Empirical Application of the Scully's and Quadratic Models in Estimating Optimal Tax Rate for Economic Growth Maximization in Kenya

What percentage of tax revenue in GDP is considered optimal for economic growth maximization in Kenya? to determine this percentage, this paper estimates the Scully’s model and the quadratic model using quarterly time series data for years 2000 to 2021. Findings reveals non-linear relationship exist between tax revenue and economic growth in Kenya. Precisely, 19% of tax revenue in GDP is found to be the optimal tax rate for growth maximization in Kenya. Using this rate, a growth rate of 8.4% instead of the actual mean growth rate of 5.6% is attained. The study concludes that, the existing tax structure in Kenya is below optimal and there is need for restructuring it to accommodate increased tax burden through implementation of sound plans that improves tax collection framework