2. 2022

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    Factors affecting Value Added Tax Compliance among Wholesalers in South of Nairobi County,Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Ombati, Alex Kebaso
    Taxation is considered the primary source of government funding and plays a critical role in social economic and political development of any nation across the globe. “Despite ongoing tax reforms by the government, a large section of small business tends to exhibit low tax compliance even though they are eligible to pay taxes. This is evidenced by many governments being unable to meet their target revenue collections. The main objective of this study was to determine the factors that affect VAT compliance in South of Nairobi, Kenya. The specific objectives were to determine the effect of taxpayer perception on VAT compliance, establish the effect of enforcement measures on VAT compliance and to establish the effect of stakeholder sensitization on VAT compliance. The study was guided by Fiscal Psychology Theory, Economic deterrence theory and Stakeholder’s theory. The study employed explanatory research design that involved the use of a structured questionnaires in collecting primary data. A pilot study was conducted in West of Nairobi Kenya to test the reliability and validity of research instruments. The study population was 4053 licenced wholesalers with South of Nairobi. A sample size of 364 was determined by using Yamane 1967 formula and selected using stratified random sampling. Data collected was analyzed using descriptive and inferential statistics. The relationship between the independent variables mentioned above and VAT compliance was obtained by using regression analysis. Regression analysis established that taxpayer perception had a beta coefficient (β 1 ) of (0.314, P=0.000<0.05) while enforcement measures had a beta coefficient (β 2 ) of (0.253, P=0.003<0.05). Lastly, stakeholder sensitization had a beta coefficient (β 3 ) of (0.421, P=0.001<0.05). Model summary show that the predictor variables used explain 55.9% of variations in dependent variable meaning that there are still other variables that affect the wholesalers in South of Nairobi County. The study made conclusions on taxpayer perception, enforcement measures and stakeholders’ sensitization that there was a significant positive relationship between all independent variables and Value added tax Compliance among wholesalers in south of Nairobi Kenya. The study therefore recommends that the government should ensure efficient in utilization of revenue generated for the benefit of its people so that the citizens can have more confidence in them and support their administration by being VAT compliant. KRA should review its policies on court sanctions, fines and penalties on taxpayers and strictly enforce the deterrence sanctions since tax deterrence sections influence tax compliance level by wholesalers in south of Nairobi Kenya. Also, KRA should emphasize on VAT awareness of taxpayers as this will enhance their compliance levels. Therefore, there is need to undertake other studies related to the same topic with wide considerations to other determinant like technology and online filing on VAT compliance.
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    Effect of AD Valorem Tax Valuation on Revenue Performance, A Case of Secondhand Motor Vehicle Dealer in Nairobi County, Kenya
    (KeSRA/Moi Research Project, 2022-06) Mulwa, Justin; Dr. Omwenga Emmah
    Tax revenues are a critical component of government resources in almost all economies as they support the role of government in providing public services, re-distribution of income, and implementing other fiscal policy concerns. However, tax revenue performance often faces challenges that deny many governments the ability to meet their economic growth and development ambitions. Some of these challenges are internal and while others emanate from the taxpayers. The study attempted to determine the effect of ad valorem tax valuation on secondhand motor vehicle dealers in Nairobi County. The specific objective of the study was to determine the effect of tax rates, the effect of the system of valuation, and the effect of policies and regulations on revenue performance. The study was anchored on the Laffer Curve theory, the technology acceptance model theory, and the theory of planned behavior. The study adopted an explanatory research design. The study targeted a population of 3055 employees of the department of customs and border control of the Kenya Revenue Authority segmented into various levels. A sample of 354 was drawn from the population using the Bridget and Lewin formula and the respondents' response rate of 72% was obtained. A questionnaire was used to collect primary data and analysis included both descriptive and inferential statistics. The study adopted Multiple Regression model for its inferential analyses. Descriptive statistics were presented in tables while correlation and regression analysis were used for inferential statistics. The findings of the study indicated that tax rates, system of valuation, and policies and regulations had positive and significant effect on revenue performance. These results were evidenced by the standardized beta values of 0.179 for tax rates, of 0.440 for system of valuation, and of 0. 308 for policies and regulations. A unit change in tax rates increased revenue performance by 0.179. A unit change in the system of valuation increased revenue performance by 0.440. A unit change in policies and regulation increased revenue performance by 0.308. Further, the findings of the study revealed that the correlation coefficient of R was 0.697 and the R square was 0.486. The model revealed an R squared of 0.486 where the factors under the study, contributed to 48.6% of the revenue performance while the remaining 51.4% can be explained by other factors which were not part of this study. These factors could include but not limited to demographic, cultural, economic and other externalities. Based on the findings of the study, it was concluded that tax rates, system of valuation, and policies and regulations influenced revenue performance. The study, thus, recommended that Kenya Revenue Authority, and the government should put in place concrete policies & regulatory frameworks that are favorable to Kenyan motor vehicle dealers. This is to work in harmony with the effects of regional and community blocks import barriers and that affect the importation and sale of motor vehicles. The study suggests the need for more studies focusing on other factors determining revenue performance not included in the study such as cultural, economic, social and other externalities across other properties valuations in Kenya.
