THE IMPACT OF TAX INCENTIVES ON THE GROWTH OF THE KENYAN ECONOMY

Abstract

ABSTRACT Taxation is the key source of revenue that the government of Kenya uses to provide public goods and services to the citizens. Revenue collections have increased over the last decades, though the collections have not been enough to fund the proposed budgets. This results to budget deficits. Raising efficient tax revenues in the country is the main objective for the government, thus it balances the increasing competing development needs and its desire to encourage investments through tax incentives. Budget deficit of a government shows that there is a form of negative saving. Reduction in deficit positively influences the national savings more than the changes in tax policies and encourages savings within the economy thus stimulating investments. It is vital for the government to raise adequate revenue for the country through taxation to meet its development plans. Individual tax incentives are prominent form of incentives and include deductions, exemptions, and credits. Some of the examples are mortgage interest deduction, individual retirement accounts and hybrid tax credit. Cooperate tax incentives can be raised at federal, state and local government levels. Cooperate tax is mostly directed at individual companies involved in cooperate site selection project. My objective of this study is to establish the effects of tax incentives on economic growth in Kenya. To achieve this I will use secondary data using descriptive analysis and regression analysis