Factors influencing residential monthly rental income tax compliance in Kenya: a case of Lolwe Estate, Kisumu County, Kenya

Abstract

Tax compliance has emerged as critical issue in developed as well as developing economies around the world. The essence of this study was to identify factors influencing monthly rental income tax compliance by the property owners in Kisumu, Lolwe estate. Specifically, the study looked at how tax rate, availability of tax information; costs of compliance and tax awareness influence tax compliance. The Fiscal exchange and the Allingham-Sandmo (AS) Theories provided anchorage to the study. The design that was adopted was descriptive survey. The study targeted 200 property owners from Lolwe Estate. A census was used and thus the sample size was 200 respondents. Data was collected using questionnaires and the analysis was conducted with aid of descriptive and inferential statistics. The study found out that tax rates, availability of tax information, cost incurred in being compliant and tax awareness are critical factors influencing residential monthly rental income tax compliance. The study concludes that tax rates, availability of tax information, cost incurred in being compliant and tax awareness have a positive and significant influence on residential monthly rental income tax compliance. The study recommends that KRA should consider widening the tax base and reducing the tax rates so as to improve on residential monthly rental income tax compliance. KRA should ensure that information on taxes is readily available to tax payers. KRA should strive to improve on efficiency in systems so that tax payers do not incur a lot of costs while complying with residential monthly rental income tax compliance. There is need for awareness programs and efforts so that more tax payers are taught on the need to comply with residential monthly rental income tax compliance.