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    Effect of Digitalization Effectiveness on Turnover Tax Compliance among Textile Small and Medium Size Enterprises in Eastleigh, Nairobi County
    (KeSRA/Moi Unpublished Research Project, 2022-11) Abdi, Ahmed Mohamed
    Taxes are an important way for both developed and developing economies to raise money for government projects that help them grow. The main purpose of this study was to determine the effect of digitalization effectiveness on turnover tax compliance among small and medium size enterprises in Eastleigh, Nairobi County. The specific objectives that guided the research were: to study the relationship between technological ease of use and turnover tax compliance; to establish the relationship between technology usefulness and turnover tax compliance and to examine the relationship between system security mechanism and turnover tax compliance among small and medium size textile enterprises. This study was grounded on Technology Acceptance Model and Unified theory of Acceptance and use of Technology. Explanatory research design was applied in this study. The target population was textile enterprises operating in Eastleigh. Stratified sampling technique was utilized since the population itself was stratified in nature. Yamane's (1973) formula was used to determine the sample size of 243 textile SMEs. Data was collected using questionnaires and analyzed descriptively. To establish the relationship between study variables correlations and regression analyses were carried out. The study showed that regression coefficient (β = .098, t (171) = 1.343, p>.05) for technological ease of use, implying that a single unit improvement in technological ease of use improves turnover tax compliance by 9.8%. However, this was found to be insignificant (P=0.181>0.05). On the other hand, regression coefficient for technology usefulness was (β = .311, t (171) = 0.002, p<.05); implying that technology usefulness accounts for 31.1% of the variance in turnover tax compliance. This was found to be significant and thus, affirms that technology usefulness have a significant relationship with turnover tax compliance among small and medium size textile enterprises in Eastleigh, (P=0.002<0.05). On system security mechanism, the regression coefficient showed (β = .129, t (171) = 0.151, p>.05), implying that a single unit system security mechanism improves turnover tax compliance by 12.9%. However, this was found to be insignificant (P=0.151>0.05).The study concludes that technology had removed the effort for users to become compliant and they were open to accept new technology that would enable them become compliant. This study recommends that KRA need to ensure that their digital systems are easy to use and useful to taxpayers. KRA also need to ensure that their online system is reliable, functional and effective. This may increase the efficiency and convenience of filing taxes which may lead to positive experience and attitude that would facilitate compliance.
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    Effect of Digitilization on Value Added Tax Compliance among Small and Medium Enterprises in Embakasi Central Subcounty, Nairobi County, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Apollo, Cleveland Ochieng
    Technological advancement is a key driver that builds efficiency in organizational processes as it offers cost cutting opportunities. The spread of digital services through capabilities of the internet and Information and Communication Technology has created an opportunity to save on costs of transactions. The motivation of this research lied in the contrasting result and the need to document the Kenyan case in respect to digitalization of a tax system and its effect on tax compliance. Hence, the general objective was to investigate the effect of digitalization on value added tax compliance among Small and Medium Enterprises in Embakasi Central Sub-County, Kenya. The specific objectives were: To establish the effect of online filing procedure on Value Added Tax compliance in Kenya, to determine the effect of use of electronic tax registers on Value Added Tax compliance in Kenya, investigate the effect of digital payment systems on Value Added Tax compliance in Kenya and to determine the effect of Value Added Tax automated assessment system on Value Added Tax compliance among small and medium enterprises in Embakasi Central Sub-County. The study was anchored on these theories: Innovation Diffusion Theory, Technology Acceptance Theory and the Economic Deterrence Theory. This study used explanatory research design. The population of this study was 190 VAT registered taxpayers at Embakasi Central Sub County and sample size of 129 VAT taxpayers. In this study, primary data was obtained through issuance of a questionnaire. To elucidate on interdependence of variables, descriptive and inferential statistics were undertaken. The study findings indicated that online filing, electronic tax registers, digital payment systems, VAT automated assessment systems signficantly affects value added tax compliance with evidence of beta and ρ values of (β1) of 0.286, ρ<0.001 for online filing, while electronic tax register had a beta coefficient (β2) of 0.329, ρ<0.000, digital payment systems had a beta coefficient (β3) of 0.311, ρ<0.000. Lastly, VAT automated assessment had a beta coefficient (β4) of 0.296, ρ<0.000. The study results concludes that online filing, electronic tax registers, digital payment systems, VAT automated assessment systems had influence on VAT compliance. In light of the statistical results and conclusions, it is recommended that digitalization components can be further enhanced to achieve higher levels of VAT compliance. KRA should revamp digitalization to improve capabilities such as widening digital payment systems to include online cheques remittance, real time ETRs and improve the VAT automated assessment systems. More studies may be done in this area to offer more insights on other factors such as Taxpayer behavioral tendencies on tax revenue performance.
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    Perceived Effect of Taxpayer Education on Income Tax Performance among Micro Enterprises in Nairobi County, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Obongo, Felix Odhiambo
    Tax revenue is the backbone of all governments' revenues in the world. Studies point to the possibility that taxpayer education impacts the understanding of the tax laws, tax procedures, and tax filing, among others. However, there is a lack of taxpayer's education attribution to a particular tax base in the overall revenue performance. The study's objectives were to investigate the effect of taxpayer sensitization, the effect of print media education, and the effect of electronic media taxpayer education on income tax performance among micro-enterprises in Nairobi County, Kenya. The study is significant because KRA could use the findings to improve its taxpayer outreach interventions by understanding what works best among the micro-enterprises. The study was anchored on transformative learning, social learning, and the benefit theories of taxation. The target population of the study was 7,800 micro enterprises in the Kamkunji area. Bridget and Lewin's formula was used to arrive at a sample of 380 micro-enterprises, and a systematic sampling technic employed to reach the sampled population. Primary data was collected using a self-administered five-point Likert scale questionnaire. Findings indicated that Taxpayer sensitization was significant on income tax performance with (β=0.274, p=0.000; ρ < 0.05), print media education was significant on income tax performance with (β= 0.324; p=0.004; ρ < 0.05) and electronic media education was significant on income tax performance with (β=0.321; p=0.001; ρ < 0.05). Pearson correlation tested at a 95% confidence level showed a positive correlation of R 0.397, 0.283, and 0.421 between taxpayer sensitization, print media education, electronic media education, and tax performance. The findings revealed that taxpayer sensitization, print media education, and electronic media education correlate with income tax performance up to R=0.887 and account for R 2 =0.786. The findings further revealed that even if the results were adjusted, the study still accounted for Adjusted R 2 0.779 variation of income tax performance. The Regression equation showed that the independent and dependent variables were statistically significant. A unit change in taxpayer sensitization, print media education, and electronic media education increased income tax performance by 0.274, 0.324, and 0.321, respectively. The study concluded that taxpayer sensitization, print media education, and electronic media taxpayer education affected income tax performance. The study recommends that revenue authorities encourage taxpayers to attend taxpayers' week organized for business entities in which they present and represent other businesses' tax needs. This would lead to an increased level of awareness which is critical for improved income tax performance. Since the study found variations in the relationship between taxpayer education and income tax performance, future studies might be conducted in the areas that caused the variation, including economic, social, and religious factors.
