Research Projects

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Study on the effectiveness of tax payer education as a revenue collection strategy in KRA
(KESRA/JKUAT - Unpublished research project, 01-09-18) Rotich, Patrick Kipkemoi
Taxpayer education can be described as a method of educating the people about the whole process of taxation and why they should pay tax. It assists taxpayers in meeting their tax obligations to the government. This means that the primary existence of taxpayer education is to encourage voluntary compliance amongst taxpayers. Taxpayer education program serves to: create taxpayer awareness of laws and procedures, educate taxpayers on their tax responsibilities and rights, assist and motivate taxpayer to comply voluntarily, assist taxpayers on reporting the correct income and amount of tax, maintaining close relationship between the tax authority and the taxpayer continuously, and, instill public confidence in taxation system. It is expected that, tax education will assist taxpayers to understand tax laws and procedures as well as creating positive tax compliance attitude. It was envisaged, that with an electronic filing system implemented, KRA will increase revenue collection, reduce the time taken in verification of manual data, reduce operational costs, and thereby channel and dedicate more time to taxpayer education to increase the rate of compliance. There is a paucity of published work on the effectiveness of tax payer education as a revenue collection strategy in KRA, particularly in the context of developing countries in the dynamic African region and specifically in Kenya. This study intended to bridge this gap in knowledge that exists. The objective of this study was to establish the effectiveness of tax payer education as a revenue collection strategy in KRA focusing on Nairobi region. The study adopted a descriptive research design. The target population was the four different KRA regions in Nairobi, namely Nairobi North, Nairobi East, Nairobi West, and Nairobi South. Simple random sampling was applied in order to randomly pick 120 respondents who participated in the study. The study relied on data collected through questionnaires structured to meet the objectives of the study. Responses were tabulated, coded and processed by use of a computer Statistical Package for Social Science (SPSS) version 20.0 program to analyze the data. The study found that there exists a relationship between staff training, stakeholder sensitization program, and media education and revenue collection strategies in KRA. Therefore, study concludes that staff training, stakeholder sensitization program, and media education are statistically significant and they therefore influence revenue collection strategy in KRA. The study recommends that there is need for the more training on the reforms and modernization at KRA should be offered so as to improve on the skills, knowledge and professional capacity of the employees. This will improve service delivery in terms of clearance and increased revenue; KRA should also focus on maintaining a good corporate image to ensure that its training programs are perceived in good light by the tax- paying public; KRA should strive to facilitate participation by all sectors and categories of taxpayers. There is also need to conduct a study on the challenges facing tax payer education and sensitization in Kenya.
Effect of trade facilitation on export performance in Kenya
(KESRA/JKUAT - Unpublished research project, 01-10-18) Chege, Michael
This study addresses trade facilitation on export performance in Kenya by tracking the achievements and implementation using Kenya as a case. The study uses descriptive research design and data for the study were mainly secondary data. The study found that as a result of implementation of trade facilitation initiatives, performance in trade, FDI inflows and trade taxes collection in all EAC countries have improved significantly. Kenya is performing well than the rest of EAC countries on external border agency cooperation, governance and impartiality while Tanzania performs better than other EAC countries in FDI inflows and contribution of export to the Gross Domestic Product (GDP). The study found a significant positive relationship between countries’ trade facilitation and export performance. Facilitation was found to have no significant relationship on FDI flows. The major setbacks of trade facilitation are non-tariff barriers, transport infrastructure, inadequate human resources capacity, and low level of automation.
Effects of technology adoption on vat and excise duty compliance in Kenya
(KESRA/JKUAT - Unpublished research project, 01-10-18) Bifwoli, Chrisantus Barasa
In the current world, technology adoption is very important and is one of the key elements to the success of most economies in terms of quality delivery of products and services, operations and the provision of services. Therefore, most organizations are trying to take advantage of the increasing technological adoption to counter the ever increasing competition from other organizations. In Kenya, as an example of a growing economy, organizations such as the Kenya Revenue Authority (KRA) has shown tremendous growth in revenue collection because that have been enabled by the adoption of advanced technology. This research paper presents the current trend of which KRA is trying to adopt advanced technologies in its activities so as to improve its services to Taxpayers and generate revenue for the Government of Kenya. This research also proved that the adoption of new technologies by KRA has shown significant changes over the period of time in the quality of services delivered and the amount of revenues collected. The clarifications and data analysis of how KRA uses Information technology in their operations was well illustrated in the literature review and the observations. Three variables was applied in the implementations of Information technology that is used in this research paper. The three variables include; -The degree of which the new technologies are being adopted -The degree of utilization of these technologies -The changes that the technologies have brought to the Kenya Revenue Authority in revenue growth. During the study, the participants were assured