Determinants of Value Added Tax Performance among Small and Medium Enterprises in Nakuru Central Business District-Kenya
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Date
2021
Authors
Sora, Jane Shaga
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
Small and Medium Enterprises have always been a factor of concern among tax policy makers all over the world. On one hand, since they constitute the largest universe of taxpayers and on the other their importance in the collection is very small. Taxation of Small and Medium Enterprises is a burden they must bear to sustain their government since the government has certain activities for the benefits of Small and Medium Enterprises. The current research will seek to determine the factors affecting value added tax performance among Small and Medium Enterprises in Nakuru Central Business District. The dependent variable was Value Added Tax performance while the independent variable was tax literacy, cost of compliance and tax audits. The specific objectives were to determine the effect of tax literacy, compliance costs and tax audit on Value Added Tax performance in Nakuru Central Business District. The study was pegged on three theories namely; Contract theory, Transaction Cost Economics Theory and agency theory. The study used descriptive research design. The target population in this study comprised of 578 Small and Medium Enterprises in Nakuru Town registered in the department of trade where a sample of 236 respondents were selected using stratified random sampling. The primary data was collected by use of a questionnaire where the collected data was sorted, corded and fed into statistical package for social sciences after which the relevant descriptive statistics such as standard deviation, mean, variance, and mode output was generated along with correlation and regression analysis for subsequent model testing. The data was analyzed at 5% significant level and 95% confidence level. The descriptive findings show that several tax trainings conducted by Kenya Revenue Authority through workshops and seminars in Nakuru central business district has equipped Small and Medium Enterprises with basic understanding of tax laws. Also, the results show that Small and Medium Enterprises have an access to tax education through media advertisements, magazines and from the Kenya Revenue Authority website. However, concerning access to information on the aggregate taxes collected and how they are spent, the results show that Kenya Revenue Authority rarely share the information concerning collections and how they are spent. Also, regression analysis and correlation analysis established a positive and significant relationship between tax literacy and tax audit with value added tax performance. However, a negative and significant beta coefficient and person correlation coefficients were established between cost of compliance and value added tax performance. The study concludes that tax literacy, reducing cost of compliance and regular tax audit can help improve value added tax performance. The current study recommends that Kenya Revenue Authority need to establish ways of sharing information on value added tax performance and usage to the taxpayers. Lastly, similar studies can be done in other towns in Kenya to establish whether similar findings will be obtained. Also, similar study can be done in Nakuru but in a different sector like real estates and see if same findings will be obtained.
Description
Keywords
SME, VAT