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    Effect of Organizational Factors on Electronic Tax System Usage by Employees of Kenya Revenue Authority in Nairobi County, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Munuve, Jemimah Mueni
    The usage of the electronic tax system by the Kenya Revenue Authority employees is very low and institution has not yet exploited the full potential of the system. This study sought to investigate the effect of organizational factors on electronic tax system usage by employees of Kenya Revenue Authority. Specific objectives were to determine the effect of training, management support, incentives and KRA policy on electronic tax system usage by employees of Kenya Revenue Authority. The study was anchored on the theory of reasoned action and Technology Acceptance Model. Explanatory research design was employed. The target population was 1546 Kenya Revenue Authority employees within Nairobi County. Simple random sampling was used to select a sample of 317 respondents. Structured questionnaires were used to collect data. Data was analyzed using descriptive and inferential statistics. Results revealed an R-square value of 46.7%. Findings further indicated that training (β= 0.183, P<0.05) had a positive and significant effect on electronic tax system usage; management support (β= 0.173, P <0.05) had a positive and significant effect on electronic tax system usage; incentives (β= 0.15, P <0.05) had a positive and significant effect on electronic tax system usage; and KRA policy (β= 0.387, P<0.05) had a positive and significant effect on electronic tax system usage by employees of Kenya Revenue Authority. The study concluded that the most significant predictor of electronic tax system usage was KRA policy, training, management support and incentives in that order. The study recommended that Kenya Revenue Authority management should organize frequent trainings on electronic tax system usage; focus on enhancing resource allocation, management involvement, and monitoring and evaluation; focus on enhancing: bonuses, salary increment, promotions and recognition; and focus on enhancing clarity, appropriateness, and efficiency of KRA policy. The study makes significant contribution to policy, theory and practice in the field of tax administration.
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    Factors affecting Residential Rental Income Tax Compliance among Property Owners in Kenya : A Case of Gatundu South, Kiambu County
    (KeSRA/Moi Unpublished Research Project, 2022) Mwema, MaryAnne Wanjuhi
    Taxation is a major source of revenue for the Government. Therefore, taxpayers in Kenya are required to comply with various laws set aside by the Kenyan Government when it comes to payment of taxes. This study sought to determine the factors affecting Residential Rental Income Tax compliance among property owners in Gatundu South, Kiambu County, Kenya. The specific objectives of this study were to determine the effect of automation of service on Residential Rental Income Tax compliance among property owners in Gatundu south, to establish the effect of taxpayer perception on Residential Rental Income Tax compliance among property owners in Gatundu south, to determine the effect of tax audits on Residential Rental Income Tax compliance among property owners in Gatundu south, To establish the effect of stakeholder sensitization on Residential Rental Income Tax compliance among property owners in Gatundu south. The theories that supported this study were Economic deterrence theory, Theory of Technology Acceptance, Ability to Pay Theory and Fiscal Exchange Theory. A descriptive research design was adopted. The target population comprised 1298 residential property owners in Gatundu South. A sample size of 297 respondents was selected using a random sampling technique. The primary data was collected by the use of questionnaires. The results revealed that Automation of services, taxpayer perception, tax audit and stakeholder sensitization caused a variation of 61.9% (𝑅 2 =0.619) Regression analysis was conducted and the findings revealed that automation of services on Residential Rental Income Tax compliance was statistically significant with (β1) of 0.229 and p value of 0.002 which is less than 0.05. Taxpayer percetion on Residential Rental Income Tax compliance was statistically significant with (β2) of 0.390 and p value of 0.001 which is less than 0.05 . Tax audit on Residential Rental Income Tax compliance was statistically significant with (β3) of 0.287 and p value of 0.000 which is less than 0.05. While stakeholder sensitization on Residential Rental Income Tax compliance was statistically significant with (β4) of 0.204 and p value of 0.000 which is less than 0.05. The study then concluded that on automation of services, taxpayer perception, tax audit and stakeholder sensitization that all independent variables had a significant relationship with rental income tax compliance. The study recommends that policy maker should formulate policies that can improve compliance levels of tax payments by Kenyan property owners. This will help the government raise more domestic revenue from tax collection which will be used in realizing the government’s goals. Further studies may be conducted to determine the effect of compliance cost on residential rental income tax compliance.
