5.2018

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Browsing 5.2018 by Subject "Garissa"

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    Factors influencing tax compliance among small and medium enterprises in Garissa town
    (KESRA/JKUAT - Unpublished research project, 2018-10) Mitimbo, George Aroka
    Tax is an important stream of revenue for government’s development projects and therefore a lot of efforts must be made by government agencies to ensure that it is accurately and efficiently collected so as to facilitate the government’s operations. In an effort to maximize collection of revenue and efficiency in tax administration, key changes to tax policy evolving around ensuring equity, further widening of the tax base, promoting increased investment and in so doing, reducing the tax compliance burden, have in the recent past been and continuously being made by the governments of Kenya, in both county and national levels. This study sought to identify the factors that influence tax compliance in Kenya, specifically focusing on SMEs operating within Garissa Town. The researcher influenced by Tax Morale besides Allingham and Sandmo Theories outlined a detailed literature review and identified the variables for this research to be tax rate, availability of tax information, tax cost and attitude of SME’s towards tax payment. The research used a descriptive survey. Considering a remarkable number of registered taxpayers in Gaissa Town, a sample size of 140 was picked using Krejcie & Morgan table as representative, to be the focus of this study. To ensure that various diverse categories of taxpayers and business entities were included in the survey, stratified sampling technique was adopted. Primary and Secondary data was collected using self-administered questionnaires and an interview guide. The collected data was consequently analyzed using Statistical Package for Social Scientist (SPSS) software and the findings of the research presented using tables. The findings of the study revealed that with regard to tax rate as a factor influencing SMEs compliance, most of them were of the opinion that Kenya’s tax rates are high with several different tax heads and this consequently hinders their level of compliance. The lack of readily available information relating to tax matters accounted for a great percentage as a reason for non-compliance. Lack of information contributed to the inability of the taxpayers to correctly compute the taxes payable; another form of non-compliance. The SMEs view that if more information would be availed to them in form of tax seminars and literature, this would demystify the complex concept of tax and greatly motivate them to be compliant. The findings of this study further revealed that most of the SMEs interviewed incur more than Kshs. 50,000 monthly, as costs of tax compliance. Some of these costs include bookkeeping, installation of software and internet costs, additional cost of hiring professional staff such as auditors and tax experts, accounting for the largest proportion of these costs. With regard to SMEs attitude as a factor affecting tax compliance, the respondents agreed and felt that they barely have access to public utilities which are made available by the taxes paid to the government; hence they hardly enjoy benefits of the taxes they pay. These organizations do value the payment of taxes to the government to a great extent, which affects their level of tax compliance. The findings of the study further revealed that the respondents do feel that their counterparts, fellow SMEs from other regions, also value the payment of taxes to the government to some extent. However, the taxpayers do feel and strongly agree that the taxation system in Kenya is in great need of improvement. By gaining an in depth understanding of these underlying factors, KRA and the government of Kenya will be able to make changes that will greatly improve taxpayers’ tax compliance level, with the end result being increased government revenues, allowing the tax authority to give quality service to taxpayers and the government as a whole providing more and improved utilities to the public. From the analysis of the findings, a recommendation for the adjustment of tax rates and penalties downwards was made, digitization of tax return forms, intensification of taxpayer education, continuous training of the technical staffs, increased audit sessions and KRA should strive to provide improved services to the taxpayers. The study also suggested that similar studies should be done on other areas since the relationship adduced does not conform to the rule of the thumb this is because different regions and sectors provide different operational environments.