1. 2023

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Effect of tax planning strategies on the performance of manufacturing firms in Nairobi City Kenya
(Moi University/KESRA, 2023) Mugambi Mary Mukami; Dr. Gitonga Doris; Dr. Kipkiyai Collins
Better performance has been the objective of all commercial manufacturing firms across the globe. However, these are not regularly realized due to high costs on taxes including multiple and double taxation which result to poor performance of manufacturing firms, mostly in developing economies. In order to manage the effects of taxes on the profitability of firms and to improve their performance, various tax planning strategies are engaged by the firms so as to reduce the impact of high tax burden. It is in this regard that this study aimed at determining the effect of tax planning strategies on the performance of manufacturing firms in Nairobi City Kenya. The study was guided by the following specific objectives; to determine the effect of Income shifting, expense deduction, Capital Intensity and firm restructuring on the performance of manufacturing firms in Nairobi city, Kenya. The study was anchored on the following theories; The Hoffman’s tax planning theory, trade off theory, stakeholder theory and benefit theory of taxation. The study adopted explanatory research design. The target population of the study was 469, registered manufacturing firms in Nairobi city Kenya. A sample of 216 manufacturing firms using stratified random sampling was employed. Quantitative; primary data was collected using structured questionnaires. Reliability of the data collection instrument was tested using Cronbach Alpha test. Data was analyzed using descriptive statistics and inferential statistics methods and the hypothesis were tested at 0.05 significant level. Multivariate correlation, and multiple regression analysis tests were also applied in data analysis. The regression results showed that income shifting(𝛽1=0.134,p=0.05) had no statistical significant effect on the performance of the manufacturing firms in Nairobi city ,Kenya.The study findings, concluded that income shifting, capital intensity and firm restructuring tax planning strategies positively and significantly effects the performance of manufacturing firms, further the findings revealed that expense deductions had a negative effect on the performance of manufacturing firms. The study findings recommend that manufacturing firms prioritise on firm restructuring as a tax planning approach to improve their performance, tax practicing experts should advise their clients to embrace income shifting, capital intensity and firm restructuring as strategies to improve their firm performance, and also research to be done using other variables so as to establish which other factors affects the performance of the manufacturing firms in respect to tax planning.
Factors influencing revenue collection in Kitui County Government, Kenya
(Moi University/ KESRA, 2023) Kivite Amos Kitavi; Dr. Nekesa Marion (PhD); Dr. Odunga Robert (PhD)
Revenue collection in counties in Kenya is a crucial aspect of their financial management and governance. Most of Kenyan County governments grapple with revenue challenges, facing difficulties in generating sufficient funds for essential services and development initiatives. The purpose of this study was to establish factors influencing revenue collection in county governments, specifically focusing on Kitui County. Specific objectives included; to establish the effect of technological innovation, employees’ competence and legal framework on revenue collection in Kitui County, Kenya. This study was anchored on Optimal taxation theory, Technology Acceptance model, and Subsidiary Theory of Taxation. The study employed an explanatory research design and involved340 employees of Kitui County government as target population. The study adopted stratified random sampling and purposive sampling techniques and further, the Krejcie and Morgan table (t table) was used to give an ideal sample size of 181. The researcher obtained data from primary sources using self-administered questionnaires. Both descriptive and inferential analysis was carried out with the help of the SPSS software. The study adopted regression analysis to confirm the influence of study factors on revenue Collection in Kitui County. The findings revealed that the predictors (technological innovation, employee competence and legal frameworks) collectively contribute to 37.5% prediction of the revenue collection at the County. Specifically, one-unit positive change in technology innovation, influences revenue collection by 0.350(35.0%); a unit increase in employee competency is associated with an estimated increase of 0.084 (8.4%) in the revenue collection at the County and a unit increase in legal frameworks is associated with an estimated increase of only 0.026 (2.6%) improvement in revenue collection at the County. Hypotheses testing revealed that technological innovation and legal framework have a significant influence on revenue collection in Kitui Government, Kenya, (p value=0.000<0.05) and (p- value=0.014<0.05) respectively. However, employees' competence was found not to have any significance effect on revenue collection in this context (p-value=0.290>0.05). The findings underscored the significant contributions of technological innovation and a well-structured legal framework in predicting revenue collection outcomes, highlighting their importance in the County's fiscal strategy. These results have practical implications, suggesting that investments in technology and legal reforms should be prioritized by the County government to optimize revenue generation. The study recommended that he County government continues to invest in advanced technological solutions, prioritize continuous training programs for its workforce and enhance policies, rules, and regulations governing revenue collection at the County.
