Influence of Tax Administration on the Growth of Small and Medium Enterprises in the Manufacturing Sector in Nairobi City.
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Date
2022-09-01
Authors
Marieta, Daisy
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT - Unpublished research project
Abstract
The consistently rising financial and economic needs of Kenya and the budget constraints that continually exist compromise the sustainability and development of the Kenyan economy. The motivation behind this study is to collect data on the influence of tax administration on the growth of SMEs in Nairobi City. More specifically it is limited to the influence of efficiency of tax administration, tax equity and fairness and taxpayer education with regards to the growth of SMEs. This wasfurther discussed in this study and further review empirical literature conducted by various authors on how these factors have catalyzed improvement in collection of revenue by the Kenya Revenue Authority to spur growth of SMEs.The taxpayers who participated in this study comprised SMEs in Nairobi City. There are over 10, 0000 SME taxpayers located in Nairobi. However, a sample size of 50 was considered for investigation where stratified random sampling method was used to arrive at the figure. The study employed the use of structured and open- ended questionnaires to collect primary data which was edited for consistency. It was entered in Statistical package for social science (SPSS) to enable a comprehensive descriptive statistical data analysis for ease of presentation. The findings indicated that tax equity and fairness on the growth of SME as supported by 89.79% on the statement that some SME sectors are taxed more while some receive bonuses and incentives which is unfair. The research concluded that the tax system was efficient and that it is designed in order to accelerate voluntary tax compliance. Tax inefficiencies gives rise to additional costs to the SMEs which include social costs, travelling costs, audit costs, administrative costs. These costs will divert funds meant to expand and facilitate growth of SMEs to comply with tax authorities. Further conclusions are made that taxpayer education has a significant effect on the growth of SMEs on the manufacturing industry in Nairobi City. The study recommends that Kenya Revenue Authority (KRA) should have an office in every county that will address tax issues at county level and the services to be offered should include tax penalties, filing of tax returns, tax computation and tax differentiation. KRA should also establish different deduction levels and apply the standard rate plan on the revenue turnover less standard deduction. KRA should continuously implement reforms on publicizing prosecution of non-compliant by providing incentives for voluntary compliance and the tax laws should be constantly reviewed to strengthen to seal loopholes that are being exploited by non-compliant SMEs. KRA should create more awareness on the tax compliance among SMEs through policy documentation which classify different betting firms’ entities.
Description
Tax Administration
Keywords
Tax Administartion, Small and Medium Enterprises