1.2022

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Customer-Focused Service on Tax Compliance in Kenya
(KESRA/JKUAT - Unpublished research project, 2022-09-01) MUTHURI, JANE
Kenya Revenue Authority is involved in revenue collection mainly from taxation of taxable persons in the economy. Small businesses are often involved in tax evasion practices deliberately or without knowledge. It is not an easy fete to convince the small and medium enterprises to comply with tax laws. It is for this reason that customer service is seen as a good strategy through which tax compliance among the Small and Medium Enterprises. This study had the general objective of assessing the sequel of customer service on tax compliance in Kenya. The study had three specific objectives: To find out the effect of tax payer training on tax compliance, customer care staff training and to examine how communication to customer strategy on tax compliance, a case of SMEs in Nairobi Central Business District. The study adopted a descriptive research design because it had the objective of establishing the relationship between the variables. The study had a target population of 1,500 Small and Medium Enterprises operating with the Nairobi Central District. A sample of 150 was selected through stratified sampling which acted as a representative of the entire population. The study used descriptive statistics in data analysis. The study has found out that the most enabling factor is customer communication, followed by customer care and the lowest influencing is taxpayer training. Further, the study has found there is a need to improve the customer service of KRA in order to foster voluntary tax compliance. The regression model has found out that 53.7 % of the variations of Turnover Taxes is explained by taxpayer training, customer care training and communication strategy. The study recommends that the KRA needs to establish a strategic customer care department in order to facilitate information dissemination which will foster tax compliance among the SMEs in Kenya. Tax training should be done regularly and the appropriate communication channels should be used.
Determinants of Turnover Tax Compliance Among Small and Medium Enterprises Sector in Kenya
(KESRA/JKUAT - Unpublished research project, 2022-09-01) OKUKU, DANIEL
Tax being the key source of revenue that enable government accomplish its mandate to the citizen, low tax compliance among the ever-expanding potential small businesses sector is perceived to be contributing to the perpetual tax revenue performance short of target. The objective of the was evaluate the determinants of tax compliance in the case of small and medium enterprises taxpayers’ sector. Thereby, identify areas of strength and weakness and making recommendation for improving areas of weakness. The main determinants that were studied include; Tax penalties and Fines, automation tax processes and taxpayer education. The Economic Deterrence theory, Fiscal exchange Theory and Prospect theory are the theoretical framework that guided the study. The study adopted explanatory research design. The sample size from the target population computed through stratified random sampling was 234 owners of SMEs in Embu Town from which 192 participants responded. Data collected was subjected to descriptive, correlation and multiple regression analyses. The results of multiple regression analysis indicated that Penalties and Fines positively and significantly influenced Tax Compliance (β1=0.263, p=0.000<0.05); Automation of Tax Processes positively and significantly influenced Tax Compliance (β2=0.293, p=0.000<0.05); Taxpayer Education positively and significantly influenced Tax Compliance of SME’S in Embu County (β3=0.260, p=0.000<0.05). From the findings, the study recommends that KRA should enhance penalties and fines, automation of tax processes and taxpayer education so as realize tax compliance of Small and medium enterprises in Embu County. The study suggest that future studies can evaluate other factors that affect tax compliance among Small informal enterprises in Embu County
Effect of Itax System On Vat Compliance Among Small and Medium Enterprises in Eldoret Town.