The influence of tax investigations on excise duty revenue performance among corporate large taxpayers in Nairobi, Kenya
(KeSRA_Moi University, 2023-09) Mangiteni, Stephen Chacha
Over the past few decades, the contribution of excise taxes to Kenya's total tax revenue has experienced a decline, posing challenges to the fiscal expectations of the Kenya Revenue Authority (KRA). Between 1991 and 2004, excise taxes contributed 17% of the total tax revenue in Kenya. However, between 2007 and 2017, this figure dropped to an average of 12.7%. Data from the Kenya Revenue Authority's (KRA) annual reports between 2015 and 2021 shows that excise taxes contributed an average of 14.5% to total revenue. Kenya Revenue Authority (KRA) has failed to reach fiscal expectations for excise tax collections despite numerous reorganization efforts aimed at doing so over the past few years. This study investigated the role of tax investigations on excise duty revenue performance among large corporate taxpayers in Nairobi, Kenya. The research was guided by three specific objectives: detection, disruption, and deterrence measures on excise duty revenue performance among large corporate taxpayers in Nairobi, Kenya. The study analyzed the role of tax investigations using four theoretical frameworks: Economic deterrence theory, the theory of planned behavior, institutional theory, and Agency theory. An explanatory research design was employed to achieve the research objectives, targeting a population of 3732 firms in the Large Taxpayer Office (LTO). A sample size of 361 was determined using Yamane's formula. Primary data collection was employed using closed structured questionnaires that meet the study's objectives. The data were analyzed using descriptive, inferential statistics, and multiple linear regression analysis to establish the role of tax investigations on excise duty revenue performance. The study findings revealed that detection, disruption, and deterrence measures had a statistically significant positive effect on excise duty revenue performance, as evidenced by the beta coefficients (detection: β1=0.221, p <0.05; disruption: β2=0.293, p <0.05; deterrence measures: β3=0.214, p <0.05). The study concluded that detection, disruption, and deterrence measures affect excise duty revenue performance. Based on the findings, the study recommends that KRA develop evidence-based policies to improve excise duty revenue performance and enhance corporate governance practices. Future research may be carried out on the strategies extensive corporate taxpayers employ to strengthen compliance in the face of tax investigations. The implications of tax investigations on tax policies related to excise duties can also be studied.
Perceived tax fairness and turnover tax compliance: The role of ease of use of electronic tax system among small and medium enterprises in Nairobi, Kenya
(KeSRA_Moi University, 2023-09) Tananko, Violet
Kenyan government through Kenyan revenue authority (KRA) has been working effortlessly to improve turnover tax compliance as a result of an increase in government projects and a global economic slump. However, despite much intervention, according to KRA report compliance of turnover tax has been low with shortfall of Ksh 14.6 billion Shillings in the period 2021-2022. Therefore, the general objective of this study was to determine effect of perceived tax fairness on turnover tax compliance: the role of ease of use of electronic tax system among SMEs in Nairobi. The study specifically determined; the effect of procedural tax fairness on turnover tax compliance, effect of distributive tax fairness on turnover tax compliance, effect of retributive tax fairness on turnover tax compliance and determine moderating effect of perceived of ease of use of electronic tax system on the relationship between perceived tax fairness and turnover tax compliance. The study was informed by the equity theory and technology acceptance model. The study employed explanatory research design. The target population were 4821 registered SMEs in Nairobi Central Business District, Kenya. Stratified and random sampling techniques were employed to select 376 owners/managers SMEs. Questionnaires were used to collect data. Validity and reliability of the research instruments was tested using factor analysis and Cronbach alpha. Data was analysed using means, standard deviation, Pearson correlation and multiple regression analysis. The finding revealed that procedural tax fairness (β= 0.421, p=.000<.05), distributive tax fairness (β= 0.154, p=.000<.05) and distributive tax fairness (β = 0.439. p=.000<.05) positively influences the turnover tax compliance among the SMEs in Nairobi. Further findings revealed that perceived ease of use of the electronic tax system was found to have a moderating effect on the relationship between procedural tax fairness and turnover tax compliance (β= 0.45, p=.000<.05, R2Δ = 0.046) suggesting the importance of user-friendly and accessible digital tax systems in facilitating compliance. However, perceived ease of use of the electronic tax system did not moderate the relationship between distributive tax fairness and turnover tax compliance (β= 0.04, p>.05, R2Δ = 0.00) and retributive tax fairness and turnover tax compliance (β= 0. 5, p=.>.05, R2Δ = 0.00). Therefore, the study recommended for policymakers and the Kenya Revenue Authority to continue providing fair and transparent tax procedures, while also ensuring that the electronic tax system is easy to use and understand for SME owners. Also, emphasis should be on improving the perceived fairness of the tax system, ensuring that lower-income SMEs receive adequate support. Also, efforts should be made to improve the perception of tax fairness among SMEs by ensuring equitable distribution of tax burden and consistent application of rules and regulations. Finally, policymakers and tax authorities should ensure that the electronic tax platforms are easy to use and understand.