of confidentiality and anonymity of the information they provided. Informed consent was obtained from them. The high response rate was obtained in this study by giving enough time to participants to fill the questionnaires and personal visits made by the researcher on follow up calls to the participants. The objectives of the research was; to assess the effect of itax down times on VAT and Excise tax compliance, to investigate the effect of technological coverage on VAT and Excise tax compliance and to evaluate the effect of cost of technology on VAT and Excise tax compliances. The study was conducted in Nairobi in the main offices of the Kenya Revenue Authority, Domestic Taxes Department Large taxpayer office. Most of the direct questions were directed to the compliance and recruitment officers with over 5 years working experience, the tax agents and newly Vat/Excise registered taxpayer into the K.R.A systems. The sample frame for this study was drawn from compliance and recruitment officers of KRA’s Domestic Taxes Department- Large Taxpayers Office. Email lists were used as a sampling frame to obtain the names of Tax agents and new taxpayers that are being introduced into the KRA system. Sample and Sampling Technique, the participants were equally distributed to the various KRA Domestic Taxes Department-LTO section, compliance and recruitment programs and new taxpayers in this area of study. Each participant was expected to have at least a sample of 5 respondents. The sampling procedure was not discriminate on matters such as gender and race. This study was based mainly on primary research and therefore the most appropriate instrument to collect data for the study was questionnaires. This is because questionnaires are considered more reliable compared to other methods and also provides references with very little alterations (Cooper & Schindler, 2001). Some questionnaires were hand delivered while others were filled online as some of the respondents were not available at that time but only accessed through emails. Secondary data was administered through examining the previous statistical records relating VAT and Excise recruitment and revenue growth associated with technology adoptions over the specific period of time. Data collection procedure, in order to ensure validity and reliability of the research, the questionnaires were constructed carefully with no ambiguity. This helped to facilitate answers to all research questions presented. The questionnaires were pre-tested through a pilot study after which corrections and adjustments was made, which ensured reliability. These results was not be included in the study, but the time that the participants will took to complete the questionnaires was noted and informal feedback obtained. Data Processing and Analysis, the quantitative data collected was analyzed using the basic analysis procedures such as tabulating which is the best method when it comes to the comparison of figures. The qualitative data was analyzed using conceptual content analysis because it is the best analysis method for qualitative data. The data analyzed was presented in bar graphs for the quantitative data and pie charts for the qualitative data. Tables and figures and suitable illustrations were also used.
Effect of reforms in customs administration system on trade facilitation in Kenya
(KESRA/JKUAT - Unpublished research project, 01-10-18) Kibaki, Joel Muchiri
Customs administrations today face a variety of political and administrative pressures and challenges. These include fluctuating workloads with static or declining resources, greater business expectations, and continuing pressures to meet often-conflicting government revenue, trade facilitation, social protection, and national security objectives. To cope with these pressures and challenges, the international customs community looks to the applied use of information technology (IT) as a catalyst for improving organizational and operational efficiency and effectiveness. The general objective of this research was to establish the effect of reforms in custom administration system integrity, efficiency and governance on trade facilitation in Kenya. The specific objectives were to determine the effect of reforms in integrity of ICT infrastructure, improvements in efficiency of ICT service delivery and ICT governance reforms on trade facilitation in Kenya. This study was a descriptive cross-sectional survey. This study was carried out in Nairobi. The study involved 492 employees in the Customs Services Department of KRA at KRA headquarters in Times Towers, Nairobi. The sampling frame that was applied in this study was a list of employees in the Customs Services Department of KRA. This study employed stratified sampling technique to select the study participants. Questionnaire was utilized as data collection instrument in the current study. Analysis was through both descriptive and regression statistics. Presentation of results for both the descriptive and inferential statistics was through tables, pie-charts and graphs. Study results indicate that reforms in ICT integrity had significantly and positively affected trade facilitation (β = 0.540; t = 4.714; p < 0.05). Further, findings showed that reforms in efficiency of ICT service delivery positively and significantly influenced trade facilitation (β = 0.385; t = 2.550; p < 0.05). Additionally, study findings revealed that reforms in ICT governance at KRA had a significant and positive effect on trade facilitation (β = 0.174; t = 2.096; p < 0.05). From the study findings, the following recommendations are made. First, Customs initiatives, such as deferred payment of revenues, clearance on minimum information, periodic goods declarations, tariff-free policies and duty-free imports, and so on have to be carefully reviewed and integrated with any new legislation and systems upgrade. Secondly, any modernization of the customs systems should encompass the alignment of Customs procedures and documents with international standards, conventions and other instruments. Lastly, the introduction of Customs Automation by KRA should ensure that the systems it adopts are compatible with what other governmental departments and private sector stakeholders, whose activities involve Customs operations have.