(KESRA/JKUAT - Unpublished research project, 2022-09-01) MUTUKU, ERIC
Automation of revenue collection system involves investing in modern technologies for example: ICT in order to upgrade the revenue system to achieve The general objective of this study was to examine the effect of iTax system on VAT compliance among SMEs in Eldoret town. The study was guided by the following specific objectives: - to assess the effect of SMEs technical skills, to find out the effect of SMEs training on VAT compliance among SMEs in Eldoret town and to establish the effect of Tax compliance costs on VAT compliance among SMEs in Eldoret town. The study employed descriptive research design. The study target population was 100 registered SMEs in Eldoret town. This study employed primary data collected 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 employed in the analysis. All the analysis was conducted using the statistical package for social sciences (SPSS Version.24). Analysis of variance (ANOVA) was to establish if there is a statistical significance between the observed and expected values with the Pearson Chi square giving the degree significance of the relations. The study findings indicated that VAT compliance had strong positive correlation with SMEs technical skills, SMEs training and Compliance costs at 0.332, 0.421 and 0.357 respectively. These results show that in terms of statistics, SMEs training have more statistical effect on VAT compliance. The study recommended that to enhance compliance there is need to intensify SMEs technical skills in terms of increasing the number of sessions and broadening coverage to include tax consultants. This will enlighten the taxpayers on existing law and any other tax liability. This will also provide a forum for taxpayers to air their complaints and or compliments. There is need to continuously train technical staff to keep abreast with the tax law and any other changes therein. The SMEs should be encouraged to improve their bookkeeping by offering incentives, such as application of a lower presumptive tax rate for small businesses meeting certain recordkeeping standards and the government should also engage the small holders in sensitization forums on how to reduce the cost associated with tax compliance
Effect of Technology Acceptance On Tax Compliance Among Small and Medium Enterprises in Nakuru Town
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Cherogony, Collins
Tax revenue is the main source of government income in Kenya. It constitutes over 88% of total government revenue. The government through KRA has to institute measures and systems to collect tax revenue to support government operations. KRA has tried over the years to modernize its tax systems to curb tax leakages and tax evasion by introducing Itax, ICMS among others. This study, therefore aims to establish the effect of technology acceptance on tax compliance among SMEs in Nakuru town. The objective of the study is to determine the effect of ease of use, usefulness and risk of use on tax compliance. The study employed descriptive research design. Target population of 271 respondents was considered for the study. A sample size of 80 respondents was selected using stratified random sampling technique. Primary data was collected using closed ended questionnaires administered to respondents. A pilot study was conducted to test for reliability of data instruments and validity of research instruments. Data was analyzed using descriptive and inferential statistics by use of Statistical Package for Social Science Software (SPSS). Measurement of variables was carried out by use of a 5-point Likert scale. The R2 of the regression model was 0. 619. The findings indicated that usefulness had a positive and significant relationship with tax compliance (β=0.351., p=0.000). ease of use had a positive and significant relationship with tax compliance (β=0.435, p=0.006) and risk of use had a negative and significant relationship with tax compliance (β= -399, p=0.003). The study concluded that there was a significant relationship between technology. The KRA management should also invest in training KRA employees on IT skills. This will make it easy for employees to adopt and use tax information technology systems. Further, the management should find ways of eliminating possible risks associated with use of technology including financial risks, privacy risk and performance risk.
Efficiency of Itax On Tax Revenue Performance by Smes in Nairobi Central Business District
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Ongondi, Anthony
The study aims to investigate the factors affecting adopting of itax system by small and medium enterprises in Nairobi County, Kenya. The study was guided by the following specific objectives: -. To establish the influence of SMEs cost of internet on adopting itax system among small and medium enterprises at CBD Nairobi, to assess the technical skills and knowledge on adopting itax system at CBD, Nairobi and to evaluate the influence of SMEs Perception on adopting of itax system, among small and medium enterprises at CBD, Nairobi. The study adopted descriptive research design. The study target population was 1500 Small and Medium taxpayers at CBD, Nairobi. The study sample size was 150. This study used primary data collected through questionnaires. A pre-test on a different sample were 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 employed in the analysis. All the analysis was conducted 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 significance of the relations and the study will use inferential and descriptive statistics to analyse data. SMEs cost of internet and adopting of iTax system as depicted by a correlation value of 0.455. This implies that SMEs cost of internet was linearly related to adopting of iTax system. The study also depicted that there is a positive correlation between SMEs technical skills and adopting iTax system with a correlation value of 0.434 and another correlation was between SMEs perception and adopting of iTax system which shows that there was a positive correlation value of 0.423.
