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(KESRA/JKUAT - Unpublished research project, 2022-09-01) MUTHURI, JANE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.
The Determinants of Value Added Tax Compliance Among Small and Medium Enterprises in Machakos Munipality
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Faith, Akoth Ogutu
The study aim was to establish the determinants of Value Added Tax compliance among small and medium enterprises in Machakos Municipality, Kenya. The study was guided by the following specific objectives: - to determine the effects of tax audit on Value Added Tax compliance among small and medium enterprises in Machakos Municipality, Kenya; to determine the effects of cost of compliance on Value Added Tax compliance among small and medium enterprises in Machakos Municipality and to determine the effects of taxpayer awareness on Value Added Tax compliance among small and medium enterprises in Machakos Municipality. The study adopted descriptive research design. The study target population was 364 Small and Medium taxpayers in Machakos Municipality. The study sample size was 191 small and medium enterprises selected using stratified random sampling. This study adopt 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 will be carried out by use of descriptive statistics and inferential statistics using standard statistical techniques including Pearson correlation coefficient and regression analysis. All the analysis was carried out 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. The descriptive results indicated that the cost of preparing, filing and submitting returns make significant part of indirect business costs. Further, the respondents were neutral on whether tax audit procedures by KRA are friendly and effective. However, was established that information on the aggregate taxes collected from value added tax and how they are spent is not readily available to SMEs through both print and social media. Correlation analysis showed a significant positive correlation coefficient between tax audit and Value Added Tax compliance, while cost of compliance and value added tax compliance had a strong negative and significant correlation coefficient. Lastly, correlation analysis indicated that there was a strong positive correlation between taxpayers’ knowledge and value added tax compliance. the correlation results were further supported by the regression analysis results where a significant positive regressioncoefficient was established between tax audit and taxpayers’ knowledge with value added tax compliance. however, the regression analysis results showed a negative and significant relationship between cost of compliance and value added tax compliance. The study also concluded that taxpayers’ knowledge can help improve compliance. Also, increased use of tax audit as a deterrent measure to value added tax noncompliance would lead to increased value added tax compliance. However, increasing cost of value added tax compliance would lead to reduced value added tax compliance by small and medium enterprises in Machakos Municipality. The study therefore recommends that Kenya Revenue Authority frequently use this as a deterrent measure as it seems to produce best result in in value added tax compliance. Further, more emphasis need to be done on sharing information with taxpayers concerning the Value Added Tax collected and how it is utilised. Similar research should be done using more variables so as to establish which other variables for example, technology and level of income affecting value added tax compliance. Similar studies can also be done in other towns in Kenya to establish whether similar findings will be obtained. A similar study can be done in Machakos Municipality but in a different sector like agriculture, service industry or even on individuals
The Effect of Taxpayer Knowledge of Excise Tax Laws On Tax Compliance
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Kiogora, Vivian
Excise duty refers to tax charged on given products and services made locally or imported, on fluctuating rates indicated in the Excise Duty Act 2015. In Kenya, it is charged in both given rate where a particular measure of expense is charged per unit of measure on an excisable item, and promotion valorem rate where a rate of duty is charged on the estimation of an excisable item. Compliance of tax is characterized as how much the taxpaying network meets the tax commitment as set out in the fitting legitimate and administrative arrangements (Maxwell, 2003). He includes that agreeable tax make auspicious, appropriate and exact statement to the expense authority and intentionally settle all the due duty liabilities. Tax payer consistence relies upon financial impetuses installed in the assessment structure and the adequacy in distinguishing and punishing resistance. At the edge, individuals participate in tax avoidance when the normal advantages (lower charges) are equivalent to the normal costs. Despite excise duty contributing alot to the revenue collection compliance to the excise tax laws has been very challenging. Thus, 11 the main objective of the study was to determine the effects of taxpayers’ knowledge on the level of Excise duty compliance among the water bottling companies in Nairobi County. The study employed a descriptive research design. Descriptive approach was integrated with survey design so as to collect comprehensive qualitative and quantitative data that enriches the outcome of the study. The study targeted all the water bottling companies in the Nairobi County as the population of the study. Nairobi County is composed of 17 sub counties and an estimated number of 120 water bottling companies (KRA, 2018). The study collected primary data. Questionnaires were used with close-ended questions for qualitative and quantitative data respectively. Analysis was done using the SPSS software. The study adopted regression analysis to confirm the effect of tax knowledge of excise tax laws on tax compliance. The study concluded that the electronic media education in Nairobi County include television, radio and social media. This had been used to inform the tax payers of the excise tax laws on tax compliance. The findings led to conclusion that print media education improved tax compliance. Print media education informed the tax payers of the excise tax laws on tax compliance. This had increased tax compliance and provided greater knowledge among tax payers. From the findings, it can be concluded that KRA does not do regular stakeholders sensitization. The respondents had poor knowledge of excise tax laws on 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.