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    Determinants of Value Added Tax Compliance among Small and Medium Manufacturing Enterprises within East of Nairobi Tax District, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Muthoka, Harrison
    VAT underperformance in the financial years 2018/2019 and 2019/2020 of 12% and 7% respectively, points to challenges that exist in the collection of value added tax, though an important element of overall tax revenue performance. This challenge called for the need to investigate the determinants of VAT compliance among small and medium enterprises, due to their highest interaction with vatable goods and services. The general objective of this study was to investigate the determinants of value added tax compliance among small and medium manufacturing enterprises within the East of Nairobi tax district. The specific objectives included the effect of taxpayer awareness, cost of compliance, and tax morale on value added tax compliance. The study further sought to determine the moderating effect of automation on value added tax compliance. The study was mainly anchored on economic deterrence theory and supported by fiscal exchange, transaction cost, and tax morale theories. Explanatory research design was adopted. Target population included 9,120 SMEs in the manufacturing sector from which a sample of 383 was derived using Bridget & Lewin formula. Primary data was collected using self- administered five-point Likert scale questionnaire. Instrument validity and reliability tested above 0.7 of Cronbach Alpha test attaining the consistencies required. Cost of compliance showed negative and significant correlation with VAT compliance at - 0.665. Taxpayer awareness and tax morale were all positively and significantly correlated with VAT compliance at 0.675 and 0.659 respectively while tested at confidence level of 95%. All the determinants with moderator variable correlated with VAT compliance up to 82.8%. R 2 caused 68.6% variations across all the determinants on VAT compliance. The remainder 31.4% could be explained by other factors not included in the model such as taxpayers’ behavior among others. The model further revealed a constant of 19.818, a unit change in taxpayer awareness, cost of compliance and tax morale causes 1.661, -3.394 and 0.646 on VAT compliance respectively. A comparison between the R 2 without moderation and with moderation revealed that the R square increased from 53.1% to 68.6%, implying that automation had a substantially positive moderating influence on the relationship between taxpayer awareness, cost of compliance, tax morale, and value added tax compliance among small and medium manufacturing enterprises. The study recommends that; the Government should formulate policies targeted towards creating taxpayer awareness on how tax revenue supports provision of public goods and services, KRA should ensure the cost of complying with applicable tax laws and regulations is not expensive to taxpayers as this would lead to increased non-compliance. Religious and social institutions should be activated to help spread the belief that payment of taxes is the right thing to do. Further studies may be conducted to determine whether other aspects such as enforcement measures and human factors have significant influence on VAT compliance.
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    Determinants of Value Added Tax Compliance within Classified Hotels in Nairobi County, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022-06) Kanguru, James Karanja
    Taxation is the main instrument through which governments raise finances required to provide public goods. Kenya Revenue Authority does not collect as much revenue from tax as it should as a result of low compliance. Value Added Taxpayers in particular have the potential of generating a lot of revenue for the government but this is not the case Unfortunately, Kenya, like other governments, struggles to achieve its set revenue targets. In relation to its VAT collection, KRA notes a compliance gap as high as 45%. The question of how to narrow the compliance gap is therefore timely. The hotel industry forms an integral constitution of the larger tourism sector, regarded as one of the main economic pillars of the country, with a contribution of 8.2% to Kenya’s GDP and over 1.1 million employment opportunities. This study seeks to determinants the Value Added Tax compliance among the classified hotels within Nairobi County. The objectives of the study were to determine tax compliance costs, tax knowledge, taxpayer perception and tax audit on value added tax compliance among the classified hotels within Nairobi County. The study was supported by four theories namely; The rational choice theory, The Information Asymmetry Theory, The Fiscal Exchange Theory and The Lending Credibility Theory. The study adopted explanatory research design where the target population was 60 classified hotels within Nairobi County. The study had 2 respondents each from the 60 different Hotels thus making a total of 120 respondents. Primary data was used to collect the data using questionnaires. Regression and Correlation analysis was used to determine the significance and relationship of the variables. The data was analyzed using descriptive and inferential statistics. Regression analysis was conducted; the findings revealed that, tax compliance costs had β1 -0.226 =p value of 0.000 which is less than 0.05. Tax knowledge β2 0.218 =p value of 0.000 which is less than 0.05. Taxpayer perception β3 0.302 =p value of 0.002 which is less than 0.05. Tax Audit β4 0.340 =p value of 0.003 which is less than 0.05. significantly affect classified hotels within Nairobi County. The study concluded that indeed tax knowledge, taxpayer perception and tax audit enhance value added tax compliance among the classified hotels within Nairobi County. However, compliance cost affects value added tax compliance negatively. The study recommends that, KRA should step up trainings to sensitize hotel operators on taxation matters, including required documentation and deadlines, train and carry out public awareness campaigns targeted at the hospitality sector on matters relating to taxation as well as conduct record keeping trainings to hotel operators. Further research may be done to examine the effect of tax incentives on tax compliance in the hospitality industryTaxation is the main instrument through which governments raise finances required to provide public goods. Kenya Revenue Authority does not collect as much revenue from tax as it should as a result of low compliance. Value Added Taxpayers in particular have the potential of generating a lot of revenue for the government but this is not the case Unfortunately, Kenya, like other governments, struggles to achieve its set revenue targets. In relation to its VAT collection, KRA notes a compliance gap as high as 45%. The question of how to narrow the compliance gap is therefore timely. The hotel industry forms an integral constitution of the larger tourism sector, regarded as one of the main economic pillars of the country, with a contribution of 8.2% to Kenya’s GDP and over 1.1 million employment opportunities. This study seeks to determinants the Value Added Tax compliance among the classified hotels within Nairobi County. The objectives of the study were to determine tax compliance costs, tax knowledge, taxpayer perception and tax audit on value added tax compliance among the classified hotels within Nairobi County. The study was supported by four theories namely; The rational choice theory, The Information Asymmetry Theory, The Fiscal Exchange Theory and The Lending Credibility Theory. The study adopted explanatory research design where the target population was 60 classified hotels within Nairobi County. The study had 2 respondents each from the 60 different Hotels thus making a total of 120 respondents. Primary data was used to collect the data using questionnaires. Regression and Correlation analysis was used to determine the significance and relationship of the variables. The data was analyzed using descriptive and inferential statistics. Regression analysis was conducted; the findings revealed that, tax compliance costs had β1 -0.226 =p value of 0.000 which is less than 0.05. Tax knowledge β2 0.218 =p value of 0.000 which is less than 0.05. Taxpayer perception β3 0.302 =p value of 0.002 which is less than 0.05. Tax Audit β4 0.340 =p value of 0.003 which is less than 0.05. significantly affect classified hotels within Nairobi County. The study concluded that indeed tax knowledge, taxpayer perception and tax audit enhance value added tax compliance among the classified hotels within Nairobi County. However, compliance cost affects value added tax compliance negatively. The study recommends that, KRA should step up trainings to sensitize hotel operators on taxation matters, including required documentation and deadlines, train and carry out public awareness campaigns targeted at the hospitality sector on matters relating to taxation as well as conduct record keeping trainings to hotel operators. Further research may be done to examine the effect of tax incentives on tax compliance in the hospitality industry.