Effects of debt collection methods on revenue targets in Kenya Revenue Authority
(KESRA/JKUAT - Unpublished research project, 01-10-18) Muthami, Alice Waturi
The study sought to establish the effect of debt collection on Kenya Revenue Collection revenue targets among small and medium taxpayers in Central Kenya. The study employed a descriptive research design to achieve the desired objectives. The target population under the study was 600 who fall in the category of small and medium taxpayers in the Central Kenya Region, Nyeri Station. The study employed the use of questionnaires to collect the required data from the respondents who were a sample of 66. The data collected was coded, quantified, and analyzed quantitatively and qualitatively. The findings show that there was a positive relationship between revenue collected and GDP and debt collected and a negative relationship between revenue collection and rate of inflation. It was further found that GDP was statistically significant in the regression model while debt collected and rate of inflation were not statistically significant. Though debt collection is not a strong determinant to revenue collection it was concluded that use of effective tools would reduce debt portfolio and that following up on unpaid taxes will foster equity and encourage compliance amongst taxpayers. The study recommendations are: there is need for the treasury to fast track waivers processing to enable the KRA reduces its debt portfolio accordingly. Where the waiver has been denied then the authority will be better place to follow up with that debt soon rather than later and where it has been granted then the debt can be written off from the system and update its debt portfolio. The society in general is ignorant about their tax laws, hence there is need for KRA to simplify the tax system and make it easy for the taxpayers to know their tax obligations and honour them accordingly. This will avoid cases of debt arising out of audit as the taxpayer is assessed on what he was ignorant about
Effect of tax incentives on performance of manufacturing firms in Kenya
(KESRA/JKUAT - Unpublished research project, 01-10-18) Musau, Gilbert Kyalo
Tax incentive is a global phenomenon for governments for attracting more investments by companies operating in different economic sectors. The main objective of this study was to examine the effect of tax incentives on performance of manufacturing firms in Kenya, taking Nairobi County as a case study. The study was guided by the following specific objectives: to identify how investment deductions affect performance of manufacturing companies in Nairobi County, to examine the impact of wear and tear allowance on performance of manufacturing companies in Nairobi County, to investigate the influence of industrial building deductions on performance of manufacturing companies in Nairobi County, to examine the effect of tax exemptions and remissions on performance of manufacturing companies in Nairobi County, and to establish how tax holidays influence performance of manufacturing companies in Nairobi County. The study adopted New Growth Theory, Tax Discrimination Theory, and Theory of Investment Behaviour. Employing descriptive research design, the study’s target population was manufacturing companies in Nairobi County. There are approximately 343 manufacturing companies in the county spreading across different sectors (KAM). This study focused on three domains namely consumer goods, industrial goods, and healthcare goods companies. A sample of 137 respondents comprising of top managers, mid-level managers and junior managers was used in the study. Stratified and simple random sampling techniques were used to pick participants. Through a structured questionnaire, the study mainly used quantitative data collected through both face-to-face and self-administered interviews. Quantitative data was analyzed using Statistical Package for Social Sciences (SPSS) and Excel Worksheets. Qualitative data was organized using NVivo software and a thematic critical discourse and content analysis was done. Data was then presented through frequency tables and graphs as well as through narrative reports. The study adhered to ethical considerations, observing the principles of confidentiality and beneficence. The study established that tax incentives had a significant effect on company performance. However, it also emerged that not all manufacturing companies were aware of tax incentives and their effect on company performance. Besides, not all tax incentives had similar impact on company performance. It is anticipated that the study findings will help the government and tax agencies to address taxation in companies dealing in all sectors. The findings will also add to the existing literature in the area of tax incentives and company performance.
Factors Affecting Customs Revenue in Kenya
(KESRA/JKUAT - Unpublished research project, 01-10-18) Sindiga, Edwin
This study sought to determine the factors that affects the customs revenue collection in Kenya by using a panel gravity model with monthly time series data spanning 2010-2017. Empirical analysis shows a positive impact of the quality standards on revenue (29%) but negative on import values by (11%) in Kenya. The positive effect on revenue post quality standards period translates to an increment of Kshs 79 Billion from January 2016 to June 2017 cumulatively. The decline in imports is explained by restrictive import standards that have netted out low quality imports. Consequently, the revenue yield per shilling import (proportion of trade revenue to CIF values) has increased from 0.19 cents in pre quality standards period to 0.23 cents post quality standards period. On the other hand, procedural trade barriers associated with import standards have also contributed to imports decline. Several administrative and operational challenges were identified in this research. Therefore, the research paper recommends that management should address administrative challenges, seal legal loopholes and capacitate quality standards unit to undertake 100% imports verification.
