COVID-19-induced cash flow constraints and the burden of taxation in Kenya
This study uses data from the Kenya Revenue Authority to study the changes in tax collection following the COVID-19 outbreak
Abstract
We use rich administrative microlevel tax data from the Kenya Revenue Authority to study the changes in tax collection following the COVID-19 outbreak. First, using data on Value Added Tax (VAT) and on Payroll Tax (PAYE), we find sharp declines in both tax revenues and in the number of firms paying taxes. These outcomes later recovered for the VAT, but remained around 20% lower than pre-COVID levels for the PAYE. Second, we study the changes in tax outcomes after the removal of the tax-relief measures introduced as a consequence of the early wave of COVID-19. Following this removal, the total value of tax payments increased only for the PAYE, but not the number of firms making payments either for the PAYE or the VAT. Finally, we discuss the Voluntary Tax Disclosure program, under which taxpayers can disclose previously undisclosed tax liabilities, and an experiment aimed at increasing take up of the program.
This work is part of the Private Enterprise Development in Low Income Countries (PEDL) programme
Citation
Casaburi, L., Oguso, A. and Pomeranz, D. (2021) “COVID-19-induced cash flow constraints and the burden of taxation in Kenya” PEDL C-19 Note
Link
COVID-19-induced cash flow constraints and the burden of taxation in Kenya