Factors Affecting the Collection of Presumptive Tax Among the Small Taxpayers in Kisumu Central Business District
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Ngugi, Martin
There is currently unresolved debate with two views on whether factors of collection of presumptive tax would increase or decrease tax collection among the tax payers. Kenya is rated among countries with low rate of tax compliance around the world. The low rate of compliance has largely been evidenced by failure of the Kenya Revenue Authority to meet revenue collection targets. Broadly, the study sought to establish the factors affecting the collection of presumptive tax among the small and medium taxpayers in Kisumu CBD. Specifically, the study looked at costs of compliance, level of awareness, penalties and interests and technology and their influence on collection of presumptive taxes. The following three theories provided anchorage to the study: the theory of optimal taxation, ability to pay theory of taxation and the Allingham and Sandmo Theory. A descriptive design was adopted and a total of 269 SMEs were targeted from Kisumu Central Business District. Using stratified random sampling, the study sampled out 160 SMEs as the sample size. Information for the study was gathered from primary sources with use of questionnaires. The analysis of the collected data was done descriptively and inferentially. It was shown that the significant factors influencing payment of presumptive taxes include costs of compliance, penalties and interests, level of knowledge and technology. The study concludes that costs of compliance, penalties and interests, level of knowledge and technology all have significant effect on collection of presumptive taxes. The study recommends that Kenya Revenue Authority should consider the costs of compliance that tax payers meet under the presumptive tax system as allowable deductions. The Kenya Revenue Authority should consider the costs of compliance that taxpayers meet under presumptive tax as allowable deductions. There is need for KRA to increase expenditure on tax payers‟ awareness and education programs so that more tax payers are aware of their various tax obligations including the need to pay presumptive taxes. KRA should do targeted awareness programs on taxpayers who may not have the knowledge regarding the due date and availability of penalties and interests to enhance more collection of presumptive taxes. KRA should integrate the registration and filling of presumptive taxes into the i-tax platforms so as to save on the costs that the tax payers incurs and thus increased collection of presumptive taxes.
Factors Affecting Value Added Tax Compliance Among Small And Medium Enterprise in Kenya
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Nasaye, Sylvia
The purpose of this study is to establish the factors affecting VAT compliance in Kisii County. The study was guided by the following objectives; to evaluate the effect of compliance cost on VAT compliance in Kisii and to establish the effect of penalties and interest on VAT compliance in Kisii County. The study adopted a descriptive research design. The target population during the study were people residing in and working at Kisii County. The study assumed a stratified random sampling method, the technique allows for equal representation and generalization of the collected data. During the study, a sample size of 150 respondents is preferred. The number is ideal as it cuts across all economic sectors operating within the county. During the study, questionnaires was used to enable collection of primary data. Qualitatively data was textually compiled and well arranged for purpose of explanation and description of findings which was assist in interpretation. The collected data was edited to check on any omissions and errors and was eventually coded. The study was then analyzed quantitatively using statistical data recorded in the Microsoft excel spreadsheet for easy presentation. The data was presented by use of frequency tables and charts. The result obtained was in determining the relationship between the independent and the dependent variables. Based on study finding, this study recommends there is need for effective cost management when administering tax. Reduction in cost of compliance will increase the number of registered traders which will increase Voluntary tax compliance. Kenya revenue Authority should offer on a regular basis technical support to traders which will help them familiarize with tax systems in order to facilitate voluntary tax compliance. Technical support will help traders reduce the transaction time in serving their clientele and transparency in service delivery.
