This study examines the effect of tax evasion, with special emphasis on Income Tax and Value Added Tax to the Government of Kenya revenue, and the effects it has on the general rates of taxes within the country. 

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The study examines the background information on the subject of tax evasion as a whole before narrowing down to income tax and value added tax. 

The findings of a survey conducted with randomly selected respondents together with the conclusions of analyzing secondary data confirm that indeed tax evasion of Income Tax and Value Added Tax is widespread in the formal economy as well as in the underground economy. 

Whereas the government has taken the necessary measures through legislation and compliance audits to fight the menace, the problem still persists on a wide scale. 

Because of tax evasion, the government has tended to keep high tax rates in order to raise sufficient funds to finance the services it provides to the citizens. If tax evasion were eliminated, the tax rates could be lowered and yet collect sufficient funds for government programs. The study also shows quite clearly that there is an urgent need for the government to educate taxpayers on their rights and obligations and on penalties that may be imposed upon those caught evading tax. 

These observations have been captured under the recommendations for the attention of Kenyan government policy makers. 

The study concludes that with consistent application of the existing laws, and with strict application of the law to all taxpayers with equal zeal that does not discriminate them on the basis of their wealth and standing in society will encourage greater compliance, and lead to higher tax yields and ultimately to lowering of tax rates. 

Finally, the Study established that an overwhelming number of taxpayers do not mind paying their taxes so long as they are assured, and can see that the government uses it wisely to provide the much needed social and publ ic services. 

Any perception that the money collected through taxes is squandered and misused will always encourage tax evasion.

Study by Mbaya, Andrew K