Factors Affecting iTax Compliance among Small Businessess in Malindi
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Date
2020
Authors
Aghan, Faith Verner
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
Small business owners play a major role in a country’s tax system. Most researchers however suggest that small business owners are most likely to cheat on their taxes than other classes of taxpayers. On the other hand, the actual experience of paying taxes and small business owners’ tax behaviour has received surprisingly little attention. This paper contributes to the understanding of small business owners’ tax compliance behaviour by pointing out that tax decisions are susceptible to psychological influences. This reasoning formed the basis of the main contribution of this study which sought to examine the factors affecting iTax compliance among small business owners in Malindi. The study was guided by the following specific objectives: To determine the effect of taxpayer awareness on iTax compliance by small businesses in Malindi, to examine the effect of taxpayer perception on iTax compliance by small businesses in Malindi and to establish the effect of iTax infrastructure on iTax compliance by small businesses in Malindi. To provide the basis of the study assumptions, the study relied on the following theories: The Technology Acceptance Model, Theory of Reasoned Action, Diffusion of Innovation Theory and the Psychology Based Theory. The study adopted cross- sectional survey design using both quantitative and qualitative approaches, where 113 small business owners were targeted from various sectors and a sample size of 88 respondents who took part in the study was determined using the Slovin’s formula. The study adopted stratified sampling technique. The study used structured questionnaires with closed ended questions which were distributed to the various sectors using drop and pick method. The collected data was analyzed using both inferential and descriptive statistics with the help of SPSS. The analysis showed that a unit improvement in taxpayer awareness would result in an increase in iTax compliance and the relationship was statistically significant. The analysis further determined that, a unit improvement in taxpayer perception would result in an increase in iTax compliance but the relationship was statistically insignificant. Finally, it was revealed that a unit improvement in iTax infrastructure would result in an increase in iTax compliance and the relationship was statistically significant. The study concluded that taxpayer awareness, taxpayer perception and iTax infrastructure significantly affect iTax compliance with iTax infrastructure being the main contributor to iTax compliance. The study recommended that KRA should simplify tax laws and ensure taxation knowledge is acquired in ways that simultaneously increase compliance and curb tax evasion. The study further recommended that KRA should make continuous modifications to the system to make it easy to use and simplify tax processes. Finally, the study recommended that KRA should conduct continuous training on technical skills, tax knowledge and build reliable internet connections to encourage adoption of online filing and consequently increase compliance.
Description
Tax Administration
Keywords
iTax Infrastructure, Taxpayer Awareness, Tax Compliance, Taxpayer Perception