Operational and deterrence determinants of excise duty compliance in Kenya : A case of bottled mineral water producers in Nairobi County, Kenya
(KeSRA_Moi University, 2023) Kakui, Samuel Muia
Excise duty compliance level in Kenya has been a major government concern. The Government through the Kenya Revenue Authority has implemented a number of policy and administrative reforms. KRA has aimed at increasing efficiency and boosting tax revenue collections. Excise duty has generally been limited to goods, which are luxuries or a risk to health or morals. However, over the years, this has become a key revenue earner contributing a sizable percentage of many countries national budgets. There has been a concern on the compliance levels of excise duty. Over the last five years, there has been a diminishing rate of increase year on year. The revenue from excise duty as a percentage of Kenya’s GDP is way below that of many Lower middle-income countries in Africa. The general objective of this study was to examine operational and deterrence determinants of excise duty tax compliance among water manufacturing companies in Nairobi County. The specific objectives of the study was to find out the effect of the reconciliation of excise duty stamps, automation of excise duty stamps, deterrence measures, and automated product marking on excise duty compliance. The study was anchored on three theories; the Allingham and Sandmo Theory, Technology Acceptance Theory (TAT), and Benefits Theory of Taxation. The study employed explanatory research design. The target population of the study was 185 registered water producers in Nairobi County in Kenya. Primary data was used with closed ended questionnaires. 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. The results indicated that reconciliation of excise duty stamps, automation of excise duty stamps, deterrence measures, and automated product marking is significant with an standardized beta coefficient of β1 = 0.225, p = 0.001; β2 = 0.273, p = 0.000; β3 = 0.317, p = 0.003; and β4= 0.260, p = 0.000. The study concluded that there was significant effect of reconciliation of excise duty stamps, automation of excise duty stamps, deterrence measures, and automated product marking on excise duty compliance. The study recommends that that KRA and the government should put in place policies and regulations that guide the overall growth of the economy and to come up with relevant and informed policies that enhance excise duty compliance. More importantly, the study recommends that KRA should put more efforts on systems automation as opposed to the monthly manual excise duty reconciliation. The study noted that future studies should be carried out to examine the effect of tax incentives on excise tax compliance among mineral water producers as well as including a moderating variable of compliance costs.
Moderating role of tax training on the relationship between tax modernization programs and tax compliance among small and medium enterprises in Nakuru County, Kenya
(KeSRA_Moi University, 2023) Kinuu, Ibrahim Maina
Compliance to tax laws and regulations among the SMEs vary among nations. Tax compliance for small and medium sized ventures is challenging which led to the institution of reforms in order to make it easier for the businesses to comply. Empirical data shows that Kenya has not been able to meet its revenue to optimal level. SMEs in particular have the potential of generating revenue for the government but this has been a challenge. This poses a significant problem to the government and the country’s growth as a whole. This study aimed the moderating role assessing the effect of tax modernization programs on tax compliance moderated by tax training among SMEs in Nakuru County, Kenya. Specifically, the study sought to: determine the effect of tax invoice management system on tax compliance; evaluate the effect of electronic tax returns on tax compliance; find out the effect of electronic tax payment on tax compliance and find out the moderating effect of tax training on the relationship between tax modernization programme and tax compliance among small and medium enterprises in Nakuru County, Kenya. The study was anchored on the following theories: economic deterrence, transaction cost economics theory and theory of reasoned action. The study adopted an explanatory research design. The study was carried out between August 2022 and November 2022. The target population was licensed SMEs in Nakuru County. The target population of this study was from a population of 32,272 registered SMEs from which a sample of 395 selected using simple random sampling. Data was collected through administration of pretested questionnaires to the owners of SMEs. Data was analyzed using both descriptive and inferential statistics. The study adopted the hierarchical regression models to test for moderation. Based on the regression results, the study found that tax invoice management system (β= 0.286; ρ< 0.05), electronic tax returns (β= 0.352 ρ< 0.05) and electronic tax payment (β= 0.145; ρ< 0.05) had a significant positive effect on tax compliance of SMEs in Nakuru County, Kenya with an R 2 of 33.4 percent. The study further found that tax training moderated the relationship between tax invoice management system (β= 0.068; ρ< 0.05), electronic tax returns (β= 0.053; ρ< 0.05), electronic tax payment (β= 0.455; ρ< 0.05) tax compliance of small and medium enterprises in Nakuru County, Kenya with an R 2 of 43.2 percent. The study concluded that the tax modernization are key determinants of tax compliance of small and medium enterprises in Nakuru County, Kenya and that tax training moderates that relationship. This study recommends that SME owners get basic training on simple record keeping which will not only enhance their level with compliance with tax laws, but also improve on the operational efficiency of their SMEs. Future studies should conduct a comparative study across multiple counties or regions within Kenya could reveal regional variations in tax compliance and the effectiveness of tax training programs.
