Received: 02 Jan 2020 , Published: 13 January 2020
Views: 110 , Download: 74
|1||Dr. Angela Mucece Kithinji|
Fiscal policy plays an important part in achieving macroeconomic balance. For instance, in Kenya, the aspect of macroeconomic imbalance and the risk associated with it come as a result of increase in shares of public expenditure and fiscal deficits in the country’s GDP. However, such imbalance has existed and has been expanding despite the fact that the Kenyan transition has significantly improved fiscal (tax) system in recent years hence, creating a legal and institutional basis for sound fiscal policies. This study therefore sought to establish the nexus between government expenditure and tax revenue. It employed use of longitudinal research design and collected secondary data for a period of sixteen years ranging from 2002 – 2017. The study analyzed data through use of descriptive and inferential statistics where test of association was done by use of Pearson correlation and test of effects between variables through use of regression analysis. The study established that government expenditure does not significantly affect taxation alone. However, when controlled by government revenue composition, government expenditure seem to significantly influence taxation in Kenya. It can therefore be recommended that apart from spending more to increase economic activities from which to generate tax revenue by Government, Government should also put in place policies that should go hand in hand in increasing tax revenue relative to total government revenue.
Aisha, Z. & Khatoon, S. (2010). Government Expenditure and Tax Revenue Causality and Co-integration: The Experience of Pakistan 1972 – 2007, Pakistan Development Review.
Aregbeyen, O. & Insah, B. (2013). A dynamic analysis of the link between public expenditure and public revenue in Nigeria and Ghana. Journal of Economics and Sustainable Development 4: 18 – 29.
Baharumsiiah, A.Z. & Lau, E. (2010), Mean Reversion of the Fiscal Conduct in 24 Developing Countries. The Manchester School. 78(4), 302 – 325.
Doh-Nani, R. & Awunyo-Vitor, O. (2012). The Causal Link between Government Expenditure and Government Revenue in Ghana, Asian Economic and Financial Review, 2(2), 382 – 388.
Ewing, B. T., Payne, J. E., Thompson, M. A. & Al-Zoubi, O. M. (Jul., 2006). Government Expenditures and Revenues: Evidence from Asymmetric Modeling. Southern Economic Journal, 73(1), 190 – 200
Garcia, J. M. (2012). The revenues-expenditure nexus: A panel data analysis of Spain’s regions. International Journal of Academic Research in Economics and Management Sciences 1: 24 – 38.
Ghartey, E. E. (2012). Co-integration and causal relationship between taxes and spending for Kenya, Nigeria and South Africa. International Economic Journal, 24: 267 – 282.
Kenya Comprehensive Public Expenditure Review (2017). From Evidence to Policy. The national treasury and planning state department for planning monitoring and evaluation department, Republic of Kenya
Kia, A. (2008). Fiscal Sustainability in Emerging Countries: Evidence from Iran and Turkey, Journal of Policy Modeling, 30(6), 957 – 972.
Kiminyei, F. K. (2018). The Nexus between Tax Revenue and Government Expenditure in Kenya. International Journal of Economics & Management Sciences, 7(5): 1 – 6
Lau, E., Tiong, M. H., & Ling, J. (2009). Fiscal Sustainability: An Empirical Investigation in Kenya, International Journal of Economics and Management, 3(1), 62 – 72.
Narayan, P. K., & Narayan, S. (2006). Government Revenue and Government Expenditure Nexus: Evidence from Developing Countries, Applied Economics Letter, 38(3), 285 – 291.
Takumah, W. (2014). The dynamic causal relationship between government revenue and government expenditure nexus in Ghana. Munich Personal RePEc Archive Paper No. 58579.
Wolde-Rufael, Y., (2008). The Revenue-Expenditure Nexus: The Experience of 13 African Countries‘, African Development Review, 20(2), 273 – 283.
Yashobanta, Y., P. & Behera, S., R. (2012). Causal link between central government revenue and expenditure: Evidence for India. Munich Personal RePEc Archive Paper No. 43072.