Effects of Taxation on Public Infrastructure Financing in Nairobi City County, Kenya

Public infrastructures in Kenya, specifically Nairobi City County have witnessed failures and poor implementation coupled with rising cost of sustaining them. The involvement of foreign or international bodies in funding the infrastructures has pointed to inadequate public financing to run local infrastructures. Studies have examined various factors that lead to this difficult situation while pointing to politics, poor economy and lack of quality management. This study aimed at finding out the effect of direct and indirect taxation level on public infrastructure financing. The main objectives of the study were to explore how direct taxation affects public infrastructure financing, to examine how indirect taxation affects public infrastructure financing and to determine the effect of both direct and indirect taxation on financing public infrastructure. In order to achieve the objectives, this study adopted a descriptive study design. A sample size of 7 sectors was drawn from a target population of 57 sectors which included roads and highways, healthcare, education, water, and sports. Stratified random sampling was employed in the selection of sample size. The study was anchored on public finance theory supported by stewardship theory and stakeholder theory. The study instrument involved use of a questionnaire focusing on the online approach. Data analysis involved descriptive as well as inferential statistics run on both computer programs of MS - Excel sheets and Statistics for Social Scientists Program (SPSS, ver.21). The analyzed data was presented in percentages, means, standard deviation and statistical inferences including modeled correlation and regression. The correlation analysis results validate that, direct taxation had a strong positive relationship with public infrastructure financing as indicated by a positive Pearson coefficient of 0.808 and p - value 0.000. Pearson correlation and variable coefficient term results revealed that public infrastructure financing and indirect taxation were positively and significantly correlated with r=0.804 and p - value 0.000. Additionally, Pearson correlation results revealed that combined direct and indirect taxation, and public infrastructure financing were strongly positively correlated with r=0.837 and p - value 0.000. The regression analysis on the other hand, revealed that direct taxation, indirect taxation and combine taxation had a positive effect on the public infrastructure financing with coefficient constants of 0.682, 0.396 and 0.714 respectively. The study therefore, recommended tax administrators to develop proper channels ensuring all citizens remit their taxes. Paid taxes to be put to good use, officials found to squander revenue from the public should be stripped off of their duties and placed to face severe punishment. The study concluded that improving on direct taxation results to improved public infrastructure financing. Secondly, indirect taxation influenced public infrastructure financing positively, and improving matters concerning indirect taxation would result to an improved public infrastructure financing. Lastly, combined direct and indirect taxes were improved, the resultant effect would be an improvement on public infrastructure financing. On the other hand, the study recommended that public empowerment should be made constant to educate the masses on indirect taxation how it comes about and its importance to the economic growth of a country. Additionally, revenues from indirect taxes should be put to facilitate important public infrastructures, where those involved in the projects need to demonstrate transparency in how they handle the revenues to build and maintain trust with the taxpayers.