Factors affecting container dwell time at the port of Mombasa
(KESRA/JKUAT - Unpublished research project, 01-10-18) Iroto, Irine
The Port of Mombasa is the gateway and exit point for cargo belonging to a vast hinterland of Kenya, Uganda, Rwanda, Burundi, Democratic Republic of Congo, Tanzania, South Sudan, Somalia and Ethiopia. Therefore, the performance of the port of Mombasa is critical to facilitation of trade within this region and also as a node linking it to international trade. There are a number of indicator of port performance and efficiency and this focused on one such indicator of dwell time, in particular container dwell time. In studying factors affecting container dwell at the port of Mombasa, the study covered such factors as port clearance procedure, port container handling machinery and port terminal operations with the aim of unearthing their influence and recommending actions that will fundamentally contribute to improved port service delivery to all port users. The study targeted a population of 300 people drawn from Kenya Ports Authority (KPA), Kenya Revenue Authority (KRA), Kenya Association of Manufacturers (KAM), Kenya International Freight and Warehousing Association (KIFWA), Shippers Council of Eastern Africa (SCEA) and transporters (roads) servicing the Northern Corridor Region. A sample size of 20% was chosen for the study that took four weeks with questionnaires being used as the main data collection instrument and the researcher administered questionnaires to 60 sampled respondents where only 49 filled and returned giving a response rate of 81.67%. The data analysis included descriptive and inferential statistics where the findings were presented in tables and figures. From the research findings, the study concluded all the independent variables studied (port clearance procedure, port container handling machinery and port terminal operations) have significant effect on container dwell time as was indicated by a very high coefficient of determination (R2) value of 0.768 (76.8%) and an overall p-value of 0.002 thus indicated the relevance of the studied variables, significant at the calculated 95% level of significance. Stepwise in view of the research findings, the study can conclude from the multiple regression analysis that all factors affected positively the container dwell time at the port of Mombasa with port clearance procedures being the highest influence with factor value of 0.934 with all other factors held at zero. The study recommended that concerning the port clearance procedure there is need to maintain a better port information system through strengthening the Integrated Customs Management System (ICMS) by having all processes of KPA and KRA agencies handled within a single platform. Further recommended is that in improving the port container handling machinery there be need by KPA for adoption of the most modern technologies and machinery in the market. Finally there should be ensured seamless port terminal operations through enforcement of the rule of ships not to be allowed to berth before the submission of manifest. And since it was found that only 76.8% of results were explained by the independent variables in the study, the study therefore recommended the need to carry out studies on other possible factors on container dwell time that will target private sector and other government agencies that have a direct influence on container delivery from/to the port of Mombasa through the Northern Corridor. These researches will involve studies on how the introduction and implementation of the Single Custom Territory is impacting on container dwell time at the port of Mombasa and pre-arrival clearance of goods and its impact on port terminal operation in terms of planning and container handling as related to container dwell time at the port of Mombasa.
Factors influencing capital gains tax performance in Thika district real estate
(KESRA/JKUAT - Unpublished research project, 01-10-18) Gathuri, Jewel Wambui
Capital gains tax is a tax imposed on the increase in value of marketable assets between the date of their acquisition or some fixed date and the time of disposal, when the tax becomes payable. Policy analysts have had diverging views of the effects of Capital Gains Tax on any given economy. Capital gains tax (CGT) has been reintroduced in Kenya as part of the government’s efforts to increase revenue and plug the budget deficit following an amendment in the 2014 Finance Act. This study therefore aimed at establishing the factors influencing the performance of CGT in Thika District Real Estate namely: lock in effect, costs and level of income. Stakeholders have raised a number of concerns on the reintroduction of this tax, whereas it is not in doubt that CGT is an important aspect of Kenyan economy, concerns have arisen on a number of issues especially since the revenue from CGT collection has faced a downward trend. Agency theory states that an agency problem occurs in such a relationship when asymmetric information is available to either party. Prospect theory states that people value gains and losses differently and as such will base decisions on perceive gains rather than losses to achieve fulfilling results for this study, the study adopted the use of the questionnaires as well as reports from KRA on remittance of the CGT and 3 top developers of real estate in Thika comprised the study’s target population of 50 respondents from which a sample size of 40% was used. The study adopted regression analysis using SPSS to establish the relationship between the dependent and the independent variables. The study findings show that Capital gains tax discouraged sales of appreciated assets because assets subject to capital gains taxation are generally held for a longer time by investors who hold assets, which have increased in value thus impacting Capital Gains Tax negatively. It was also found that the use of agents and brokers lead to high compliance costs for the tax payer and would at times lead to tax irregularities. The study also found that embracing technology would suffice in minimizing this loophole as well as ensure efficiency of tax collection. The findings revealed that 46 percent of the changes in tax performance in real estate are as a result of the factors identified in the research while 54 percent are others that are not included in this particular research. The study therefore recommends that; more variables should be used to widen the scope hence more comparisons. Kenya Revenue Authority take it upon themselves being the Tax Administration Authority to employ more technical staff and train them in interpreting the tax laws. The policy makers should introduce stringent measures in form of tax penalties and fines on the real estate firms and tax payers who violate and act as an obstacle in the administration of this tax
Influence of managerial challenges on collection of customs duties in customs & border control department of Kenya Revenue Authority
(KESRA/JKUAT - Unpublished research project, 01-10-18) Vikiru, Pamela
The key functions of the management of any organization include planning, organizing and control. The functions contribute to the achievement of goals of the organization. Despite endeavors to ensure that revenues collection at Kenya Revenue Authority (KRA) meets revenues collection targets, meeting the targets has been elusive. This study sought to determine how managerial challenges affected the achievement of the revenues collection objectives at KRA. The study had three specific objectives: to determine how planning and forecasting challenges affect collection of Customs duties; to establish how coordination challenges influence collection of Customs duties; and to establish the relationship between internal control challenges and collection of customs duties. The study was conducted at KRA. The study adopted the descriptive research design which applied survey methods. Primary data used in the study was collected by use of a self-administered questionnaire on a sample of 62 top and middle level management staff at KRA headquarters. The data were analyzed using summary statistics such as the mean and standard deviation. The relationship between planning and forecasting challenges, control challenges and internal control challenges and collection of customs duties was done using linear regression analysis. The findings indicated that procedures for the planning and forecasting process was not clear; that top management did not take keen formal responsibility for planning and forecasting; and that goals and targets were not always realistic and challenging. The study also found that frequent problems included getting in touch with partner organizations when needed and that, generally coordination was a great challenge. Further, management had not established effective reporting lines, and appropriate authorities in pursuit of objectives. KRA had also not demonstrated strict commitment to integrity and ethical values. The study recommends putting mechanism in place at KRA to strengthen planning and forecasting, control challenges and internal control challenges if they are to improve the achievement of customs duty collection targets.