Factors Affecting Voluntary Tax Compliance Among Small and Medium Enterprises
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Mosonik, Mercy
The study aim to establish the factors affecting Value added tax compliance in among Small and medium enterprises in Langas East. Eldoret. The study was guided by the following specific objectives:- to investigate the effect of costs of compliance on Value added tax compliance in among Small and medium enterprises in Langas East. Eldoret to find out the effect of penalties and interest on Value added tax compliance in among Small and medium enterprises in Langas East. Eldoret, to determine the effect of level of tax knowledge on Value added tax compliance in among Small and medium enterprises in Langas East. Eldoret, to assess the effect of rates of tax on Voluntary tax compliance in among Small and medium enterprises in Langas East. Eldoret. The study adopted descriptive research design. The study target population was 1200 Small and Medium taxpayers in West of Nairobi. The study sample size was 120. This study used primary data collected 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 done by use of descriptive statistics and inferential statistics using Standard statistical techniques including Pearson correlation coefficient and regression analysis employed in the analysis. All the analysis was done using the statistical package for social sciences (SPSS Version.24). Analysis of variance (ANOVA) used to establish if there is a statistical significance between the observed and expected values with the Pearson Chi square giving the degree significance of the relations, hence establishing the hypotheses. The study found that Tax compliance cost, penalties and interest and tax rate significantly influences value added tax compliance. Based on study finding, this study recommends there is need for effective cost management when administering tax. Reduction in cost of compliance increases the number of registered traders which increase VAT Collection. The study further established that Tax rate encourage compliance with Voluntary tax compliance. The study therefore recommends that the tax authority in Kenya (KRA) should reduce tax rates to encourage tax compliance voluntary tax compliance
Factors Affecting Withholding Value Added Tax Compliance Among Small and Medium Enterprises in Industrial Area, Nairobi County
(KESRA/JKUAT - Unpublished research project, 2022-09) Wafula, Wallace
The major issue facing Kenya Revenue Authority is that it has never been easy to convince all taxpayers to comply with the regulations of the tax system. Nairobi County plays host to a sizeable amount of businesses that make up a significant quantity of the county‟s robust economy. SMEs are continuously expanding and have the potential to increase the revenue flows but which have been otherwise left out of the tax bracket. Studies show that millions in taxes have been lost because tax evasion issue under SMEs has not been adequately addressed. As such, it emerged key enough for KRA to revert to the drawing board, reevaluate its VAT taxation mechanisms and device new approaches on how to carry out the reforms with one of them being withholding VAT with the sole aim of increasing the revenue collected from the business within Kenya. However, despite increase in revenue collection, withholding VAT has not been meeting its revenue targets over the last few years. This study was aimed at investigating the factors affecting Withholding VAT compliance among Small and Medium enterprises in Industrial area, Nairobi County The study was be guided by the following specific objectives: - to find out how taxpayer‟s knowledge management affects withholding VAT compliance, determine how cost of compliance affect Withholding VAT compliance and how tax compliance measures influence withholding VAT compliance. The main theories that will control this study are Economic (Deterrent) model and Social Influences Theory. The target population was active withholding VAT agents in Industrial area, Nairobi County. Random sampling was employed to arrive at a sample size of 60 respondents. The research design used in this study was explanatory study design. Primary data was collected through interviews by use of questionnaires with closed ended questions geared at Likert Scale. Data was coded for processing and SPSS used for data analysis to produce both descriptive and inferential statistics. Regression model was used for establishing the relationship between the study variables. The analysis of variance (Anova) was used on the average figures for all the measures of performance. The key findings of the study were that: knowledge management on taxpayers is essential for withholding VAT compliance, compliance costs deterred taxpayers from being withholding VAT compliant and enforcement measure compelled taxpayers to be withholding VAT compliant. The researcher recommends that regular tax trainings and adequate and simplified information should be provided on KRA website and other social platforms. KRA should respond promptly on issues of concern raised by taxpayers. And that KRA to offer comprehensive trainings in institutions to make taxpayers competent enough to cut down on costs of employing the services of tax experts and also training of staff .Regulatory bodies should consider controlling the amount of fee charged by tax experts. The fact that penalties on late filings and payments are already in place, they should be maintained at a considerable rate that is bearable by taxpayers. Regular audits and compliance should also be conducted by KRA to improve compliance levels. The researcher proposes quarterly audit checks
Factors Influencing Tax Compliance Among Small and Medium Enterprises in Meru Town
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Wachira, John
