How Kenyas Young and Ageing Population Impacts Tax Revenue

Addressing the evolving landscape of taxation across different demographics is crucial for achieving sustainable development goals by 2030, particularly as Kenya grapples with an annual infrastructure financing gap of approximately $2.1 billion. While there has been substantial research on taxation, studies that explore this issue through the lens of demographic changes—particularly the dynamics between the younger and ageing populations—are limited. Existing research has primarily focused on taxation in isolation, neglecting the demographic implications. Our study seeks to fill this critical gap by examining how the growth of the younger population affects tax revenue in comparison to the impacts of an ageing demographic. This approach introduces a vital perspective to current tax theory by demonstrating how demographic dynamics can significantly influence traditional revenue models in Kenya. This research utilises World Bank data spanning from 1980 to 2024, applying ordinary least squares (OLS) regression to examine the link between demographic shifts and tax revenue, with a specific emphasis on the younger and ageing populations. Our findings reveal that an increase in the ageing population positively contributes to tax revenue, whereas growth in the younger population tends to decrease it. Additionally, we identify migration as a significant factor contributing to a loss of tax revenue in Kenya. To address the challenges posed by shrinking tax bases due to these demographic shifts, we recommend policies aimed at extending working lives, facilitating young people's entry into formal