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    Determinants of Tax Compliance among Residential Income Earners in Embakasi South Sub-County, Nairobi, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022-06) Kihuha, Luciah Wanjuhi
    In as much as there is exponential growth in the real estate sector, this growth hower does not match with the tax revenue generated from the collection of monthly residential rental income tax. There are several attributable factors to the noncompliance in this sector, and these factors affect revenue collection in different ways. The study, therefore, investigated factors affecting tax compliance among residential income earners in Embakasi sub-county Nairobi. Three specific objectives guided the study to establish the effect of automation of services, taxpayer perception, and level of awareness on tax compliance among residential income earners in Embakasi south sub-county Nairobi. Residential income reports indicate that less than half of property owners and developers comply with residential income tax requirements in Nairobi City County. Despite the tremendous growth from real estate in Embakasi south subcounty, the corresponding tax collection from the sector has remained very low. The contribution by residential income earners has been very low despite all the efforts to enforce residential income tax policies. In Embakasi, several residential owners are under review, which has formed the need for undertaking this study. The study was guided by economic deterrence theory and the ability to pay theory. The study adopted an explanatory research design. The target population was 11,501 residential income earners in Embakasi, South Nairobi. A sample size of 386 respondents was selected using Yamane's formula. Primary data was collected using structured five-point Likert scale questionnaires. Statistical tools for both descriptive and inferential statistical data were applied to evaluate variations as manifested in the variables and test for hypotheses. The findings of the study indicated that the independent variables had a statistically positive significant effect on residential income tax compliance; thus, automation of services (β1=0.362, p=0.000<0.05), taxpayer perception (β2=0.243, p=0.000<0.05) and level of awareness (β3=0.382, p=0.001 <0.05). The results concluded that service automation, taxpayer perception, and level of awareness positively and significantly affected residential income tax compliance. Based on the study findings, the Kenya Revenue Authority should enhance the automation of services for online registration, online filing, and online payment of tax liabilities to improve income tax compliance among earners of residential rental income. Future research was suggested on other factors not covered by this study but could potentially impact tax compliance across other economic sectors.
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    Effect of Withholding Value Added Tax on the Value Added Tax Revenue in Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Mabeya, Robert Nyabuti
    Value-added tax (VAT) withholding tax is a significant instrument used in various tax administrations to control revenue leakages that originate from taxpayers that charge VAT on their services and supplies and then fail to remit it to revenue authorities. The Kenya Revenue Authority (KRA) implemented VAT withholding in 2014 with the expectation that it would positively impact VAT revenue collection and compliance. The motivation of this study therefore arises from the knowledge that a number of developing countries are considering implementing a withholding tax mechanism on VAT revenue. The main objective of the study was to establish the impact of withholding VAT on VAT revenue in Kenya. The specific objectives included: to determine the effect of VAT withholding administration on VAT revenue collection in Kenya, to establish the effect of VAT withholding reform on VAT revenue collection in Kenya, to assess the effect of VAT withholding rates on VAT revenue collection in Kenya. The study was anchored on the ability to pay theory, the sacrifice theory and economic deterrence theory. The target population of the study was employees at KRA in Nairobi County. The study targeted 60 KRA employees involved in administration, collection and refund of VAT revenue. All the employees participated in the study; hence it was a census. Primary data was collected using a structured questionnaire. The study applied quantitative methods to analyse data. These included descriptive statistics such as percentages, means and standard deviation. Further, inferential statistics including correlation and regression analyses were conducted to determine the relationship between the independent variables and the dependent variable. The findings indicated that withholding VAT administration (β=0.347, p=.012), withholding VAT reforms (β=0.284, p=.034), and withholding VAT rates (β=0.34, p=0.017) had a positive and significant effect on VAT revenue. The study concluded that withholding VAT had a significant influence on VAT revenue in Kenya. The study recommended that the government through the necessary agencies such as KRA and Treasury ministry should strengthen VAT policies relating to withholding VAT administration, reforms and rates. The focus should be; Itax system, monitoring & evaluation, and compliance audit, VAT exemptions, number of tax collectors, penalties, audit skills, zero rated supplies, goods and services exemptions. Out of the limitations of the study, areas of further research have been pointed out. For instance, a study on the effect Withholding VAT system on the VAT refund/credit