Moderating influence of technology adoption on the relationship between trade liberalization and tax performance in Kenya
(KeSRA_Moi University, 2023) Chemutai, Sylvie Terer
Tax revenue is a major source of government revenue all over the world as it aids the government in the maintenance of political, social and economic objectives. However, based on the recent tax collections, it is evidenced that the tax revenues in Kenya are underperforming primarily because of tax administration. Due to this conceptual gap, the study examined the moderating effect of ICT usage and trade liberalization on government tax revenues in Kenya. The study had the following objectives; to assess the effect of trade openness on government tax revenues in Kenya; to establish the impact of international trade on government tax revenues in Kenya; to determine the effect of foreign direct inflows on government tax revenues in Kenya; and to moderating effect ICT usage on trade liberalization and government tax revenues in Kenya. The study was underpinned by the theory of public finance and public choice and the theory of competitive advantage. The study adopted an explanatory research design and used secondary data sources from the Kenya National Bureau of Statistics (KNBS) and the Central Bank of Kenya and UN Comtrade as the sources of information. The researcher used secondary data that span 32 years from 1990 to 2021 because of the sampling adequacy for the regression modelling. Data was analysed descriptively and inferentially before it is presented in tabular format. The descriptive statistics showed that the tax revenues on consumption have grown from 85% in the 1990s to 90% of government tax revenue in 2021 while non–tax revenues have averaged 15% in the 1990s to 10% of government tax revenue in 2021. The indications are that tax collections have largely lagged behind the GDP growth. The trade openness ratio has constantly dropped from over 55% in 2012 to 24% in 2019. The tax ratio has dropped from 20% in 1994 to 8% in 2021, while the trade tariffs have averaged 8% in 2004 and 2021, while the FDI: GDP ratio is marginal and has stayed relatively below 5%. Based on the regression analysis, the trade openness (β1 = 0.5547; t = 8.73, p < 0.00) and trade tarrifs (β2 = 0.6422; t = 10.15, p < 0.00) and ICT usage (β4 = -0.7889; t = -2.60, p < 0.05), were statistically significant while FDI (β3 = -0.0585; t = -0.89, p > 0.00) was not significant in explaining the changes in tax revenue. The study findings showed that the ratio of external trade and international taxes has a positive effect on tax revenue while the ratio of FDI does not. ICT usage has a negative moderating effect on tax revenue. Based on the findings the study rejected H01, H02 and Ho4 but does not reject H03 and concludes that trade openness and Trade Tariff have a positive impact on tax revenue in Kenya, while FDI does not. ICT usage has a negative moderating effect on tax revenue. The study recommends that the government tax agency seeks to improve the volumes of direct taxes and make ICT usage pervasive throughout the organization, while the government introduce a favourable tax policy.
Moderating effect of compliance cost on determinants of excise duty compliance among small and medium water bottling companies in Nairobi, Kenya
(KeSRA_Moi University, 2023) Muhia, Moses Kuria
Over the years, full Compliance on excise tax by bottled water manufacturers has not been achieved despite several efforts by KRA to seal the loopholes. The general objective of this study was to establish the moderating effect of compliance cost on the determinants of excise duty compliance among water bottling companies by small and medium enterprises in Nairobi, Kenya. The study was guided by the following specific objectives: to determine the effect of tax Knowledge on excise tax compliance, to establish the effect of tax audits on excise tax compliance, to determine the effect of digitization on excise tax compliance and to find out the moderating effect of compliance costs on determinants of excise duty compliance. The study was anchored by the following theories, ability to pay theory, economic deterrence theory, attribution theory, unified theory of acceptance & digitization and transaction cost theory. The research employed explanatory research design. The population comprised of 110 SMEs bottling water companies, due to size of the population, the study employed census. Primary data was used and structured questionnaire employed to collect data. Data findings was presented in the form of tables and figures. The study adopted multiple regression analysis to confirm factors affecting excise tax compliance and SPSS software used to analyse the data. The study found that Tax knowledge had a positive and significant effect on excise duty compliance among Nairobi water bottling SMEs. β1 = .360 p = 0.000<0.05. The study also found that tax audits had a positive and significant effect on excise duty compliance SME β2 = .189 p = 0.000<0.05. Further the study found that digitization had a positive and significant effect on excise duty compliance β3 = .344 p = 0.035<0.05. The study finally found that compliance cost had a negative and statistically significant moderating effect on relationship between tax knowledge, tax audit, digitization and excise duty compliance by the small and medium water bottling water companies in Nairobi, Kenya. β4 = -.153 p = 0.000<0.05. The study further found that the moderating effect of compliance cost on relationship between tax knowledge and excise duty compliance by the small and medium water bottling water companies in Nairobi was significant β5 = .101 p = 0.000<0.05. Further the study found that the moderating effect of compliance cost on relationship between tax audit and excise duty compliance, was statistically significant β6 = .019 p = 0.000<0.05. Lastly the study found that moderating effect of compliance cost on relationship between digitization and excise duty compliance by the small and medium water bottling water companies in Nairobi was significant β7 = .081 p = 0.000<0.05. R square change was 0.3% showing that the variation caused was reduced from 0.466 to 0.460. The study recommends more education on tax and compliance and improved digitization. Future research could compare the factors affecting excise duty compliance across different industries and sectors in Kenya. This would provide a more comprehensive understanding of excise tax compliance behavior in Kenya.
