1. Tax Administration
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Item Study on the effectiveness of tax payer education as a revenue collection strategy in KRA(KESRA/JKUAT - Unpublished research project, 01-09-18) Rotich, Patrick KipkemoiTaxpayer education can be described as a method of educating the people about the whole process of taxation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.Item Effects of debt collection methods on revenue targets in Kenya Revenue Authority(KESRA/JKUAT - Unpublished research project, 01-10-18) Muthami, Alice WaturiThe 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 aboutItem Effect of tax incentives on performance of manufacturing firms in Kenya(KESRA/JKUAT - Unpublished research project, 01-10-18) Musau, Gilbert KyaloTax 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.Item Effects of technology adoption on vat and excise duty compliance in Kenya(KESRA/JKUAT - Unpublished research project, 01-10-18) Bifwoli, Chrisantus BarasaIn 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.Item Factors influencing tax compliance among small and medium enterprises in Nairobi county(KESRA/JKUAT - Unpublished research project, 01-10-18) Ngove, Beatrice MwikyaThe 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.Item Factors influencing capital gains tax revenue collection in Kenya(KESRA/JKUAT - Unpublished research project, 01-10-18) Ogega, Margaret NyakobokeThe 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.Item Factors influencing capital gains tax performance in Thika district real estate(KESRA/JKUAT - Unpublished research project, 01-10-18) Gathuri, Jewel WambuiCapital 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 taxItem 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 KamauLow 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.Item 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 KsangIn 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.Item 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 OtienoTaxpayer 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.Item Factors affecting collection of residential rental income tax in Westlands area, Nairobi, Kenya(KESRA/JKUAT - Unpublished research project, 01-11-20) Nyongesa, Mercy NafunaTaxation 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.Item 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 WaigweTax 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 modelItem 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 OthienoThe 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 taxesItem Determinants of Residential Rental Income Tax Compliance by Property Owners in Thika Town(KESRA/JKUAT - Unpublished research project, 2018) Mbeni, Caroline KalundeTax compliance has been a crucial subject to researchers in many countries around the globe. In most third world countries house rental taxation has been classified as economic. In Kenya, statistics indicate that less than half of property owners and developers comply with rental income tax requirements. Thus, this study sought to examine the determinants residential rental income tax compliance by property owners in Thika town. The study employed a descriptive research design and collected data from a sample of 58 property owners using questionnaires. The data collected was analyzed using descriptive and inferential statistics with the help of Statistical Package for Social Sciences version 21 for evaluation of relation between dependent and independent variables. Multiple regression model was adopted. The findings of the study found a significant positive relationship between tax rate, tax knowledge and residential rental income tax compliance and an insignificant positive relationship between attitude and perception and residential rental income tax compliance. The study also found an insignificant negative effect between income levels, fines and penalties and residential rental income tax compliance by property owners. The study concluded that tax rate, tax knowledge, attitude and perception positively influence residential rental income tax compliance while income levels, fines and penalties negatively influence residential rental income tax compliance by property owners. It was recommended that KRA develops training programs to create awareness on residential rental income tax compliance by property owners and that the tax authority in Kenya (KRA) should develop effective working policies to develop a positive relationship and trust with taxpayers. It was recommended that further study be carried on the other factors that affect compliance with residential rental income tax and study to cover other areas besides Thika Town.Item Factor Affecting Value Added Tax Compliance Among Retail Shops in Nairobi County(KESRA/JKUAT - Unpublished research project, 2018) Vuzigwa, Madegwa ValaryTax is an important stream of revenue for the government’s development projects and therefore, all efforts must be made by governments to ensure that it is accurately and efficiently collected. The main issue faced by all tax authorities is that it has never been easy to persuade all taxpayers to comply with the regulations of a tax system, especially in the retail industry which contributes approximately 8.2% to the Gross Domestic Product, (Cytonn, 2016). The main objective of the study was thus to establish factors affecting VAT compliance among the retail shops in Nairobi County. The study sought to determine the effect of tax audit, tax education, and compliance cost on value added tax (VAT) using questionnaires. A sample size of 124 retail shops from the 183 target population as per recommendations with a 77% response rate was achieved. Respondents were determined using the systematic random sampling technique. The study collected primary data from the sampled retail shops using self-administered questionnaires. Data collected was analyzed using Statistical Package for Social Sciences and findings presented in the form of tables. The study used the Pearson correlation coefficient, t-statistics as well as multiple regression to analyze data collected. The findings indicate that while increase in tax audit and tax education had a positive relationship on VAT compliance, compliance cost had a negative relationship, hence the government should increase more audits and educational seminars as well as ensure low compliance costItem Effectiveness of Time Series Models On Forecasting of Value Added Tax Revenue in Kenya Revenue Authority(KESRA/JKUAT - Unpublished research project, 2018) Kithure, Muthuri EvansTaxation is one of the