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    Determinants of Digital Service Tax Awareness among Digital Corporations in Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Kiondo, Justus Kamau
    Global digital economy has presented a disruptive market economy where goods and services are traded online without the necessity to have a physical presence in the location where which sales are realized. This presents to many governments in the world the challenge of collecting the rightful amount of tax revenue from these digital economy platforms. Still, majority of these firms trading within the digital economy are not compliant. This study seeks to establish the determinants of digital service tax awareness among digital corporations in Kenya. The objectives of the study were to determine the tax knowledge, fairness of the tax and digitalization on digital service tax awareness among corporates in Kenya. The study was supported by three theories namely; The Ability to Pay Theory, The innovation diffusion theory, technology acceptance theory. The study adopted explanatory research design where the target population were all companies offering digital services in Kenya. The study adopts population census where a total of 130 corporates were subjected to the study. Primary data was used to collect the data using questionnaires. Regression and Correlation analysis was used to determine the significance and relationship of the variables. The data was analyzed using descriptive and inferential statistics. The study results showed that indeed; tax knowledge, fairness and digitalization enhances tax awareness on among corporates in Kenya. Regression analysis was conducted; the findings revealed that tax knowledge, fairness and digitalization correlate with tax awareness. The study findings indicated that tax knowledge had β1 0.398 =p value of 0.001 which is less than 0.05. Fairness β2 0.312 =p value of 0.004 which is less than 0.05. And digitalization β3 0.456 =p value of 0.000 which is less than 0.05 significantly affect digital services among corporates in kenya. The study recommends that the study recommends that the management of Kenya Revenue Authority should put more emphasis on the digitalization of services to enhance tax awareness. Further research may be done by employing secondary data from tax authorities to model tax awareness.
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    Effect of Tax Planning Strategies on Tax Savings by Manufacturing Companies in Nairobi County, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022-06) Odongo, Zachary Omondi
    There has been growing disquiet and discontent among the manufacturing firms in Kenya owing to the high level of taxation within the existing tax regime and dwindling revenues to the business occasioned by hard economic times, the taxes have been high to servicing the ballooning public debt, corruption, high cost of fuel used by manufacturers, inflation and high interest rates partly caused by COVID-19 pandemic that have led to massive job losses and reduced purchasing power. This study therefore, sought to examine the effect of tax planning strategies on tax saving by manufacturing firms in Nairobi County, Kenya. The specific objectives were to determine the effect debt in capital structure, capital allowances, tax education and intelligent sourcing on tax saving by manufacturing firms. The study is anchored on the credit theory of money, stakeholders’ theory and capital structure theory. This study used an explanatory research design. The target population constituted finance managers from a total population of 118 registered manufacturing firms. Stratified sampling was employed to arrive at the 118 manufacturing firms. Data was collected using questionnaires. Quantitative data analysis was executed through descriptive statistics such as means, standard deviations, and percentages and frequencies. Correlation and regression analysis was conducted to determine the relationship between the study variables. The findings of the study show that intelligent sourcing, tax education, debt in capital structure and capital allowances explain 56.9% of the total variations in the tax saving by the manufacturing companies. Debt in capital structure (β=0.257, p=0.008<.05), capital allowances (β=.198, p=.042<0.05), tax education (β=.232, p=.004<0.05), and intelligent sourcing (β=.243, p=.010<0.05) had a positive and significant effect on tax saving by manufacturing firms in Nairobi County, Kenya. Basing on the predictive model, intelligent sourcing had the highest positive influence on tax saving by the manufacturing firms, followed by debt in capital structure tax education and capital allowances. The study recommends the need for government to carry out tax education campaigns. There is need for government to provide tax incentives to the manufacturing companies as a way of attracting more investments in the manufacturing sector. The Government should review the various sections of the ITA to address the manufacturers tax concerns, the government should make available its existing treaties with other countries that may help the manufacturing companies know on where to access raw materials at a cheaper price. The manufacturing companies should be given easy credit access through use of business products as collaterals. The manufacturers through workshops and seminars should lobby the government to reduce taxes. Finally, the manufacturers and suppliers should integrate to make supply of raw materials easier and cheaper. The study makes significant contribution to policy, theory and practice in the field of tax administration. The study was limited to manufacturing sector; further research could focus on tax planning strategies and tax savings in other sectors such as agriculture, telecommunication among others.