Effect of tax planning strategies on the perfomance of manufacturing firms in Nairobi City Kenya
(KeSRA_Moi University, 2023) Mugambi, Mary Mukami
Better performance has been the objective of all commercial manufacturing firms across the globe. However, these are not regularly realized due to high costs on taxes including multiple and double taxation which result to poor performance of manufacturing firms, mostly in developing economies. In order to manage the effects of taxes on the profitability of firms and to improve their performance, various tax planning strategies are engaged by the firms so as to reduce the impact of high tax burden. It is in this regard that this study aimed at determining the effect of tax planning strategies on the performance of manufacturing firms in Nairobi City Kenya. The study was guided by the following specific objectives; to determine the effect of Income shifting, expense deduction, Capital Intensity and firm restructuring on the performance of manufacturing firms in Nairobi city, Kenya. The study was anchored on the following theories; The Hoffman’s tax planning theory, trade off theory, stakeholder theory and benefit theory of taxation. The study adopted explanatory research design. The target population of the study was 469, registered manufacturing firms in Nairobi city Kenya. A sample of 216 manufacturing firms using stratified random sampling was employed. Quantitative; primary data was collected using structured questionnaires. Reliability of the data collection instrument was tested using Cronbach Alpha test. Data was analyzed using descriptive statistics and inferential statistics methods and the hypothesis were tested at 0.05 significant level. Multivariate correlation, and multiple regression analysis tests were also applied in data analysis. The regression results showed that income shifting(𝛽1=0.134,p=<0.05),Capital intensity((𝛽3=0.377, p<0.05),Firm restructuring (𝛽3=0.842, p<0.05) had statistically positive significant effect on on the performance of the Manufacturing firms while expense deduction(𝛽2=-0.014, p>0.05) had no statistical significant effect on the performance of the manufacturing firms in Nairobi city ,Kenya. The study findings, concluded that income shifting, capital intensity and firm restructuring tax planning strategies positively and significantly effects the performance of manufacturing firms, further the findings revealed that expense deductions had a negative effect on the performance of manufacturing firms. The study findings recommend that manufacturing firms prioritise on firm restructuring as a tax planning approach to improve their performance, tax practicing experts should advise their clients to embrace income shifting, capital intensity and firm restructuring as strategies to improve their firm performance, and also research to be done using other variables so as to establish which other factors affects the performance of the manufacturing firms in respect to tax planning.
Determinants of E-filing system adoption among taxpayers in Gatundu South Sub-County kiambu county, Kenya
(KeSRA_Moi University, 2023-09) Njuguna, Jesse Njeru
Due to advancement in technology many countries have shifted to e-Filing Systems to enable taxpayers to file their tax returns online on their own from any location connected to the internet without necessarily visiting the KRA-workplaces for help in filing their tax returns in every calendar year within the month of June. This notwithstanding, many taxpayers are still seeking help from KRA work-places to file their tax returns and in some instances seen them request for the extension of tax filing time in every calendar year within the month of June which always forces KRA to operate for longer hours both in weekdays and weekends in order to support taxpayers in filing their tax returns invoking the issue of e-filing system adoption. It is surprising that a few studies have examined this concern yet e-filing ought to make it convenient for taxpayers to file their tax returns on their own. Consequently, the study invokes the question as to what drives taxpayers to resort to KRA work places, professionals and cybercafé for help in filing their tax returns. The study aimed to examine the determinants of e-filing system adoption among taxpayers in Gatundu South Sub-county, Kiambu County. The specific objectives were to determine the effect of perceived ease of use, perceived usefulness, facilitating conditions and user ability on e-filing system adoption among taxpayers in Gatundu South Sub County. The study was anchored on three theories; Unified Theory of Acceptance & Use of Technology, Technology Acceptance Model and Diffusion of Innovation Theory. The study employed explanatory research design. The target population for the study was 75,974 potential users of the e-filing system (iTax) in Gatundu South Sub-County who were derived from the 2019 census report by the Kenya National Bureau of Statistics. The study used random sampling technique in selecting a sample size (n) of 398 respondents in Gatundu South Sub-County. The study collected primary data through close-ended questionnaire, with a response rate of 84%. 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, These results indicate that the independent variable, perceived ease, perceive usefulness, facilitating conditions and user ability caused a variation of 27.3% (R2=0.273) on e- filing system adoption. The study findings indicated that perceived ease, perceived usefulness, facilitating conditions and user ability had a statistically positive significant effect on e-filing system adoption as per Beta coefficients of perceived ease (β1=0.395, p=0.000<0.05), perceived usefulness (β2=0.227, p=0.000<0.05), Facilitating conditions (β3= 0.264, p=0.000<0.05) and user ability (β4=0.009, p=0.000 <0.05). The study results concluded that perceived ease of use, perceived usefulness, facilitating conditions and user ability affect e-filing system adoption. Based on the findings, the study recommends that KRA should plan a more effective strategy and formulate policies of promoting e-filing usage among individual taxpayers in Kenya. Therefore, future studies can be extended to individual taxpayers in other Counties within the country using other variables not utilized in this study to find out what drives/invoke them to resort to KRA work-places for support in filing their tax returns which always led to extension of working hours both in weekdays and weekends by KRA country wide in every calendar year in the month of June.
