopted to enhance financial performance by KRA. In addition, regression model were used to measure the quantitative data to establish the extent to which independent variables affect the dependent variable as shown by the size of the beta coefficients. It was established that tax payer education and revenue collection points have strong, positive and significant effect financial performance of KRA while computerized operations and staff training have strong, negative and significant effect on financial performance of KRA. More training on the reforms and modernization at KRA should be enhanced so as to improve on the skills, knowledge and professional capacity of the employees to increase revenue. In addition, more revenue collection centers need to be established since they have been effective in enhancing financial performance by the Authority. Finally, the study recommends that the revenue collection process should be continuously revised so as to ensure that the number of transaction increases and that tax evasion is avoided. Policy makers should come up with policies that prevent the tax evasion in Kenya.