The role of administrative factors in stimulating tax reforms in Kenya

Abstract

The Kenyan law as relates to tax has been deemed complex in terms of the understanding of what needs to be incorporated in the computation of tax to be paid and what should not be part of the tax bracket. As such, the complexity of the corporate tax system may be the reason for low compliance levels in Kenya. The compliance problem has meant that the Government collects far less than it needs to yet projects that are to be funded by the Government continue to escalate. The tax reforms therefore come in handy to remedy the situation for corporate tax payers. It is in this light that the study seeks to examine the role of tax complexity, enforcement and compliance in tax reforms in Kenya. The study sought to establish the role of tax complexity, compliance and enforcement in tax system reforms in Kenya. This study used a descriptive survey. The population of interest in this study consisted of all the 350 tax managers within the Kenya revenue Authority who deal with or advice on tax reforms issues and the financial managers in the 55 companies listed. The financial managers deal with tax issues hence their consideration in this study. Three managers within Nairobi formed the sample size that filled in the questionnaire for the tax managers at KRA. A sample of 35 financial managers was selected for the study using simple random sampling. Primary data was collected from the respondents using two sets of questionnaires. The primary data collected was analyzed based on descriptive statistics such as percentages. Results were presented using tables and graphs, and pie charts for effective interpretation by users. The study found that tax compliance, tax complexity, and enforcement play major roles in influencing tax system reform in a country. As the study found out, low levels of compliance earlier on led to more reforms to ensure that compliance percentages. increase. Ever since the introduction of new measures at the KRA, compliance levels have been rising. These points to the fact that compliance levels significantly influence tax system reforms. Low levels of compliance earlier on led to more reforms to ensure that compliance percentages role. Further, the reforms that were earlier on carried out in the tax system were meant to make more taxpayers comply. The problem was due to lack of stringent enforcement procedures that saw many escape the traps. With the new political reality, enforcement has been beefed up and this has seen KRA surpass even its revenue collection targets. Thus, enforcement plays a major role in tax reforms. The study recommends that for any meaningful tax reforms to take place in Kenya, the role of administrative factors such as enforcement, compliance and tax complexity should be considered. The administrative factors are an important ingredient III realizing the objectives of tax reforms.