Received: 02 Jan 2020 , Published: 13 January 2020
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|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.
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