Factors Affecting Tax Compliance
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Muthiani, Moses
Taxpayer audit plays a huge role in raising tax administration and taxpayer compliance by influencing the behavior of the taxpayer. This study intended to establish the effect of tax audit on tax compliance by SMEs in Nairobi. The study was guided by the Policeman Theory, Agency Theory, and Classical Theory of Tax Compliance. The study adopted descriptive research design, and targeted small and medium enterprises (SMEs) in Nairobi Central Business District in Nairobi County. Stratified and systematic random sampling technique was used to select 50 respondents. Data was collected using a semi-structured questionnaire, and thereafter analyzed for final report writing. Quantitative data was analyzed using descriptive and inferential data analysis techniques. The resulys indicated that the SMEs sector was dominated by young people who had good education. It clearly emerged that tax audit, taxpayer awareness and employee competence, all had significant influence on the level of tax compliance by SMEs in Nairobi. Statistics indicated that 59% off the respondents agreed that tax audit had influence on tax compliance of small and medium businesses. Furthermore, 53%) of the respondents agreed that level of tax audit often determined level of tax compliance by SMEs. There was also a positive relationship between level of tax audit awareness and tax compliance by SMEs, with 85% of the respondents holding this view. It also was also evident that employee competence played a key role in influencing tax compliance by SMEs in Nairobi. An overwhelming majority seemed to agree that employee competence positively affected tax compliance by SMEs. The research generally concluded that each one of the three independent variables (predictors) had a significant influence on the level of tax compliance by SMEs. It clearly emerged out that tax audit dictated the understanding of small and medium enterprise owners on the need to be tax compliant. Taxpayer awareness was equally critical in determining the level of tax compliance by SMEs. This ensured that small and medium business owners acquired requisite knowledge regarding the need to pay their tax as required by law. Similarly, employee competence impacted positively on the general tax compliance by SMEs, as this further encouraged professionalism in firms and greatly helped them in meeting their corporate objectives. The study recommended that the government, through KRA, should liaise with the larger business sector to expand tax auditing to the SMEs sector to encourage all the players to always be tax compliant. It is also important for the government to enhance taxpayer awareness through effective platforms such as seminars, media adverts or roadshow campaigns for all business owners to understand the need for being tax compliant. Also, as has been evidenced through SMEs in Nairobi that employee competence was critical in tax compliance; the government should encourage all businesses in the SMEs sector to emphasize on investing on their staff for optimum performance.
Factors Affecting Tax Compliance Among Real Estate Owners in Kenya, Busia Township, Busia County
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Talam, Sylvia
Taxes have a very vital part in the Budget of every country’s bargain and one the key motives as to why Governments impose taxes is to create revenue distribute and manage resources. However, its hard task to persuade all taxpayers to pay taxes. The Government of Kenya has been having a continuously increasing Budget in the recent years in terms of Government expenditure. This is an indicator that the Government has to partake well-organized tax structure in order to fund this budget. The real estate sector being among the fastest emergent sectors is set to contribute a lot to the total revenue collected. This study explicitly seeks to investigate the influence of compliance cost, tax knowledge and education, and fines and penalties on tax compliance among real estate owners in Kenya. The study was directed by economic deterrence theory, Fischer theory and theory of planned behaviour. This study seeks to reach out to a sample size of 178 respondents. A structured questionnaire was the chief instrument of data collection. The data will then be analysed quantitatively by means of descriptive and inferential statistics. The real estate owners will understand and appreciate the significance of voluntary tax compliance hence be able to reduce of non-compliance costs that could have otherwise arise. This study will also improve the Government to enable tax system more competent and increase compliance. The study implemented a descriptive research design in which a sample size of 178 respondents who were picked through random sampling. Primary data was gathered from respondents by way of a questionnaire. The data was analysed and presented in tables, pie charts as well as histograms. Regression was also piloted to form the relationship amid tax compliance among real estate owners in Kenya. The findings indicate there was significant positive relationship among the components of tax knowledge and education and tax fine and penalties with tax compliance among real estate owners in Kenya. The study commends that tax compliance need to incorporate all the KRA department into the system to enable them to advance tax compliance among real estate owners in Kenya.
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 Residential Rental Income Tax Compliance. A Case of Thika Town
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Njiru, Faith
This study aims to investigate factors affecting residential rental income in Thika town. The study was guided by the following specific objectives, to find out the influence of attitude and perceptions on residential rental income in Thika town, to evaluate the influence of Penalties on residential rental income in Thika town, to determine the influence of tax knowledge and education on residential rental income in Thika town. The study target population was 200 landlords and a sample size of 120 landlords. The study used primary data to collect through closed structured questionnaires to meet the objectives of the study. A pre-test on a different sample was conducted to give a Cronbach’s alpha greater than 0.7 for all the variables as a rule of thumb. Data analysis was used by use of descriptive statistics and inferential statistics using Standard statistical techniques including Pearson correlation coefficient and regression analysis was employed in the analysis indicated that attitude and perceptions had positive and significantly related to rental revenue collection (r = 0.456, p-value=0.00<0.05) as indicted in table above. This implies that attitude and perceptions was linearly related to residential rental income. The result also revealed that Penalties was positive and significantly related to residential rental income (r = 0.458, p-value=0.00<0.05). Lastly, the study showed that tax knowledge and education was positive and significantly related to residential rental income (r = 0.431, p-value=0.00<0.05). The study therefore recommends that the tax authority in Kenya (KRA) need to develop effective policies to develop a positive relationship and trust with taxpayers since this would encourage tax compliance. The study further established that punitive Penalties discourage compliance with residential rental income tax by property owners. The study therefore recommends that the tax authority in Kenya (KRA) should revise its Penalties to make them more severe to encourage tax compliance. The study recommends that KRA should develop training
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.
