“This study analysed the productivity of Kenya’s tax structure in the context of the tax reforms. The findings suggest that tax reforms had a positive impact on the overall tax structure and on the individual tax handles, even though the impact of the reforms was not always uniform. The reforms had a bigger impact on direct taxes than on indirect taxes, suggesting that revenue leakage is still a major problem for indirect taxes. The better responsiveness of direct taxes can be attributed to the relative effectiveness of the reforms in direct taxes, which not only made the tax system simpler but also reduced avenues for evasion and corruption. Such reforms include the introduction of PIN, lower rates, reduction of exemptions and a shift away from multiple rates across many categories. This study applies the concepts of elasticity and buoyancy to determine whether tax reforms in Kenya achieved these objectives. Elasticities and buoyancies are computed for the pre-reform period as well as the post-reform period. Evidence suggests that reforms had a positive impact on the overall tax structure and on the individual tax handles.”
