Factors affecting withholding value added tax compliance among small and medium enterprises in industrial area, Nairobi County
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Date
2019
Authors
Wafula, Wallace Nyongesa
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
The major issue facing Kenya Revenue Authority is that it has never been easy to convince all taxpayers to comply with the regulations of the tax system. Nairobi County plays host to a sizeable amount of businesses that make up a significant quantity of the county’s robust economy. SMEs are continuously expanding and have the potential to increase the revenue flows but which have been otherwise left out of the tax bracket. Studies show that millions in taxes have been lost because tax evasion issue under SMEs has not been adequately addressed. As such, it emerged key enough for KRA to revert to the drawing board, reevaluate its VAT taxation mechanisms and device new approaches on how to carry out the reforms with one of them being withholding VAT with the sole aim of increasing the revenue collected from the business within Kenya. However, despite increase in revenue collection, withholding VAT has not been meeting its revenue targets over the last few years. This study was aimed at investigating the factors affecting Withholding VAT compliance among Small and Medium enterprises in Industrial area, Nairobi County The study was be guided by the following specific objectives: - to find out how taxpayer’s knowledge management affects withholding VAT compliance, determine how cost of compliance affect Withholding VAT compliance and how tax compliance measures influence withholding VAT compliance. The main theories that will control this study are Economic (Deterrent) model and Social Influences Theory. The target population was active withholding VAT agents in Industrial area, Nairobi County. Random sampling was employed to arrive at a sample size of 60 respondents. The research design used in this study was explanatory study design. Primary data was collected through interviews by use of questionnaires with closed ended questions geared at Likert Scale. Data was coded for processing and SPSS used for data analysis to produce both descriptive and inferential statistics. Regression model was used for establishing the relationship between the study variables. The analysis of variance (Anova) was used on the average figures for all the measures of performance. The key findings of the study were that: knowledge management on taxpayers is essential for withholding VAT compliance, compliance costs deterred taxpayers from being withholding VAT compliant and enforcement measure compelled taxpayers to be withholding VAT compliant. The researcher recommends that regular tax trainings and adequate and simplified information should be provided on KRA website and other social platforms. KRA should respond promptly on issues of concern raised by taxpayers. And that KRA to offer comprehensive trainings in institutions to make taxpayers competent enough to cut down on costs of employing the services of tax experts and also training of staff .Regulatory bodies should consider controlling the amount of fee charged by tax experts. The fact that penalties on late filings and payments are already in place, they should be maintained at a considerable rate that is bearable by taxpayers. Regular audits and compliance should also be conducted by KRA to improve compliance levels. The researcher proposes quarterly audit checks
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Keywords
Consumption tax, Withholding tax, Tax agents