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    Influence of Information Communication Technology Adoption on Tax Compliance among Small and Medium Manufacturing Enterprises in Nairobi, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Nyakundi, John Makori
    Globally taxes account for significant part of governments’ revenue whereby up to 80% of the total revenue and over 50% of total revenue at least in each country even though important, under performance still affects many nations. The study aimed at investigating the influence of information communication technology adoption on tax compliance among small and medium taxpayers in Nairobi County. The specific objectives of the study were to establish the influence of ITax system influence on tax compliance, the influence of online tax filing knowledge on tax compliance and the influence of internet accessibility on tax compliance small and medium taxpayers in Nairobi County. The study was anchored on fiscal exchange theory, technology acceptance model (TAM) theory and the theory of planned behavior (TPB). The study adopted explanatory research design methods to collect, analyze data and present the study findings. The population of the study included 450 small and medium taxpayers where a sample size of 205 participants was drawn. Data was collected using a 5-point Likert scale with closed ended questions. Descriptive data was presented in tables while the inferential statistics was analyzed using regression and correlation analysis. Multiple regression analysis established a positive significant linear relationship between iTax systems and tax compliance among small and medium taxpayers in Nairobi County with evidence of p=0.000, ρ<0.05; with beta 0.289. Still, there was a positive significant linear relationship between online tax filing knowledge and tax compliance with evidence of p=0.000, ρ<0.05 with beta 0.430, and similarly a positive significant linear relationship between internet accessibility and tax compliance with evidence of p=0.049, ρ ≤ 0.05 with beta 0.214. The study revealed that ITax systems, online tax filing knowledge and internet accessibility had a positive relationship with tax compliance up to 89.8% or (R= 0.898). In addition, the results revealed that ITax systems, online tax filing knowledge and internet accessibility caused a variation of 81% or (R2=0.807 and adjusted R2 =0.803) on tax compliance. This implied that the remaining only 9% of the change was caused by other factors not included in the model. These other factors could be taxpayers perception on technology adoption, perception about the government tax expenditure, and other behavioral factors such as fear of the unknown in the use and adoption of technology. The regression equation showed that a constant change of 0.404, a unit change in ITax systems causes an increase of 0.275 in tax compliance while a unit change in online tax filing knowledge causes an increase of 0.377 in tax compliance. A unit change in internet accessibility caused an increase of 0.178 in tax compliance. The study concluded that iTax systems, online tax filing knowledge and internet accessibility played a significant role in tax compliance among small and medium taxpayers in Nairobi, Kenya. The study recommended that more efforts should be done on improving the interaction of the ITax systems with the taxpayers to achieve higher tax compliance effectively and efficiently. Further studies should be done to a larger population in other counties in Kenya for comparative purposes.
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    Determinants of Corporation Tax Performance among Small and Medium Enterprises in Nairobi Central Business District,Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Mbewa, Gordon Oscah Ochieng
    Corporation tax is a key source of revenue for most governments across the globe that enables them to provide public goods and services such as free education, subsidized medical services and infrastructure. However, its performance in Kenya has been below target. This is majorly attributed to the SMEs who despite contributing significantly to the GDP are under taxed. This study was to determine factors affecting corporation tax performance among small and medium enterprises Nairobi central business district, Kenya. The objectives of the study were Specifically, to determine the effect of taxpayer education on corporation tax performance among small and medium enterprises Nairobi central business district, to establish the effect of system automation on corporation tax performance among small and medium enterprises Nairobi central business district, to determine effect of tax audit on corporation tax performance among small and medium enterprises Nairobi central business district and to establish the effect of deterrence sanctions on corporation tax performance among small and medium enterprises Nairobi central business district. The study was supported by three theories of taxation namely; Ability to pay theory, Economic Deterrence Theory and Theory of Technology Acceptance. The study adopted an explanatory research design. The target population was 3461 who are small and medium enterprises in Nairobi central business district and Sample size of 358 respondents The primary data was collected by use of questionnaires, Regression analysis was used to determine the significance and relationship of the variables. Statistical tools for data analysis comprising descriptive and inferential statistics were applied to evaluate variations in manifestations of the variables and to test the hypotheses respectively. The findings indicated that the independent variables had a statistically positive significant effect on corporation tax performance: taxpayer education (β 1= 0.237, p=0.000<0.05), system automation (β 2= 0.275, p=0.000<0.05) tax audit (β 3= 0.359, p=0.002 <0.05) and deterrence sactions (β 3= 0.281, p=0.000 <0.05) The results concluded that taxpayer education, system automation, tax audit and deterrence sanctions significantly affect corporation tax performance. Based on the findings, the study recommends that KRA to pay more attention on tax audit that would enhance corporation tax performance. Therefore, future research can be done on other variables such as the effect of compliance cost on corporation tax compliance among SMEs in Nairobi County Kenya.
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    Factors affecting Value-Added Tax Compliance among E-commerce Small and Medium Enterprises in Westlands, Nairobi, Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Musungu, Byron
    Value Added Tax compliance is presently a topical coverage issue, mainly in growing nations, as governments are in search of approaches to enhance performance in tax revenues to finance their budgets. It is a challenging issue to many SMEs, mainly for SMEs engaged in E-commerce businesses hence the focus of this study. Therefore, this study was to determine the factors affecting value-added tax compliance among e-commerce small and medium enterprises in Kenya, a case of small and medium enterprises in Westlands Nairobi County. The specific objectives of this study were to establish the effect of tax knowledge, tax Moral, technological factors and enforcement measures on VAT in SMEs engaged in E-Commerce businesses. The data reviewed that led to the problem statement for the study covered three years between 2018 and 2020. The theories supporting these study variables included the Economic deterrence theory, Fiscal psychology theory, Tax morale theory and Ability to pay theory. This study adopted explanatory research design to determine the causal relationship between tax knowledge, tax Moral, technological factors, and enforcement measures and VAT compliance. The target population of study included 1,223 small and medium enterprises E-commerce businesses in Westlands Nairobi County. Yamane formula was used to determine the sample size selection of 301 respondents for this study systematic sampling technique was used. Piloting of the questionnaire was carried out on SMEs in Nairobi central business district to test its validity and reliability. The study collected primary data through close-ended questionnaire, with a response rate of 83%. The data was analyzed using descriptive and inferential statistics to determine the association between variables, with the measurement of variables based on 5-point Likert Scale. Correlation and regression analysis provided an understanding of the relationship between the study variables. On Regression, tax knowledge, tax Moral, technological factors and enforcement measures had a strong positive correlation with value added tax compliance up to 61.3% or (R= 0.613). (R 2 ) of 0.375 reveal that when other factors are held constant, tax knowledge, tax Moral, technological factors and enforcement measures caused a variation of 37.5% on VAT compliance. The study findings indicated that tax knowledge, tax Moral, and enforcement measures had a statistically positive significant effect on VAT compliance as per Beta coefficients of tax knowledge (β1=- 0.220, p=0.000<0.05), tax Moral (β2=0.449, p=0.000<0.05) and enforcement measures (β4=0.221, p=0.003 <0.05). However, technology factor showed no significant relationship with VAT compliance (β3= 0.075, p=0.302>0.05). The study results concluded that tax knowledge, tax Moral, and enforcement measures affect VAT compliance. Based on the findings, the study recommended that the government should adopt modern tax remittance platforms for ease of value added tax remittance. The study further recommends future studies can be conducted on different variables such as on effect of administrative reforms on VAT compliance among E-commerce large taxpayers to provide additional insights and add to the existing understanding of issues explored in this study.
