Factors Affecting Tax Compliance among Small and Medium Enterprises in Embakasi East Region, Nairobi, Kenya
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Date
2022
Authors
Letting, Anastacia
Journal Title
Journal ISSN
Volume Title
Publisher
Anastacia Letting Chepkorir
Abstract
Revenue collection defined as Tax is a major source of the government revenue. However, tax
compliance among traders in the informal sector is largely questionable. The core objective of
this study is therefore to provide a theoretical analysis of the factors that may be contributing
to reduced tax compliance among traders in informal sectors in Kenya. It sought to determine
whether SMEs tax Education, tax Technology and Tax rates influence tax compliance among
Small and Medium Enterprises in Embakasi East, Nairobi. With an aim of investigating the
main hindrance to optimal tax administration and compliance among the informal, sector in
Kenya. In order to achieve this, the researcher used a mixed methodology approach, which
incorporated a cocktail of various designs that included descriptive design, stratified and simple
random design to define not only the target population but also the sample size. The data was
collected using questionnaires; administered to a sample population of 90 respondents drawn
from Embakasi East sub-county. While, the secondary data was obtained from; KRA reports,
publications, journals published and unpublished thesis. The data collected was later coded,
analyzed using Statistical Package for Social Scientist and presented in form of charts, graphs
and frequency tables. The findings indicated that there is a positive correlation SMEs tax
Education, tax Technology and Tax rate with tax compliance. As such Kenya Revenue
Authority should institute sustainable SMEs tax compliance measures upon consultation with
taxpayers to establish the most suitable tax model. It should also endeavor in carrying-out
periodic tax awareness campaigns, to empower the capacities of taxpayers and clear some
misconstrued tax perceptions they believe in. Inferences indicated that the SMEs sector has
immense potential to alleviate KRA revenue shortfalls if and only is harnessed fully. This can
be achieved through carrying out Tax research among other approaches. Further collinearity
analysis was done and the results revealed that tax technology had a positive and significantly
related to tax compliance (r = 0.341, p-value=0.00<0.05). Further collinearity analysis was
done and the results showed that tax rates had a positive and significantly related to tax
compliance in Kenya (r = 0.298, p-value=0.00<0.05). The average overall standard deviation
of 0.72 infers that 68% of the response was spread within one standard the taxpayer education
had positive and significantly related to tax compliance (r = -0.148, p-value=0.00<0.05). The
study recommends that Tax education should be rigorous to enlighten taxpayers about their
duties and the role of tax in national development as they have a right to know how the national
and county governments spend their taxes. There is a need for Large-scale structural reforms
such as simplification of tax administration by ensuring the system is simple to use when
registering as a taxpayer, filing the returns and payment of the same. Additionally, there is need
of multi-stakeholder involvement in not only formulation but also in implementation of tax
technology and There is a need for Large-scale structural reforms such as simplification of tax
administration by ensuring the system is simple to use when registering as a taxpayer, filing
the returns and payment of the same. Additionally, there is need of multi-stakeholder
involvement in not only formulation but also in implementation of tax technology..
Description
Post Graduate Diploma in Tax Administration.
Keywords
Value added tax, Gross domestic products,Tax compliance