Factors influencing tax compliance among small and medium enterprises in Nairobi county
(KESRA/JKUAT - Unpublished research project, 01-10-18) Ngove, Beatrice Mwikya
The main objective of the study was to examine factors influencing tax compliance among small scale enterprises in Nairobi County with special focus on SMEs in Toi market. The study contributes to the larger literature in the field of tax compliance and also industry players will understand some of the factors that are likely to influence tax compliance among small scale enterprises. The study was guided by the following objectives: To examine the influence of tax knowledge on tax compliance among small scale enterprises in Toi market, to establish the influence of tax rates on tax compliance among small scale enterprises in Toi market, to find out the influence of compliance cost on tax compliance among small scale enterprises in Toi market and to examine the influence of perception on tax compliance among small scale enterprises in Toi market. In examination of factors influencing tax compliance, this study utilizes two theories: Deterrence Theory and Psychology Theory. The target population was all SMEs operating within Toi market who are approximately 500 and 26 KRA Compliance staff based in East of Nairobi Station that is in charge of taxpayers in East of Nairobi areas where Toi market falls under. Considering nature of the study, a sample of 30% of the population (53) was used and a simple random sampling was adopted with questionnaire as the data collection instrument. The study analyzed both quantitative and qualitative data and the findings are presented using frequency tables, pie charts and graphs. The study had high response rate of 92%. The survey data indicate that regarding at least certain elements of the relationship between how fair individuals perceive the tax system to be and their levels of tax compliance, there may be distinct differences.
Factors influencing capital gains tax revenue collection in Kenya
(KESRA/JKUAT - Unpublished research project, 01-10-18) Ogega, Margaret Nyakoboke
The imposition and collection of taxes is simply one of the fundamental policy instruments used to achieve governmental social and economic goals. The Finance Act 2014 reintroduced capital gains tax effective January, 2015 with applicable rate of 5% in order to widen the tax base, promote equity in taxation and obtain funds to bridge the budget deficit. Capital gains tax is levied on net gains realized on sale of land, sale of building, privately traded shares and intangible assets with respect to companies. The general objective of the study was to determine the factors influencing capital gains tax revenue collection in Kenya. The influencing factors were classified under headings; capital gains tax rate, capital gains tax structure, capital gains tax knowledge and capital gains compliance strategies. The respondents were staff in Kenya Revenue Authority which is in charge with the responsibility of administration of tax laws and collection of revenue. The study focused on one of the domestic taxes the capital gains tax. The research design adopted was a descriptive research design. The target population comprised of One hundred fifty (150) employees of the Kenya Revenue Authority that are charged with the responsibility of administration and collection Capital gain tax. The study took a census approach targeting all the officers charged with the responsibility of CGT excluding the commissioners countrywide. The total number of respondents was one thirty-three (133) employees involved directly in capital gains tax collection. The study collected data using a structured questionnaire, which consisted of four sections. Primary data was obtained directly from the respondents, where the researcher used both personal administration and drop and pick later method. Before the actual data collection process, a pilot test was carried out to determine validity and reliability of the data collection tool. In data analysis, both descriptive and inferential statistics that entailed conducting Pearson’s correlation analysis was used to measure the relationship between variables. The analysis was done with the aid of SPSS software. The study revealed that Capital gains tax rate had significant contribution to capital gain tax revenue collection. The structure of capital gains tax including the inflation and indexation, historical documentation and understanding of the CGT computation was found to impact on the capital gains tax revenue collection. The CGT compliance strategies on twining of CGT with stamp duty payment, Stakeholder engagements, has improved Capital Gain Tax collection marketing, stakeholder engagements, Automation of CGT processes and review of tax laws on capital gains tax laws contributed to enhanced CGT, thus enhancing income tax revenue collection. The study recommends that in view of the fact that CGT administration changes have an impact on CGT revenue collection, Kenya Revenue Authority and the associated stakeholders such as National Treasury, should establish measures to mitigate the challenges of structure of the CGT such as taking into account inflation and indexation, harmonization of the capital gains tax system with the East Africa member states and alignment of the Stamp Duty tax laws and Income Tax laws so as to enforce the simultaneous payment stamp duty and capital gains tax. There are also gaps in the 8th Schedule of the Income Tax laws and there is a need to review the law to seal the gap that has led key stakeholders to take legal actions on the process of collecting capital gains tax. The changes in the Finance act need to be incorporated in the iTAX system to mitigate taxpayers’ challenges when declaring CGT. There is also need for maintaining a single portal for collection of capital gains tax and stamp duty tax to promote efficiency, accuracy and accountability.
