Developing countries face budget deficits because tax revenue collected do not balance off budget expenditure. Several studies have been undertaken in response to tax revenue and changes in GDP by Wawire 2011, Muriithi M K. and Moyi (2003) Gupta, A. S. (2007).

The Kenyan studies have shown positive relationship between tax revenue and GDP but they omitted the key issues on determinant of tax revenue such as, tax base, changes in oil prices, exchange rates, change in tax rates among others factors affecting tax revenue.

Stotsky and woldemariam (2007) undertook studies in Sub-Saharan country on tax efforts that revealed many sub-Saharan Countries in African face difficulties in raising tax revenue for public purpose. The study undertaken was to measure the determinants of tax share of the tax GDP and construct a measure of tax effort. In another study on tax efforts under taken in Arab countries by Nagy (2000) revealed that Tax Revenue performance varies across Arab countries. Study concluded that Tax revenue trends are not uniform across these Arab countries. Some countries have enjoyed sustained increases in tax revenue shares in recent years while others have seen tax revenue shares weaken.

According to Njoroge (2009) study he assessed how the corporate tax rate affects financing for firms listed at Nairobi Securities Exchange. The study was aimed to establish the relationship between effective corporate tax rate and debt ratio .A survey conducted on 37 companies concluded that effective tax rate has a negative effect on debt financing thus increase in corporate tax rate lead to decrease in debt financing hence results being supported by pecking order theory. The recommendation was made that further studies be done to find out how listing affects the operations once they are listed.

In the study undertaken by Eshwani (2006) to establish if there was any relationship
between taxation and Foreign Direct Investment in Kenya used a sample period of ten years (1994-2003).The study revealed that there was effective taxation level reduction in the year 1994- 2003 and there was cyclical trend with some years reporting robust growth of the volume with the highest recorded in 2000.He made further recommendation to focus on accelerating the process of deregulation of foreign Direct investment initiated in Kenya.

Recently Kenyan experienced a problem of oil prices fluctuations that had shown many
motorists reduce the usage o f motor vehicles in order to cut down on fuel consumption.

Through this situation government revenue estimates had implication on budget statement because budget works on estimates which are captured during budget preparation and if this revenue is not realised there is an increase in budget deficit. This study also focuses broadening of tax base to strengthen income tax revenue. When the tax base is broaden tax revenue increases reducing budget deficit. Members of Parliament for a long time have enjoyed tax exemptions on pay as you earn until year 2011/2012 when Minister of Finance released a finance bill in parliament for lifting the exemptions. A serious debate raised several where several were raising controversial sentiments concerning the issue. Until financial Year 2012/2013 the Minister of Finance made it clear that all MPs to pay taxes on their salaries and implementation were made

Tax rate in Kenya have remain constant for almost a decade which has affected tax revenue.

Due to change in population growth rate KRA has to revise tax rates to administer the
problem in tax revenue. If changes are not considered the situation remain constant and in case of any change will be bring resistance like change in withholding tax rate that was effected by the Minister Finance in 2011/2012 to 10% was reverted back to 5% in May 2012.



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