Taxpayers Compliance Behaviour With Tax System

Abstract

Despite the increasing need to increase revenue collection and enforcement so as to provide public services, developing countries still face the challenges of low tax compliance and tax administration. Small and medium businesses are instrumental in the growth of the economy as they create jobs and help fight poverty. With the favourable investment environment in Kenya, small businesses have frog-leaped into medium enterprises and the sector has received a lot of attention in the recent past from many quarters due to the immense economic potential being associated with. The government recognized the potential lying within the small taxpayers awhile ago through the introduction of turnover tax in the Finance Act 2006 through the provision of the Income Tax Act, Cap 470.The sector have for long operated without formal structures However since the SME were brought to tax bracket, little documented and empirical studies exists on tax compliance behavior. This casts doubts on the ability of the government to actually increase revenue collection and improve tax enforcement efforts. The purpose of the study was to assess the factors that influence taxpayers’ compliance behavior with tax system among small and medium business income earners in Kericho municipality, Kenya these factors tries to explain why taxpayers comply or fail to comply. The study adopted a survey research design. The target population include all the all the 550 small business income tax payers issued with Municipal Council of Kericho Trading License for the year 2011. A sample of 100 small business income tax payers selected and included in the study. Data was collected through administration of a questionnaire with both the small business income earners. The collected data were then processed and analyzed using descriptive and inferential statistics and presented in the form of proposions, tables and percentages with the aid of Statistical Package for Social Sciences (SPSS) version 17.0 for windows