Aggressive Tax Planning and Performance by Kenya Revenue Authority

Abstract

Taxation is a vital fiscal tool that can be utilized to augment the economic wellbeing of a nation. Taxation is not only vital for revenue generation purposes; it can also be used to control the behavior of taxpayers such as raising taxes on commodities that are deemed to be toxic to the society, if over consumed. In Kenya, from Financial Year 2010/11 to Financial Year 2020/21 has recorded a deficit budget. A deficit budget implies that the economy’s leverage is weak. The country`s debt ceiling has now become a major issue, since the increase in national debt has surpassed the stipulated threshold necessitating adjustment of debt ceiling. Aggressive tax planning is vital with regards to revenue performance by Kenya Revenue Authority. This paper reviews the conceptual, theoretical and empirical literature and raises a variety of issues that necessitates a proposed theoretical model for the purpose of understanding aggressive tax planning and performance by Kenya Revenue Authority. This study aims at assessing the effects of debt shifting, location of intellectual property rights, bilateral tax treaty and performance by Kenya Revenue Authority. This research will be anchored on Social Learning Theory and Tax Competition Theory. This research study reviewed on the previous studies undertaken on the area of interest. This study focused on the study findings and the methodology. The conclusions regarding the relationship that exist between the independent variables and dependent for this study were derived from the findings of the past studies. Recommendations in this study were made based on the previous study findings and conclusions. This study found that Multinational corporations tend to exploit all the available loopholes within the tax laws in order for them to decrease their tax liability to tax administration. Due to multinational corporations adopting aggressive tax planning, the dire repercussions include tax revenues being collected by the tax administration tend to reduce significantly. This leads to tax administration not meeting their tax revenues collection targets. This study recommends KRA to continuously review any existing loopholes in the tax laws. Sealing the respective loopholes in the tax laws tend to enhance tax revenues collection targets. Further, multinational corporations need to observe ethics in their business practices.