Impact of Outsourcing Tax Services on the Revenue Collection Performance among Counties in Kenya

Abstract

Across the globe, many local governments face a financial crisis occasioned by their inability to raise sufficient revenue to finance their operation and meet the needs of their people. As a result, most of the local governments end up being over reliant on funds transfers from the central government to remain operational. To alleviate the weakness in revenue collection, the use of agents/third parties to collect revenue on behalf of the local authorities (commonly referred to as outsourcing) has gained popularity in recent years all over the world. To enhance their revenue performance, many of the governments around the world have sought to outsource their tax services. In view of this, the current study sought to establish the impact of outsourcing tax services on revenue collection performance among County Governments in Kenya.Specifically, the study explored the impact of outsourcing of ticketing services, outsourcing of property rates collection and outsourcing of licencing on revenue collection performance among Counties in Kenya.The study used a descriptive research design. The target population of the study was the 47 Sub County Revenue Collection Units in Kenya.The study utilized secondary data which was collected using a Secondary Data Collection Sheet. The study data was analyzed through descriptive statistics and presented through percentages, frequencies, mean and standard deviation. In addition, the study applied the ANOVA test and F ratio at a significance level of 5% to test the study’s null hypothesis that there was no difference between pre and post IT outsourcing revenue collection performance.The statistical analysis was performed using the Statistical Package for Social Science (SPSS version 23.0).The study findings were presented in tables. The study found that the difference between the pre and post outsourcing of ticketing services, property rates and licencing revenue collections among Counties in Kenya was statistically significant.The study findings also showed that the increase in the mean values of revenue collected from ticketing services, property rates and licencing was higher in the post-outsourcing period than in the pre-outsourcing period.The study concluded that outsourcing of ticketing services, property rates collection and licencing had a significant impact on the revenue collection performance among Counties in Kenya. To continually improve its revenue collection performance, the study recommends that the administration of County Government in Kenya.should consider outsourcing revenue collections from sources that are not yet outsourced. Further, the County Government should continually review its outsourced revenue collection functions in order to ensure that they are meeting the intended objective of helping the county maximize its revenue collection performance.