Factors Influencing Turnover Tax Compliance among Micro, Small and Medium Enterprises Sector in Westland Area in Nairobi, Kenya
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Date
2022
Authors
Mutinda, Timothy
Journal Title
Journal ISSN
Volume Title
Publisher
KESRA/JKUAT
Abstract
Turnover tax was introduced in Kenya in 2007 to enhance revenue collection, improve tax
administration and reduce non-compliance and collection costs among the micro, small and
medium enterprises. However, the level of tax compliance for the turnover tax has been very
low since its implementation. The main objective of the study was to establish factors
influencing turnover tax compliance among micro, small and medium enterprises sector in
Westlands area in Nairobi. The specific objectives were to establish the effect of
digitalization of service, compliance cost, taxpayer perception and deterrent measures on
turnover tax compliance among the MSMEs in Westlands. The study was anchored on four
theories; Ability to pay theory, Fiscal Exchange Theory, The economic deterrence theory and
Technology Acceptance Theory. The target population was 241 MSMEs registered by the
Kenya Revenue Authority and a sample size of 151 respondents. Primary data was collected
through closed-ended questionnaire, with a response rate of 74%. The data was analyzed
using descriptive and inferential statistics. The study findings indicated that the
digitaliazation of services.(β1=0.315, p=0.000<0.05), taxpayer perception.(β3=0.278,
p=0.006<0.05), and deterrence measures.(β4=0.330, p=0.000<0.05), had a statistically
positive significant effect on turnover tax compliance among the MSMEs in Westlands while
compliance cost .(β= -0.294, p=0.000<0.05), had a negative effect on turnover tax compliance
among the MSMEs in Westland. The study results concluded that digitalization of service,
compliance cost, taxpayer perception and deterrence measures significantly affect turnover
tax compliance among the MSMEs in Westland. Based on the findings, the study
recommended that KRA should pay more attention and focus on deterrence measures and
develop policies relating to the deterrence measures. The study therefore suggests that, future
studies to focus on different variable such as effect of tax audits on turnover tax compliance
in Kenya.
Description
Post Graduate Diploma in Tax Administration
Keywords
Turnover tax, Deterrence Measures,Costs of compliance