Determinants of capital gains tax performance among property owners in Nakuru City, Kenya
(KeSRA_Moi University, 2023) Lesupeer, Mpukiyan Peter
Tax compliance remains to be a very crucial subject to researchers in many parts of the world across the globe. Despite the increasing need to raise the level of revenue collection, developing countries still face the challenges of low tax compliance. Capital gains taxes for practical and political reasons are perpetually riddled with exemptions and exceptions making them complicated to administer and to comply with. The big complication is determining the true capital gain net of inflation after netting out the purchase price and the cost of maintenance and investment in the asset over the years. The main objective of this study was to establish the determinants of Capital Gains Tax performance among property owners in Nakuru City, Kenya. The specific objectives were to determine the effect of taxpayers‟ sensitization, systems automation and taxpayers‟ perception on capital gains tax performance. This study was built on the benefit theory of taxation, universal theory of acceptance and use of technology and social influence theory. The study adopted explanatory research design. The target population was 6,231 property owners with movable and immovable properties in Nakuru City where a sample of 376 property owners was drawn. Primary data collection was employed in the study using structured questionnaires. The study used descriptive statistics and multiple linear regression analysis to establish the effect of the determinants of capital gains tax performance. The study findings showed that taxpayers‟ sensitization, systems automation and taxpayers‟ perception had a statistically positive significant effect on capital gains tax performance with evidence of beta values of: taxpayers‟ sensitization (β1=0.357, p=0.000<0.05),systems automation (β2=0.261, p=0.003<0.05) and taxpayers‟ perception (β3=0.285, p=0.001<0.05).The study results concluded that taxpayers‟ sensitization, systems automation and taxpayers‟ perception had significant influence on capital gains tax performance. Based on the findings, the study recommends that KRA should pay more attention on taxpayers‟ sensitization that contributes to online payment process being efficient in payment of taxes. The study therefore suggests that future research should be conducted to investigate effect of other variables such as cost and tax knowledge on Capital Gains Tax performance.
Socio-Psychological Determinants of Tenants Attitude towards Residential Rental Income Tax Compliance in Eldoret Municipality, Kenya
(KeSRA_Moi University, 2023) Elijah Kiptoo Kandie
Residential rental income tax compliance in Kenya has remained poor despite penalties, periodic audits, fines, and the geo-mapping of residential properties by KRA. Although data indicate a rapid expansion of the real estate industry, taxes on rental income have. remained the same with this expansion. Due to tax shifting by property owners, tenants. are at the core of rental income tax. In addition, tenants and property owners occasionally collaborate in evading rental income taxes. Furthermore, tenants may decide to purchase a home if high property taxes increase the amount of rent due. This could decrease the demand for rental homes and lower the amount of rental income tax collected. Additionally, as part of third party reporting, KRA requires tenants to voluntarily divulge information on property owner when submitting their annual self assessment returns. Prior studies have revealed that socio-psychological factors influence a person's attitude towards compliance with tax laws. However, few studies have assessed tenants' attitudes toward residential rental income tax compliance. Therefore, this study sought to examine the effect of perceived tax system fairness, perceived enforcement power, perceived tax knowledge, perceived trust in government and perceived social norm on tenants' attitudes toward residential rental income tax compliance. The study was grounded on the theory of planned behavior and the theory of social norms. The study adopted the explanatory and cross-sectional research design. The study’s population comprised of 119,042 tenants, however the final sample was 399 tenants. Self-administered questionnaires were used to collect data that was analyzed through descriptive and inferential statistics. The results of multiple regression were used to test the hypotheses. The findings revealed a significant negative relationship between perceived tax system fairness (β =-0 .123; ρ < 0.05), perceived enforcement power (β =-0.124; ρ < 0.05), perceived tax knowledge (β =-0 .128; ρ < 0.05), perceived social norm (β =-0 .111; ρ < 0.05) and tenants’ attitude towards residential rental income tax compliance. The study further found a positive relationship between perceived trust in the government and tenants' attitude towards residential rental income tax compliance (β =0.224; ρ < 0.05). The study concluded that socio-psychological factors are significant determinants of tenants' attitude towards residential rental income tax compliance. Based on the findings, the study makes several recommendations. First, KRA needs enhance outreach programs to create awareness of the significance of complying with the residential rental income tax. Second, the tax authority should develop effective working strategies to establish trust and cooperation with taxpayers to foster a culture of voluntary tax compliance with rental income tax. Third, government should foster a culture of voluntary tax compliance among the populace. Finally, future research may focus on other real estate industry participants, such as property managers and estate agents, as drivers of residential rental income tax compliance.
