• Munene Lewis Njagi
• Maureen Ndagara
• Anita Ncurai

Fiscal policy, which involves government decisions on taxation and spending, plays a fundamental role in shaping economic outcomes by fostering sustainable growth and alleviating poverty (IMF, 2023). Kenya’s government has sought to increase the tax revenue collected by enhancing collection efficiency and broadening the tax base. The tax revenue collected is expected to influence fiscal policy and economic growth because the government finances its expenditures (development and recurrent) largely through tax revenues, which form the backbone of government income. This study sought to establish the effect of tax revenue on economic growth in Kenya. It aligned with the Endogenous Growth Theory, emphasizing the growth enhancing role of tax revenue when it is focused to productive sectors. This was done while accounting for Keynesian concerns over demand suppression. Inflation moderates the relationship negatively by reducing the growth benefits of tax revenue. The study adopted a causal research design. The research utilized annual data on gross domestic product (GDP) and total tax revenue from 2013 to 2024. The primary data sources included the Central Bank of Kenya (CBK). Data, sampled systematically, was analyzed using Stata software (version 14.2) and the Vector Error Correction Model. Findings (β = 1.732414, p = 0.0000) showed that tax revenue had a statistically significant effect on economic growth. It is recommended that Kenya should broaden its tax base to reduce over-reliance on a narrow pool of taxpayers, and improve tax administration efficiency. At the same time, tax revenues should be strategically redirected towards infrastructure, industrialization, and agricultural modernization to generate long-term growth multipliers.

Tax Revenue, Economic Growth, VECM, Inflation Moderation, Kenya, Fiscal Policy.

"Effect of Fiscal Policy Variables on Economic Growth: Taxation. ", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.12, Issue 10, page no.c646-c652, October-2025, Available :http://www.jetir.org/papers/JETIR2510281.pdf

"Effect of Fiscal Policy Variables on Economic Growth: Taxation. ", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.12, Issue 10, page no. ppc646-c652, October-2025, Available at : http://www.jetir.org/papers/JETIR2510281.pdf