Taxes are an involuntary charge levied by the government on individual income, business profits and on transactions of goods and services. The purpose of the study was to analyze determinants of income tax compliance on SMEs. The main issue faced by tax authorities is that it has never been easy to persuade all taxpayers to comply with the regulations of the tax systems. Small and medium enterprises are the majority of businesses in Kenya yet taxes collected from this sector are considerably low. In Kenya, the biggest block of taxpayers on the business sector are the Small and Medium enterprises(SMEs) who according to IMF are 80 percent of taxpayers but remit only 5-10 percent of revenue. Their compliance rate is poor as most of the businesses are not registered and hence not paying taxes. This study aimed at assessing the tax compliance by SMEs in Meru town. The study used a descriptive research design and owing to the large population a sample size of 166 traders was drawn from the target population of around 1657 traders. To ensure that various diverse categories of taxpayers and business entities were included in the survey, stratified sampling technique was adopted. Data was collected using structured questionnaires with both closed and open ended questions and analyzed using both descriptive and inferential statistics. The research found that the SMEs know how to keep records/documents; the SMEs have obtained a taxpayer identification pin number as well as registered the business as a tax agent; the SMEs are fully aware of the tax filing procedures; and the SMEs understand that they should pay taxes due within the prescribed period from the date of issue of the Notice of Assessment or within the stipulated period. The study also found that tax authority audits and investigations are few among SMEs; the SMEs were legally not obligated to audit their books therefore successful prosecution is not possible; and the SMEs believe that the penalty is lower than their tax saving due to not complying with tax laws. The study found that automated tax systems has ensured full compliance and reduced the associated costs quantity. The study concluded that taxpayer knowledge had the greatest effect on tax compliance among SMEs in Meru Township, followed by technology strategy, and then penalties and interests had the least effect on tax compliance among SMEs in Meru Township. On taxpayer’s knowledge and tax compliance, the study recommends that tax payers learning ought to be emphasized since tax data, tax learning tends to advance tax compliance than tax organization. There is also need to enhance compliance to intensify taxpayer education in terms of increasing the number of sessions and broadening coverage to include tax consultants. The study recommends that KRA should have an office in every county that will address tax issues at county level and the services to be offered should include tax penalties, filing of tax returns, tax computation and tax differentiation.
Influence of Tax Administration on the Growth of Small and Medium Enterprises in the Manufacturing Sector in Nairobi City.
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Marieta, Daisy
The consistently rising financial and economic needs of Kenya and the budget constraints that continually exist compromise the sustainability and development of the Kenyan economy. The motivation behind this study is to collect data on the influence of tax administration on the growth of SMEs in Nairobi City. More specifically it is limited to the influence of efficiency of tax administration, tax equity and fairness and taxpayer education with regards to the growth of SMEs. This wasfurther discussed in this study and further review empirical literature conducted by various authors on how these factors have catalyzed improvement in collection of revenue by the Kenya Revenue Authority to spur growth of SMEs.The taxpayers who participated in this study comprised SMEs in Nairobi City. There are over 10, 0000 SME taxpayers located in Nairobi. However, a sample size of 50 was considered for investigation where stratified random sampling method was used to arrive at the figure. The study employed the use of structured and open- ended questionnaires to collect primary data which was edited for consistency. It was entered in Statistical package for social science (SPSS) to enable a comprehensive descriptive statistical data analysis for ease of presentation. The findings indicated that tax equity and fairness on the growth of SME as supported by 89.79% on the statement that some SME sectors are taxed more while some receive bonuses and incentives which is unfair. The research concluded that the tax system was efficient and that it is designed in order to accelerate voluntary tax compliance. Tax inefficiencies gives rise to additional costs to the SMEs which include social costs, travelling costs, audit costs, administrative costs. These costs will divert funds meant to expand and facilitate growth of SMEs to comply with tax authorities. Further conclusions are made that taxpayer education has a significant effect on the growth of SMEs on the manufacturing industry in Nairobi City. The study recommends that Kenya Revenue Authority (KRA) should have an office in every county that will address tax issues at county level and the services to be offered should include tax penalties, filing of tax returns, tax computation and tax differentiation. KRA should also establish different deduction levels and apply the standard rate plan on the revenue turnover less standard deduction. KRA should continuously implement reforms on publicizing prosecution of non-compliant by providing incentives for voluntary compliance and the tax laws should be constantly reviewed to strengthen to seal loopholes that are being exploited by non-compliant SMEs. KRA should create more awareness on the tax compliance among SMEs through policy documentation which classify different betting firms’ entities.

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