Effect of tax administration on compliance among small and medium sized enterprises in Kiambu County
(KESRA/JKUAT - Unpublished research project, 01-11-20) Wachira, Stephen Kamau
Low levels of tax compliance are observed among SMEs thus reducing potential tax collections and increasing the tax administration effort. Many countries address these issues by adopting simplified tax regimes for SMEs and implementing dedicated compliance strategies. The general objective of the study was to determine the effect of tax administration on tax compliance among small and medium sized enterprises in Kiambu County. The study was guided by the following variables; deterrence tax measure, electronic taxation system and tax education. The study was anchored on three theories; The Deterrence Theory of Tax Compliance, Theory of Planned Behavior and Adams Smith Canons of Taxation Theory. The target population comprised of 247 registered businesses in Kiambu County as at 31st December, 2019. This study adopted cross sectional survey design. Stratified random sampling method was used to select relevant respondents. Questionnaires were used to collect primary data from respondents. Secondary data was obtained from related materials in tax management journals. Quantitative data was analyzed using SPSS version 25. Descriptive statistics and multiple regression analysis was used to predict the effect of deterrence tax measures, electronic taxation system and tax education on tax compliance. A pilot study was undertaken on 15 of the respondents to test the reliability and validity of the questionnaire. The study found out that there was a positive and significant relationship between deterrence tax measures and tax compliance. Further, the results revealed that there was a positive and significant relationship between electronic taxation system and tax compliance. Lastly, there was a positive and significant relationship between tax education and tax compliance. Based on the findings, the study concluded that deterrence tax measures, electronic taxation system and electronic taxation system have a positive and significant effect on tax compliance. Based on the findings, the study concluded that deterrence tax measures, electronic taxation system, electronic taxation system have a positive and significant effect on tax compliance. The study recommends that the sanctions and penalties should be levied promptly once a liability has been established; should not be excessive; should, however, be higher than the prevailing market interest rates. KRA should offer continuous training to taxpayers on how to use the various IT platforms like iTax, EGMS, Mobile Apps and Electronic Stamps in their organizations to improve excise duty compliance. Lastly, there should be training of special units within the revenue departments; for providing education, counseling and support to the taxpayers, through different media which include newspapers, television, radio programs, websites, seminars and front desk help, these create more room to disseminate key information to the taxpayer.
Effect of tax incentives on financial performance of construction and allied firms listed on Nairobi securities exchange
(KESRA/JKUAT - Unpublished research project, 01-11-20) Muruny, Haron Ksang
In the recent past, construction sector was ranked among the best performers in the country, buoyed by the increasing demand in housing for the expanding middle class. However, increasing economic pressures and the overall instability of both micro and macroeconomic environment, has resulted in a mixed trend within the Kenyan construction industry. Increasing prices of industrial inputs used in the allied industrial construction sub-sector has had far-reaching consequences across the whole construction sector. Different interventions have been implemented to stabilize the sector, some of which include diverse forms of incentives. This study investigated the interventions in the tax measures, looking into the aspect of tax incentives on the financial performance of the listed construction firms in Kenya. Three taxation incentives, notably; investment promotion incentives, export promotion incentives and wear and tear. The study employed descriptive statistics design utilizing quantitative data centering on the allied construction companies listed at the Nairobi Securities Exchange. Audited Financial data for the listed companies, extending for a period of 5 years (2014 – 2018) was used in this study. Data related to the different set of tax incentives, was obtained from the publications by the Kenya Revenue Authority (KRA), Kenya National Bureau of Statistics (KNBS) and the Central Bank of Kenya (CBK). The independent variable metrics for measurement in this study, including investment promotion, export promotion and wear and tear were compared against profitability ratio, return on assets (ROA) cumulatively for all the listed construction firms. Multiple regression analysis and correlation tests were performed to test for inference and association. The study established strong positive correlation between investment promotion, export promotion and wear and tear versus ROA. The study concludes that export promotion incentives and investment promotion incentives accrue partial benefits to firms in the construction sector, contributing towards partial financial performance. Also, the study establishes that wear and tear accrue a negative financial performance of construction firms listed in Kenya. The study recommends for extension of periodic timelines for the tax incentives in export promotion and investment promotion to boost production and subsequent financial stability of listed construction firms. The study recommends for the revision in the applicable formula used in the calculation of wear and tear for the firms operation in the construction sector.