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    Influence of Tax Incentives on the Performance of the Capital Markets in Kenya
    (KeSRA/Moi Unpublished Research Project, 2022) Gatuyu, Justice Thuranira
    Capital markets in an economy play a substantial social value by facilitating efficient use of the economy’s existing productive capacity and allocation of scarce capital, promoting the efficient division of available resources, and facilitating the allocation of risks. On this account, the Government of Kenya has over the years introduced various tax-based policy initiatives to support the growth of the capital markets. However, the prevailing studies have not established whether these tax incentives have made any influence to deepen the capital markets or have been revenue leakages. The main objective of this study was to investigate the influence of tax incentives introduced in the tax law and policy actions on the performance of the listed and over-the-counter capital markets in Kenya from 1990 to 2020. The specific objectives of the study were to assess the effect of equities tax incentives, establish the influence of debt tax incentives and evaluate the effect of trading incentives all on the performance of capital markets. The study was underpinned by several theories including efficient market hypothesis, information asymmetry theory, signalling theory, and optimal tax theory. The study employed an explanatory research design. It focused on select tax incentives in the capital markets from the year 1990 to 2020 and reviewed their influence on the performance of capital markets measured by trends in equity and bonds turnover. The study relied on secondary data obtained from the analysis of tax statutes, policy documents, and CMA periodic reports on capital markets' performance. The study relied on data from Kenya. The study findings indicated that equities tax incentives (β= -11.46910, P=0.0148), and debt tax incentives (β= -5.651615, P=0.0135) paradoxically had a negative and significant effect on capital market performance in the short run. Trading tax incentives did not have a statistically significant effect on capital market performance (P-value =0.6060 > 0.05). The study concluded that equities tax incentives often serve as a signal for investors to stampede out of the markets, hence occasioning a negative and significant effect on capital markets performance in Kenya. The study recommendation was that the government need not employ the tax incentives associated with equities and debt capital markets such as corporation tax and withholding tax on interest because these incentives do not positively influence the overall performance of capital markets and maybe an opportunity loss on revenue collection. However, trading tax incentives influence the sustaining of market liquidity and ought to be sustained.
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    Factors affecting Tax Debt Collection in Kenya Revenue Authority
    (KeSRA/Moi Unpublished Research Project, 2022) Wairimu, Miriam
    There is growing concern about the Kenya Revenue Agency's ability to manage the tax debt. This is indicated by the high level of tax arrears that are currently owed to these institutions and the many companies that have collapsed with so many taxes owed. This shows that tax administration still needs to be improved to deal with the ever-increasing tax arrears. Therefore, this study aimed to determine the factors that influence the collection of tax obligations by the Kenya Tax Authorities. Its specific objectives are to determine the impact of taxpayer data quality, preventive measures, monitoring of taxpayer compliance, and access to information on tax debt collection in Kenya's Inland Revenue. The theories that underlie this research are prevention theory, agency theory and moral hazard theory. This study uses an explanatory research design and the target group is 371 debt handlers from corporate taxpayer accounts. All respondents are counted. Primary data was collected through giving questionnaires. Descriptive statistics including percentages, averages and standard deviations are used. Pearson's correlation analysis was performed to establish the relationship between the research variables. Multiple linear regression is used to test the effect of the independent variables on the dependent variable. Regression of coefficients showed that payer data quality (β=0.253, p=0.000), deterrence measures (β=0.306, p=0.000), taxpayer compliance monitoring (β=0.345, p=0.000), and information access (β=0.138, p=0.001) had a positive and significant effect on tax debt collection. The study concluded that validation of taxpayer’s data during registration enhances tax debt collection. The study concluded that deterrence measures had a positive and also significant relationship on tax debt collection. Further, conducting compliance checks on tax payers by KRA has helped in reducing default rate. Also, raising of audit assessments on tax payers reduces tax debt. The study came to the conclusion that taxpayers' ability to access tax information is a critical factor in their willingness to pay taxes, and that it is impossible to imagine effective turnover tax collection in the absence of adequate taxpayer information. KRA management should provide accurate information to the tax payers; should facilitate the validation of data collected from the tax payers; should use deterrent measures on defaulters. The government should allow KRA managers to deactivate pins of the tax defaulters. The KRA management should ensure easy access of tax information to the tax payers. The study also suggests that in order to increase tax collection, KRA management should make sure that tax payers have access to third-party information. The study findings make significant contribution to theory, policy, and practice in the field of tax administration. Since the R square was not 100%, it means that other additional factors could enhance the model for tax debt collection in Kenya Revenue Authority. Future studies could therefore focus on other factors that affect tax debt collection in Kenya Revenue Authority such as use of technology, and tax knowledge.