In Kenya government expenditures are funded using revenue. Revenue is the receipts
collected from taxes, appropriation o f aid, borrowings, grants and revenue from public
investments. Tax Revenue is a percentage of total government collected to finance the
government total expenditure; Musgrave and Musgrave (2004). Tax revenue is generated from indirect and direct taxes. Direct taxes are paid and accounted for by individuals and corporation such as Pay As You Earn (PAYE). Indirect taxes are levied upon production and consumption such as Value Added tax (Vat). Appropriation in Aid is an income from services rendered by ministries which are surrendered to Exchequer every financial year. Appropriation in Aid contributes towards government receipts. Borrowing is another area where of government generates revenue. When the government expenditure exceeds revenue collected then government borrows to cover the shortfall. Borrowing may be internal or external borrowing .Grants are foreign aid which are non refundable from one country to another. Revenue collected from public investments is generated from the sale of government assets and dividend earned various government investments.

Treasury is a department which is under ministry of Finance that is responsible with assessing and accounting of revenue collected. Treasury have several departments that are used to collect revenue including income tax. Custom and Exercise and Sales departments. Part of revenue is collected at the source and accounted for to the right departments. Total revenue collected is accounted for and any differences between the actual and approved estimates must be explained. The total collected revenue is allocated to various government expenditures through the sub budgets submitted from various ministries to come up with the main government budget which comprises of all the national income and expenditure.

In Kenya revenue collected from taxation remains the single largest source of government budgetary resources. For the last one decade tax revenue is made up 80 % of total government revenue (including grants). In the last five years, the contribution of tax to total government recurrent revenue (excluding grants) has averaged 93 %.Comparison of various taxes shows that direct taxes compared to indirect taxes contribute a greater share of overall tax revenues. In the year 2011/2012, the highest tax contribution came from VAT followed by Personal Income Tax and then Corporate Income Tax. The ratio of tax revenue to GDP has gradually increased from 14 % in last one decade to 22 % in 2011. The current ratio of 22 % is relatively high compared to most of the other countries in the region; like Uganda
reported an average tax to GDP ratio o f I I.I % and in Rwanda it was 9.2 % Deloitte Kenya (2012) budge analysis


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