Factors affecting tax compliance by small and medium enterprises in Meru town, Meru county
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Date
2019
Authors
Gatobu, Lesley Kathure
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
Taxation is the main source of revenue for government funding and therefore all efforts must be
made by governments to ensure accurate and efficient collection. The aim of the study was to
determine whether tax fines and penalties, tax knowledge and education and perceived
opportunity for tax evasion variables have an impact on tax compliance among SMEs in Meru
Town area. A sample size of 97 was picked and data collected using a self-administered
questionnaire. The study found 96.6% of Kenyans feel the tax rates are high and in many forms
which hinder compliance. Inadequacy or lack of tax information tailored to be understood by the
tax payers contributed to the inability and/or inaccurate calculation on tax payable by the SMEs
affecting 82% of the respondents. The SMEs view that there are few tax evasion opportunities
they are aware of but 44.8% agree most business don‟t report taxes fairly and under declaring
increases profits. The findings of the study further revealed that the three variables under study
do influence the tax compliance at P<0.05. The dependent variables account for 47.7% of the
variability in the independent variable, tax compliance, indicating tax knowledge and education,
perceived opportunities for tax evasion and tax fines and penalties can explain 49.6% of factors
influencing tax compliance. Understanding the underlying factors and tailoring tax information
dissemination and collection approaches would greatly improve taxpayers‟ tax compliance level,
which would improve revenues collection providing resources for improved government
services. The study recommends increased taxpayer education; enhance surveillance and
monitoring to increase compliance.
Description
Keywords
Tax Knowledge, Tax Laws, Tax evasion