Factors Influencing Tax Compliance of Residential Rental Income Taxpayers in Makadara Sub-County, Nairobi, Kenya
(KESRA/JKUAT - Unpublished research project, 2022-09-01) JANET, MORAA KINARA
In Kenya, tax targets are seldom achieved due to low tax compliance. The KRA is expected to achieve an efficiency rate of 95 percent of the exchequer and therefore this requires high levels of tax compliance. This study sought to assess factors influencing tax compliance on residential rent income in Makadara sub-county, Nairobi, Kenya. The specific objectives were to establish the effect of tax knowledge, to find out the effect of tax audits, to assess the effect of financial base and to establish the effect of taxpayers’ attitudes on tax compliance among residential rental income taxpayers in Makadara Sub-County. This study was based on Economic deterrence theory, Theory of planned behavior, Theory of reasoned action and Allingham and Sandmo theory. This study adopted a descriptive research design. The population of this study was nine hundred and thirty-four residential landlords. The sample for this study was 100 residential landlords of Makadara Sub-County drawn from the records held by Kenya Revenue Authority. This study used primary data that was sourced using a questionnaire. Data analysis was done using both descriptive and inferential statistics. The outputs for data analysis were presented on tables and graphs. Results established that tax knowledge had a positive and significant effect on residential rent income tax compliance. Tax audits had a positive and significant effect on residential rent income tax compliance. Moreover, financial base had a positive and significant effect on residential rent income tax compliance. However, negative taxpayers’ attitudes had a negative effect on residential rent income tax compliance. It is recommended that KRA should undertake taxpayer sensitization and education program to improve tax knowledge and also increase frequency of tax audits to boost tax compliance.
Influence of Perception of Corruption on Tax Compliance Among Manufacturers in Makadara Sub-County in Nairobi County
(KESRA/JKUAT - Unpublished research project, 2022-09-01) Isaiah, Gitonga Nyaga
In Kenya, both electronic and print media have continuously reported many incidents of corruption, cases of public spending wastage and high perception of corruption in the government. Corruption in the government institutions including KRA cannot be ruled out. As a result, the government and the Authority have adopted mechanisms for addressing this problem in order to reduce the perception of corruption. The mechanisms were clearly spelt out in the KRA 7th Corporate Plan for the period 2018/19-2020/21 under the theme of ‘Integrity Programme’. The Authority aimed at reducing Corruption Perception Index (CPI) to bolster its corporate image and improve on tax compliance. The CPI increased from 32% in 2017 to 39% in 2019, while it reduced to 34.2 % in FY 2020/21. This was contrary to the expectations that it would have reduced with 10% by the end of FY 2020/21. Several corruption surveys undertaken by the Authority have established that contrary to expectations, the CPI had increased (KRA, 2019; KRA 2021). Based on the above observations, the researcher initiated this study with an aim of establishing how perception of corruption influences tax compliance the among listed members of KAM in Makadara Sub- County, Nairobi County. The study was carried out among Members of KAM in Makadara sub–County in the County of Nairobi. Makadara Sub County was purposively selected as it hosts most of the industries (166 or 29.5 % of the 562 listed by KAM in the County) were located there. The study utilized both primary data and secondary data. Simple Random sampling techniques was used and sample size of 116 members was selected from the target population of 166 manufacturers. The instrument used for data collection were Questionnaires which were distributed to the sampled respondents while secondary data was gotten from the public sources, library, internet and KAM office among other sources. The study achieved a response rate of 85.3% (99 respondents of 116 responded). The results were tested for reliability using the Cronbach’s alpha which was estimated at 0.826 (86.2%). Analyses was done using Excel and SPSS tools and results presented using descriptive and inferential statistics. The results of this study showed that the overall Corruption Perception Index among the KAM members was 1.06 (35.2%), at the range of 0 to 3. This value shows a moderate corruption levels in KRA. From measures of corruption indices analyzed, Corruption Practice Index was found to be 1.01 or 33.7%, Corruption Pressure Index at 0.87 or 29.0%, Corruption Spread Index at 1.09 or 36.3% while the future corruption index was 1.25 or 41.7%. These indices point to moderate levels of corruption in KRA. In addition, the findings of the study showed that corruption pressure, Magnitude of corruption and future expectation of Corruption had a significant contribution to tax compliance (p-value = .023 , P <.001, and .012 respectively). However, the result show that the p-value for corruption practices, 0.163, is greater than 0.05 significant level. The study recommends that KRA need to address the existing forms of corruption by tightening the anti corruption measures envisaged in the 8th KRA Corporate Plan.

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