means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Tax revenue forecasting plays a central role in annual budget formulation. It provides policy makers and fiscal planners with the data needed to guide borrowing, use accumulated reserves, or specify monetary measures to balance the budget. Therefore, it is necessary for a government to forecast the revenue it collects for planning purposes. Kenya Revenue Authority (KRA), is an agency of the government of Kenya that is responsible for the assessment, collection and accounting for of all revenues that are due to government, in accordance with the laws of Kenya. The main objective of this study was to fit time series models in the data series of revenue collections and establish their effectiveness as far as revenue forecasting is concerned. The study used the monthly Value Added Tax (VAT) collections data from the financial year 2009/2010 to 2015/2016 with the general objective of exploring patterns in the data such as trend, seasonal components, cycles among others and further establish a suitable forecasting model which can be used to predict the amount of VAT revenue to be collected in a certain specified period. The first step was to check if the series was stationary by using Dickey Fuller Test, thereafter transformation by differencing if the series was not stationary. The order of the models was tentatively chosen by analyzing the ACF and PACF plots of the data. This resulted to AR(3) model, MA(1) model, ARMA(3,1) model and ARIMA(3,1,1) model which were fitted to the data series. In order to select the best potential model, different statistics were used like BIC, AIC, AICc, and forecast accuracy measures like ME, MAE and MPE. ARIMA(3,1,1) was selected as the best model compared to the other models. Diagnostic check was made to test for correlation and normal distribution of the residuals using Box-Ljung test, Q-Q plots and Shapiro wilk test and the results showed normal distribution of the residuals with no correlations for all the models. Using the models, forecast of VAT revenue collection in the financial year 2016/2017 was made and the forecasted values compared with the revenue collections that were made in the respective financial year. ARIMA (3,1,1) produced better forecasted values as compared to the other models. Therefore ARIMA (3,1,1) was chosen as the best effective model to fit the data series and forecast the VAT revenue collections.Item Effects of Tax Incentives in The Development of Manufacturing Industries in Nairobi, Kenya(KESRA/JKUAT - Unpublished research project, 2018) Wangu, Munene RosemaryThis paper investigated the effects of fiscal incentives such as corporate tax incentives, capital allowance incentives, and VAT incentives on the development of the manufacturing industries in Nairobi. The study used Return on Assets (ROA) as the proxy for development. The researcher was motivated by the fact that many developing nations, like Kenya, often use fiscal incentives to attract foreign direct investment (FDI) through export processing zones (EPZ). The companies that invest in this zones often receive unique treatment and incentives for a given period of time. However, several researchers have investigated the effects of the incentives on the EPZs but not on the general manufacturing environment. Therefore, this research sort to understand if the fiscal incentives on the manufacturing sector without focusing on a specific are of production of zone. The study employed a descriptive survey research design. For data collection, the researcher employed random sampling to gather a sample of 51 respondents from an initial target sample of 80 respondents. The study used a questionnaire as the main data collection instrument. The data collected was analyzed using descriptive statistics and was regressed to give a statistical meaning to the results. The final regression equation was, ROA = 22,892,923 + 4.952 (corporate income tax incentive) + 9.344 (Capital allowance incentive) + 0.254(VAT Incentive). This showed that the various fiscal incentives all have a positive and significant effect on the development of manufacturing industries in Nairobi. The study concluded that even though these incentives are effective in stimulating development, they require other policies in order to maximize their effects on the manufacturing sector. The researcher recommended that the government should implement other policies that improve the business environment for the manufacturing sector. The government should focus on the local manufacturers and the reduction in the cost of doing business in order to maximize the effectiveness of the fiscal incentives in the economy as a whole. Keywords: Return on assets, corporate tax incentives, capital allowance incentives, VAT incentives, and export processing zones.Item Factors Affecting Compliance of Medium Taxpayers in Nairobi County(KESRA/JKUAT - Unpublished research project, 2018) Mutsiambo, Phelistas LudiaTax compliance remains a key area of focus in most governments all over the world and revenue collecting institutions. In Kenya, tax revenue has remained low compared to registered taxpayers in the KRA tax system. This scenario is the same even after continuous field audits, compliance checks, debt monitoring, enforcement, and market surveillance among other initiatives. Revenue collection stands at 19.5% of Gross Domestic Products (GDP). The main objective of this study was to investigate factors affecting compliance in revenue collection by medium taxpayers in Nairobi County. The study was guided by the following specific objectives, that is, to determine the influence of literacy level, business performance, tax law complexity and technology influence of tax compliance among medium taxpayers in Nairobi County. Most of the research done so far have always placed emphasis on compliance, tax evasion and avoidance, recent research indicates that taxpayers are ridden with challenges, which are often overlooked. This study adopted a descriptive research design. The study targeted medium enterprises operating their business in Nairobi’s Industrial area. There are 500 Medium Scale Enterprise operating in this area. This study adopted simple random sampling technique and this is chosen because the researcher focuses on traders operating in a given area. The nature of data that was used in this study was primary data. The data was presented in tables and graphs and explanation will be presented in prose. The study found that a majority of the medium taxpayers have moderate to slightly high levels of understanding of their tax