Factors influencing monthly rental income tax compliance from residential property owners in Nairobi south district.

Abstract

Rental income reports indicate that less than half of property owners and developers comply with rental income tax requirements in Nairobi City County. Despite the tremendous growth from real estate in Nairobi South District, the corresponding tax collection from the sector has remained very low. The contribution by landlords has been very low despite all the efforts to enforce rental income tax policies. The purpose of the study was to investigate factors influencing monthly rental income tax compliance in Nairobi South District. The study objectives were to establish the effect of tax knowledge on monthly rental income tax compliance from residential property owners in Nairobi South District, to establish effect of tax rate on monthly rental income tax compliance from residential property owners in Nairobi South District and to establish the effect of digitalized tax services on monthly rental income tax compliance from residential property owners in Nairobi South District. The study was guided by Allingham-Sandmo Theory and the fiscal exchange theory. The study adopted a descriptive survey design. The target population was 134 rental property owners in Nairobi South District. The sample size of the study was 100 rental property owners The response rate was 87% .Both primary and secondary data was used where questionnaires were employed to collect primary data while secondary data was obtained from KRA website and other academic materials. Both descriptive statistics and inferential statistics was carried out with the help of the SPSS software. Based on research finding it can be concluded that tax knowledge, tax rate and digitalized tax services influences monthly rental income tax compliance in Nairobi South District. It is thus recommended that there is need for tax training and awareness through seminars and workshops on how to the importance to comply with tax payment to the authorities and its importance to the continuity of the business. Promoting public tax education is necessary in increasing public awareness about taxation while promoting tax compliance. The study recommends that Tax authorities should set a favorable tax rate levied on rental properties. This will ensure that both tax authorities and tax owners benefit without straining one another. The tax rate should be fair to the taxpayers’ pockets. The study recommends for the creation of awareness on the available digital platform to pay, file and compile tax returns.