Perceived Effect of Tax Policy on Income Tax Compliance Among Selected Gambling Firms in Nairobi County, Kenya
(KeSRA_Moi University, 2023) Mutua Mutava
Income tax compliance is an important issue in any economy worldwide. The gambling and lottery industry has recently risen to become a very lucrative industry in Kenya that can no longer be ignored and warrants more research. Companies are required to adhere to taxation regulations set out by the Kenyan government and file accurate tax returns. However, few gambling companies comply with tax policies, implying that majority are operate in the black market evading taxation. This study, therefore, sought to determine the effect of tax policy on income tax compliance among gambling firms in Nairobi County, Kenya. The specific objectives were to establish the influence of tax regimes on income tax compliance, to determine the effect of tax rates increase on income tax compliance among gambling firms in Nairobi County, Kenya, and to effect of tax base on income tax compliance among gambling industry in Kenya. This study was based on three theories: The Ability to Pay, The Tax Morale Theory and Economic Theory of Income tax compliance. The research adopted explanatory research design. The target population for the study was gambling companies operating in Nairobi City. According to Betting and Licensing Control Board, there are 30 major sports gambling and lottery companies in Nairobi County. Therefore, the target population for this research was 250 senior and middle level managers in the 30 gambling and lottery companies in Nairobi County, Kenya. Simple random sampling technique was adopted to pick out the respondents obtained from managers of gambling companies. Furthermore, the sample size was determined by use of Yamane (1967) formula which will yield a sample size of 154. Primary data was collected through use of semi- structured questionnaires. Data was analyzed using descriptive and inferential statistics. From regression results, the adjusted R Square value was 0.191 indicating that the model explains only about 19.1% of the variability in the income tax compliance by gambling firms. Furthermore, the findings revealed that a unit increase in tax regime is associated with an estimated increase of 36.9% units in income tax compliance; a unit increase in tax rate is associated with an estimated increase of 34.9% units in income tax compliance and a unit increase in tax base is associated with an estimated increase of 19.9% units in income tax compliance. Furthermore, hypotheses testing revealed that tax regimes, tax rates and tax base have a significant effect on income tax compliance among gambling firms with (p=0.000<0.05); (p=0.000<0.05) and (p=0.011<0.05) respectively. These comprehensive findings collectively underscore the importance of thoughtful tax policy design in fostering taxpayer cooperation and compliance within the gambling sector in Nairobi. The study recommended for the Review tax regime structure, Tax rate optimization and Income tax compliance education in the gambling sector
Perceived Determinants of Tax Compliance among Small and Medium Scale Enterprises in Nairobi South Tax region, Kenya. The Moderating Role of Institutional Quality
(KeSRA_Moi University, 2023) Holyzine Ogake Ongeri
Despite the importance of tax revenue, poor tax compliance among small and medium sized businesses remains a persistent issue for countries around the world. Studies have revealed an association between perceived tax determinants and tax compliance behaviours; however, the findings are inconsistent and inconclusive. A strand of literature further argues that institutional quality has an impact on individuals’ and corporate entities’ tax compliance. Therefore, this study sought to examine whether institutional quality moderates the relationship between perceived tax determinants and tax compliance among small and medium-sized enterprises in Nairobi South. Specifically, the study examined the effect of perceived tax complexity, perceived tax deterrence and sanctions, perceived psychological cost perceived tax law and fairness on tax compliance among small and medium-sized enterprises in Nairobi South. The study further determined whether institutional quality moderated the relationship between perceived tax complexity, perceived tax deterrence and sanctions, perceived psychological cost perceived tax law and fairness and tax compliance among small and medium-sized enterprises in Nairobi South. The study was grounded on the fiscal psychology theory, the theory of planned behaviour and the institutional theory. The study adopted both the cross-sectional and explanatory research design. Data was gathered from 325 SMEs out of a possible 370 using a close ended questionnaires with a 1-5 Likert scale to gauge respondents' agreement with statements related to tax compliance, perceived tax deterrence and sanctions, perceived tax law and fairness, perceived psychological cost, and institutional quality. The study's findings revealed that Perceived tax complexity (β= 0. 137, ρ<0.05), perceived tax deterrence and sanctions (β= 0.161, ρ<0.05), and perceived psychological cost (β= 0.120, ρ<0.05), perceived tax law fairness (β= 0.201, ρ<0.05) had a positive and significant effect on tax compliance among small and medium-sized enterprises in Nairobi South. Further, the findings revealed that institutional quality had an enhancing moderation effect on perceived tax complexity (β= 0.664, ρ<0.05), perceived tax deterrence (β= 0. 694, ρ<0.05), while perceived psychological cost (β= -0. 796, ρ<0.05) and perceived tax law fairness (β= -0.524, ρ<0.05) had a buffering moderation effect on tax compliance. These findings highlight the important interconnection between taxpayers’ institutional factors in explaining tax compliance behaviours. In light of these findings, the study offered targeted recommendations for policy and practice. Policymakers are urged to emphasize the transparency and fairness of tax systems, develop strategies to reduce psychological costs associated with compliance, and consider comprehensive institutional improvements to bolster compliance. These insights provide a foundation for refining strategies to foster voluntary tax compliance among SMEs, contributing to sustainable revenue generation and economic growth. Similar study could employ longitudinal research designs that would unravel the causal dynamics underlying the relationships identified, offering insights into the evolution of compliance behaviour over time. Future studies could also consider other jurisdictions as well as other potential moderators.