Effects of taxpayer education on monthly rental income tax compliance in Thika town central business district
(KESRA/JKUAT - Unpublished research project, 01-11-20) Osingo, Kennedy Otieno
Taxpayer education has become a major component in the tax systems in inspiring sense of civic duty among the taxpayers as well as promoting and expanding revenue collection. This is important especially when legislation have been enacted to target a particular group of taxpayers or to create an entirely new tax-head (Ionel, 2013). Therefore, as taxation laws change with technological advancement for a particular country, for the purposes of this research paper Kenya, there is need to educate the taxpayers and inform them accordingly on the legislated changes. The absence of this may give rise to cases of involuntary noncompliance or tax evasion. Therefore, this study‘s main objective was to study the effects of taxpayer education on monthly rental income tax compliance. This research study employed descriptive research design where questionnaires were used to collect qualitative data. The study was conducted within Thika Town CBD and it targeted all Landlords with residential property within Thika CBD as its population of focus. According to Thika KRA Station Block Management System, the town is divided into about eight blocks. It‘s estimated that over 200 residential houses have been built within the CBD at the time of the study. Hence, a sample of 50 residential houses were selected in a random sampling process. A total of 50 semi-structured questionnaires were designed with open ended questions and close ended questions to aid qualitative and quantitative data collection. A pilot test was conducted on 10 landlords with aim of testing the validity and reliability of the questionnaires. This helped to cite inconsistencies which were afterwards corrected in a thorough editing process. The study established that Monthly Rental income tax compliance is dependent on educating the tax payers on return filing, tax calculation and the process of tax payment. The study in conclusion asserts that taxpayer education is a strong pillar is spurring tax compliance among the landlords hence, KRA through the government should invest more especially the taxpayers in the rural areas in order to inform them on the changes in the and less complex methods of calculating and remitting tax without incurring costs.
Factors influencing Value Added Tax compliance among small and medium business enterprises in Thika Town
(KESRA/JKUAT - Unpublished research project, 01-11-20) Njuguna, Gladys Waigwe
Tax is the most important stream of revenue for government’s development projects and services which includes, Health care, infrastructure, education and electricity efforts must be made by governments to ensure that it is accurately and efficiently collected to facilitate the government’s operations. In an effort to maximize collection of revenue and efficiency in tax administration, there must be fair and favorable tax policies to ensure maximum compliance among the tax payers. This study sought to discuss the factors that influence VAT compliance in Kenya, specifically focusing on SME’s operating within Thika town. This study was guided by measuring how availability of tax information to the taxpayer, taxpayer attitude and compliance cost affect value added tax compliance among the SMEs. The guiding theories for the study were economic (deterrence) theory, the Expediency theory of taxation and cost of service theory. This study employed a descriptive research design to determine the correlation between the independent and dependent variables. The target population was 1050. The research used a sample size of 290 SME’s selected from the target population for the study. This study used both primary data and secondary data. Primary data was collected using structured questionnaires with closed questions and secondary data was acquired from the Kenya Revenue Authority reports and from journals which represents academic research. The study used both descriptive and inferential statistics in analyzing the data collected while the regression analysis was used to ascertain the correlation that exist between the independent variables and dependent variable. The study established that the correlation between the independent variables was statistically significant with a p value of 0.00 which is less than 0.05. The findings were presented using frequency distribution tables and charts. The study concluded that tax information, taxpayer attitude and tax compliance cost affected value added tax compliance of SME’s operating within Thika town. Based on the findings the study recommends that the KRA should continue providing tax payer education to the tax payer so that they can understand the digital tax return system hence they can file their returns with no external sourcing which will lead to a low compliance cost and introduce tax education to students to create a positive attitude toward paying tax. The government can also create an exclusive social recognition to the compliance taxpayer acts as an incentive for more tax payers to join the compliance list, hence increase the level of VAT compliance. However, further studies can be done on 33.1% of the change in value added tax compliance factors which were not included in the model
Factors affecting collection of residential rental income tax in Westlands area, Nairobi, Kenya
(KESRA/JKUAT - Unpublished research project, 01-11-20) Nyongesa, Mercy Nafuna
Taxation remains to be the main source of government revenue in both developed and developing economies. It also provides an important avenue for financial independence of nations from external assistance. The study aimed to establish the factors affecting collection of residential rental income tax in Westlands, Nairobi County. The study was guided by the following specific objectives:- to investigate the effect of taxpayer knowledge on the collection of residential rental income, to find out the effect of technology on the collection of residential rental income and to determine the effect of penalties and interests on the collection of residential rental income. The study adopted descriptive research design. The study target population was 1300 property owners in Westlands. The study sample size was 130. This study used primary data through questionnaires. A pre-test on a different sample was carried out to give a Cronbach‘s alpha greater than 0.7 for all the variables as a rule of thumb. Data analysis was conducted by use of descriptive statistics and inferential statistics using Standard statistical techniques including Pearson correlation coefficient and regression analysis was employed in the analysis. All the analysis was done using the statistical package for social sciences (SPSS Version.24). Analysis of variance (ANOVA) was used to establish if there is a statistical significance between the observed and expected values with the Pearson Chi square giving the degree of significance of the relations, hence establishing the hypotheses. In multivariate analysis, multiple regression analysis models were used to determine the type of the relationship that existed between independent and dependent variables. The study found that tax knowledge (β = .212; ρ < 0.05), technology (β = 0.343; ρ < 0.05) and penalties and interests (β = .209; ρ < 0.05) significantly influences residential rental income tax collection by Kenya Revenue Authority. Based on study finding, this study recommends that KRA should develop training programs to create awareness on residential rental income tax compliance by property owners. The study further established that fines and penalties encourage compliance with residential rental income tax by property owners. The study therefore recommends that the tax authority in Kenya (KRA) should revise its fines and penalties to make them more severe to encourage tax compliance.