obligations. Filing tax returns and comfortably engaging in various tax calculations without assistance. Majority of medium taxpayers, taxes paid are somewhat less than the profits they make. The study concludes that majority of the medium taxpayers have moderate to slightly high levels of understanding of their tax obligations particularly with regard to filing tax returns and comfortably engaging in various tax calculations without assistance. Majority of medium taxpayers, taxes paid are somewhat less than the profits they make. The tax laws are however moderately complex in respect to tax obligation as set out in various tax laws and comfortably engaging in filing tax returns as required by law. The study further concluded that deduced that technology has significantly enhanced revenue collection among a majority of medium taxpayers in the country particularly in registration of taxpayers using the electronic tax registers and in filing tax returns using the iTax System. The government should sensitize the taxpayers on the importance of paying tax. The study also recommends that Kenya Revenue Authority should embark on public awareness campaigns to educate the public on their role. Medium taxpayers should also be educated on basic tax calculations to reduce the indirect costs associated with compliance with this policy.Item The Effects of Taxation of Intangible Assets On Tax Revenue: Tapping The Untapped Revenue in Digital Assets, Royalties, Licenses, And Contractual Customer Relations(KESRA/JKUAT - Unpublished research project, 2018) Nguyo, Kevin MuteruThe intangible assets group as a source of tax revenue remains untapped in Kenya and like many developing nations. Despite taking the Lion’s share of most upcoming organizations, intangible assets are not offered the necessary focus in terms of tax administration. Most developing nations lack a general framework for the valuation and measurement of the intangible assets. As a result, it becomes difficult for the relevant authorities to formulate regulations for tax administration in line with intangible assets. The International Valuation Standards organization has established three different methods of valuation for intangible assets. The international Accounting Standards IAS provides for the valuation and accounting for intangible asset through IAS 38. Despite the existence of such measures most developing nations are yet to establish the means through which the revenue authorities can measure the intangible assets. Most organizations have their unique methods of valuation. This implies that the organization retains the authority to determine the value of the assets. The main purpose of this research was to explore the untapped sources of revenue for the Kenya Revenue Authority in the form of intangible assets. Precisely, this paper focused on the characteristics of intangible assets that make them easily taxable and a sustainable source of tax revenue. Intangible assets include royalties, licenses, and intellectual properties that yield huge economic benefits for the owners. This research focused on the intellectual properties and the extent to which the KRA can yield a considerable amount of revenue through the taxation of intangible assets. The researcher employed a descriptive survey research design. A descriptive survey consists of instruments such as questionnaires, observations, and interviews aimed at collecting data from a representative sample of a given population. The study targeted companies listed at the Nairobi Securities Exchange and select KRA officials. Owing to the sensitive nature of the study, the study relied on a convenient representative sample. The data was collected through interviews, and questionnaires. The researcher analyzed the data using SPSS. The researcher concluded that there is a strong relationship between tax revenue and the valuation of intangible assets. Based on the values of intangible assets held by the organizations under review, it is evident that KRA could increase its revenue base by tapping into the intangible assets. The researcher recommends that the government should adopt one of the valuation methods developed by the international valuation standards organization. This is in order to provide a platform for the development of regulations for the taxation of intangible assets. The development of a single valuation method would allow KRA to develop means of administering taxation for the intangible assets.Item Effect of Itax System On Revenue Collection of Kenya Revenue Authority: A Case of Large Taxpayers(KESRA/JKUAT - Unpublished research project, 2018) Njenga, Annrita WanjiruThe general objective of the study was to establish the effect of iTax system on revenue collection in Kenya Revenue Authority among Large Taxpayers in order to achieve the purpose of the study and to address the statement of the problem the study is guided by the following three specific objectives. To establish the effect of the adoption of electronic registration on revenue collection by the Kenya Revenue Authority on Large Tax Payers. To establish the impact of the adoption of iTax on efficiency of operation at Kenya Revenue Authority on Large Tax Payer. To find out the challenges of iTax adoption at the Kenya revenue authority when dealing with large tax payers. The success of the KRA adoption largely depends on the functionality of the service. The study established that KRA‗s revenue collection had an impact on iTax adoption. The research adopted a descriptive research design which was the most suitable method as it enabled the researcher to analyze the effect of technology adoption on tax compliance. The population of interest of the study consisted of 1,240 large taxpayers. The sampling frame consisted of the segmented taxpayers from the large taxpayer’s office department. The researcher adopted both stratified and random sampling techniques. The sample size consisted of 124 respondents to whom questionnaires were administered. The quantitative data collected was analyzed by the use of inferential statistics using SPSS and presented through regression and correlation analysis to determine the relation between the dependent and independent variables. The information was displayed by the use of tables where necessary. Descriptive statistic such as mean, standard deviation and frequencies was used to measure the central tendencies of the variables. The study concludes that iTax adoption of large taxpayers is influenced by revenue collection and efficiency. The study recommends continued seminars and training of tax payers on filling of returns.