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Tax Evasion Essay

852 words - 4 pages

In Kenya, tax revenues make up to 80% of the government’s budgetary resources with a
negligible proportion coming from grants and loans owing to the stringent conditionalities
adopted as part of Structural Adjustment programmes (SAPs) imposed on the Kenyan
government in the 1990s by International monetary Fund (IMF) and the World Bank (Muriithi
and Moyi, 2006). Government use taxation to raise revenues to cover their expenditures on the
provision of social goods and services, to regulate the level of spending in the economy,
redistribute income among the populace and control imports into the country (Wilkinson, 2007).
Different taxation methods are used to create a tax base which forms a ...view middle of the document...

Psychological tax contract is influenced by government policy, tax
authority’s behavior and state institutions to influence morale. Studies done by Australian Tax
Office in 2004 have, however, shown that the economic consideration based on calculated risks
and opportunities that would accrue from non-compliance will carry more weight for small
taxpayers who are most likely to be individuals and therefore have self-interest than large
taxpayers who are mostly corporate bodies. The concept of fairness in the tax structure and the
contract with the government (tax authority) in explaining the compliance behavior among the
taxpayers has recently started to gain currency especially after a research undertaken for OECD
in 1996. The findings showed that the ability of the taxpayers to trust the regulating body and
their perception of fairness with which they are treated, has a greater influence on a person’s
choice to contravene the tax code than simple economic self- interest does (e-Journal of Tax
Research, 2006).
As part of the reform measures in tax administration, the Kenya revenue Authority (KRA) was
incorporated in 1995 as a semi-autonomous government agency with an amalgam of five
revenue departments administering upwards of 17 revenue Acts that were originally in the
ministry of Finance. Since its inception, KRA has instituted various legal and administrative
measures designed to seal revenue leakage through effective audit and surveillance tools and
increased compliance through self assessments. Reforms initiatives that have...

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