1)Explain 6 challenges the government is facing in raising revenue
2)Discuss 6 methods used by the Kenya government to control public finance
1) Challenges in raising revenue for the government include:
- Economic downturns: During times of economic recession, tax revenues tend to decrease as businesses struggle and individuals have less disposable income.
- Tax evasion and avoidance: Some individuals and businesses may engage in illegal activities to avoid paying taxes, which can lead to substantial revenue losses for the government.
- Informal economy: A large portion of economic activity in many countries occurs in the informal sector, where taxes are not always collected. This makes it difficult for the government to generate revenue.
- Corruption: Widespread corruption can result in funds being diverted or misused, reducing the amount of revenue available for public services.
- Declining natural resources: Countries that rely heavily on income from natural resources such as oil or minerals can face challenges when prices fluctuate or reserves are depleted.
- Political challenges: Political instability or disagreements can hinder the government's ability to implement effective revenue-raising measures.
2) Methods used by the Kenya government to control public finance include:
- Budgeting and planning: The government prepares annual budgets that outline its revenue streams and expenditure priorities. This helps ensure that resources are allocated efficiently and effectively.
- Fiscal discipline: The government aims to maintain fiscal discipline by managing its spending and borrowing in a sustainable manner to avoid accumulating excessive debt.
- Anti-corruption measures: The government implements measures to combat corruption and enhance transparency in public financial management to prevent the diversion or misuse of funds.
- Tax reforms: The government periodically reviews and updates its tax policies to ensure a fair and efficient tax system that generates sufficient revenue for public services.
- Public financial management reforms: The government implements reforms to strengthen its financial management systems, improve accountability, and enhance oversight of public funds.
- International cooperation: The government seeks support and assistance from international organizations and development partners to strengthen its public financial management capabilities and ensure good governance practices.