Effect of Taxation on the Performance of Small and Meduim Enterprises in Voi Town, Kenya
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Date
2020-07
Authors
Ngali, Jenta Itaka
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
SMEs are faced with the problem of high tax rates, multiple taxation, complex tax regulations and lack of proper enlightenment or education about tax related issues. It was in this regard that the researcher sought to establish the effects of taxation on the performance of SMEs in Voi Town. The study was guided by the following objectives: To assess the effect of tax policies on performance of SMEs in Voi town, Kenya, to evaluate the effect of tax rates on performance of SMEs in Voi town, Kenya and to ascertain the effect of tax reforms on the performance of SMEs in Voi town, Kenya. The study will be of great value to the management of SMEs and formulation tax policies pertaining to KRA. To provide the basis of the study, the researcher relied on the following theories: ability to pay theory, economic theories and optimal theory of taxation. The study adopted a cross-sectional research design, where 130 SMEs of the town were targeted. The study used Yamen’s formulae to determine a sample of 98 SMEs which were stratified into various business categories. The study used structured questionnaires which were distributed to the management and owners of these SMEs. The returned questionnaires were analyzed using SPSS to establish the relationship between the study variables. The study relied on a response rate of 72.4% (71) for data analysis and findings. The analysis showed that there was a significant negative very weak relationship between tax policies and SMEs performance (β= -0.185; p= 0.030). Secondly, it was determined that there was a weak negative and significant relationship between tax rates and SMEs performance(β=-0.212; p=0.009). Finally, on the relationship between tax reforms and SMEs performance, a weak positive relationship between the two study variables (β=0.204; p=0.004). The study concluded that tax rates and tax policies has a significant negative effect on tax performance, while tax reforms has a significant positive effect on SMEs performance. The study recommended that tax regulations governing SMEs should be simplified in order to improve their growth and to make compliance easier for them.Further, tax administration should use current tax reform to reduce tax complexity with tax authorities which should focus and help taxpayer during filing taxes with returns information. Finally, tax administrators should improve their support services towards SMEs.
Description
Tax Administration
Keywords
Tax Policies, Tax Rates, Tax Reforms, SME, Tax