Factors affecting collection of taxes among real estate owners a survey of Lang’ata sub-county, Nairobi county
(KESRA/JKUAT - Unpublished research project, 01-11-20) Mulama, Andrew Othieno
The topic of tax collection has been of great concern to researchers in developed and developing nations globally. Taxation of the real estate industry has been classified as economic in most third world countries. The Domestic Taxes Department of the Kenya Revenue Authority is responsible for collection of revenue from the real estate owners and the landlord. The ability of the department to meet its objectives is the performance by which it will be judged by. The domestic tax department has several enforcement arms amongst them the rental income unit which are employed to aid in achievement its objectives. This study focused on the factors affecting the collection of taxes among real estate owners in Lang’ata sub-county. The general objective of this study was to determine factors affecting collection of tax in the real estate sector in Lang'ata Sub-County.The Specific objectives of the study were to establish whether data driven approach has enhanced tax collection among real estate owners in Lang’ata sub-county, to determine whether taxpayers knowledge of tax legislation has an effect on collection of taxes in real estate sector in Lang’ata sub-county and to establish whether enforcement measures have an effect on the level of collection of taxes in the real estate sector in Lang’ata sub-county. These objectives are crucial if the domestic tax department and the Kenya Revenue Authority as an organisation are to be considered successful. The theories that are relevant to the study include the institutional theory, resource based and the deterrence theory. The study was descriptive based research on the need to give an elaborate explanation on the factors that affect the collection of rental income tax in Lang’ata sub-county. A research gap of training more officers was identified. A sample size of 40 out of a population of 44 respondents was used in the collection of data. Stratified sampling technique was used in the collection of data. The data analysed was collected using both open ended and closed questionnaires from the respondents. The researcher will then use SPSS version 25 to analyse data and the linear regression model to show the correlation between the independent and dependent variables. From the findings it is evident data driven approach and other variables used in the study affect rental income collection.From the findings it was established that rental unit needs to employ more trained officers. However, from the study findings it was established that majority of the respondents disagreed that the benefits of the rental unit exceeds its operational costs. In addition, the study established that landlords in Langat sub-county are more open in their declarations because of the rental income unit. The study concludes that the enforcement measures is a more cost effective tool compared to other method and the rental unit does not earn domestic tax department a lot of extra revenue. The study recommends that the rental unit should invest more on training to curb tax evasion. Finally, the study recommends that the rental unit should be financially supported since it helps rental officers to easily and efficiently collect taxes
Effect of Customs Risk Based Management Systems on Trade Facilitation in Kenya Revenue Authority
(KESRA/JKUAT - Unpublished research project, 01-12-18) Ogoti, Thaddeus Nyatwanga
The main challenge in the Kenya Revenue Authority, Customs Management and administration, especially in the last recent years, has been how to balance between the needs for trade facilitation as expected of by the World Customs Organization, WCO, to facilitate legitimate international trade as a process by the adoption of simplification, standardization and unification of documents and procedures in the internationally traded goods on one hand and the level of Customs Controls and interventions to be applied. The main aim of this study was to establish the impact that risk based clearance procedures have on the performance of the port. Specifically, on the time taken for clearing of goods, protection against prohibited and restricted goods. The study used descriptive research method which involve qualitative and quantitative data analysis. The data collection method was through the use of questionnaires and analyzed using SPSS. The study found out that risk based factors such as country of origin, the nature of commodities, the clearing agent, the importer and the historical data found in the system.
Effects of internal controls on revenue collection in Kenya customs administration
(KESRA/JKUAT - Unpublished research project, 01-12-18) Chepkwony, Kibet
Internal Controls play an important role in every organization as it assists in realization of their financial performance goals. The main objective of this study is to examine the effects of internal controls in operation in Kenya Customs Administration with specific reference to Inland Container Depot with a view to establish if such internal controls have a significant relationship with revenue collected. Specifically, the study assessed the effect of the Physical control, segregation of duties and internal audit on revenue collection. In view of the above objectives of the study, the researcher conducted a census for the study since the population of 53 of the employees at ICD is manageable. Data was collected from the respondents using self-administered questionnaires from the Inland Container Depot employees. Data was coded and entered into Statistical Package for Social Sciences (SPSS, version 20.0. Data was analyzed using descriptive statistics (mean and standard deviation) and inferential statistics (correlation analysis and multiple regression analysis). The results were presented in charts, graphs and tables to ease interpretation. Multiple regression analysis was used to establish the relationship between internal controls and revenue collection in Kenya Customs Administration at Inland Container Depot. The study findings established a positive and significant relationship between physical control and revenue collection at Inland Container Depot. Findings also showed a positive and significant relationship between Segregation of duties revenue collection at Inland Container Depot. There is also a positive and significant relationship between internal audit and revenue collection at Inland Container Depot. Correlation analysis findings show that the independent variables (physical control, segregation of duties and Internal Audit.) contributed to 75.7% of the variation in Revenue Collection as explained by adjusted R2 of 0.757 which shows that the model is a good prediction. This therefore reveals that other factors not studied in this research contribute to 24.3% of the variability in the Revenue Collection. The study therefore recommends that there is need for the Kenya Customs Administration to ensure suitable environment where internal controls are monitored for the improvement of revenue collection.