Moderating Role of Tax Training on the Relationship between Tax Modernization Programs and Tax Compliance among Small and Medium Enterprises in Nakuru County, Kenya
(2023) Ibrahim Maina Kinuu
Compliance to tax laws and regulations among the SMEs vary among nations. Tax compliance for small and medium sized ventures is challenging which led to the institution of reforms in order to make it easier for the businesses to comply. Empirical data shows that Kenya has not been able to meet its revenue to optimal level. SMEs in particular have the potential of generating revenue for the government but this has been a challenge. This poses a significant problem to the government and the country’s growth as a whole. This study aimed the moderating role assessing the effect of tax modernization programs on tax compliance moderated by tax training among SMEs in Nakuru County, Kenya. Specifically, the study sought to: determine the effect of tax invoice management system on tax compliance; evaluate the effect of electronic tax returns on tax compliance; find out the effect of electronic tax payment on tax compliance and find out the moderating effect of tax training on the relationship between tax modernization programme and tax compliance among small and medium enterprises in Nakuru County, Kenya. The study was anchored on the following theories: economic deterrence, transaction cost economics theory and theory of reasoned action. The study adopted an explanatory research design. The study was carried out between August 2022 and November 2022. The target population was licensed SMEs in Nakuru County. The target population of this study was from a population of 32,272 registered SMEs from which a sample of 395 selected using simple random sampling. Data was collected through administration of pretested questionnaires to the owners of SMEs. Data was analyzed using both descriptive and inferential statistics. The study adopted the hierarchical regression models to test for moderation. Based on the regression results, the study found that tax invoice management system (β= 0.286; ρ< 0.05), electronic tax returns (β= 0.352 ρ< 0.05) and electronic tax payment (β= 0.145; ρ< 0.05) had a significant positive effect on tax compliance of SMEs in Nakuru County, Kenya with an R 2 of 33.4 percent. The study further found that tax training moderated the relationship between tax invoice management system (β= 0.068; ρ< 0.05), electronic tax returns (β= 0.053; ρ< 0.05), electronic tax payment (β= 0.455; ρ< 0.05) tax compliance of small and medium enterprises in Nakuru County, Kenya with an R 2 of 43.2 percent. The study concluded that the tax modernization are key determinants of tax compliance of small and medium enterprises in Nakuru County, Kenya and that tax training moderates that relationship. This study recommends that SME owners get basic training on simple record keeping which will not only enhance their level with compliance with tax laws, but also improve on the operational efficiency of their SMEs. Future studies should conduct a comparative study across multiple counties or regions within Kenya could reveal regional variations in tax compliance and the effectiveness of tax training programs.
Effect of Excisable Goods Management System on Excise Tax Revenue Collection in the Coast Region of Kenya
(KeSRA_Moi University, 2022) Habel Sulubu Mbaru
The Coast Region has estimated that KRA loses 4.7 litres for every five-litre bottle to the unscrupulous dealers, excise stamps are swapped. It was in the background of this statement that researcher sought to establish the effect of the excisable goods management system on the excise tax revenue collection in the Coast Region. The specific objectives of the study was to determine the effect of product marking, tracking and tracing, and product authenticity on excise tax revenue collection in the Coast Region. To provide the basis of the study, the theory of reasoned action, technological determinism theory and dynamic capabilities theories was be used. The research used explanatory research design. Data collected was primary data sources using structured questionnaires. The target population of the study consisted of 838 participants involved with the EGMS. The sample size of 271 participants was determined using a scientific formula based on stratified and random sampling technique. The study employed descriptive and inferential statistics for data analysis. The hypotheses were tested using multiple linear regression models. The results revealed that Product Marking (β1=0.127, p<0.05), excisable goods tracing and tracking (β2=0.218, p<0.05) and Product authenticity (β3=0.173, p<0.05) significantly and positively influence excise tax collection. The study concluded that product marking, tracing and tracking, and product authenticity matters in excise revenue collection in the Coast region. The implication to policy formulation is that there is need to improve on product marking by ensuring that they work in collaboration with manufacturers of these products on the adoption of latest tracking gadgets that cannot be easily tampered with. This will prevent the tax evasion by the various manufacturers especially bottling companies in the region. The research suggested that future studies be conducted through longitudinal studies to determine the success of the system on revenue collection over time.The analysis indicated that independent variables could only explain 84% of the revenue collection on the excisable goods, which implied there were additional factors which could explain revenue collection; hence future studies should identify these factors.

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