| dc.description.abstract | Tax is an important stream of revenue for government’s development projects and therefore all
efforts must be made by governments to ensure that it is accurately and efficiently collected so as
to facilitate the government’s operations. In an effort to maximize collection of revenue and
efficiency in tax administration, key changes to tax policy evolving around ensuring equity,
further widening the tax base, promoting increased investment and in so doing, reducing the tax
compliance burden, have in the recent past been made by the Kenyan government. This study
sought to identify the factors that influence tax compliance in Kenya, specifically focusing on
SME’s operating within Nairobi’s Industrial Area. The researcher outlined a detailed literature
review and identified the variables for this research to be tax rate, availability of tax information,
tax compliance cost and attitude of SME’s. The research was a descriptive survey. Given the
large population of registered taxpayers in Nairobi, a sample size of 150 was picked as
representative, to be the focus of this study. To ensure that various diverse categories of
taxpayers and business entities were included in the survey, stratified sampling technique was
adopted. Data was collected using self administered questionnaires and an interview guide. The
collected data was consequently analyzed using Statistical Package for Social Scientist software
and the findings of the research presented using tables. The findings of the study revealed that
with regard to tax rate as a factor influencing SMEs compliance, the majority view that Kenya
has high tax rates with several different tax heads and this consequently hinders their level of
compliance. The lack of readily available information relating to tax matters accounted to a great
percent as a reason for non-compliance. The lack of information contributed to the inability of
the taxpayers to correctly calculate the taxes payable; another form of non-compliance. The
SMEs view that if more information would be availed to them in form of tax seminars and
literature, this would demystify the complex concept of tax and greatly motivate them to be
compliant. The findings of this study further revealed that 47% of the SMEs interviewed incur
more than Ksh.50, 000 monthly, as costs of tax compliance. Some of these costs include
bookkeeping, installation of software and internet costs, additional cost of hiring professional
staff such as auditors and tax experts, accounting for the largest proportion of these costs. With
regard to SMEs attitude as a factor affecting tax compliance, the respondents do agree and feel
that they do have access to public utilities which are made available by the taxes paid to the
government; hence they enjoy benefits of the taxes they pay. These organizations do value the
payment of taxes to the government to a great extent, which affects their level of tax compliance.
The findings of the study further revealed that the respondents do feel that their counterparts,
fellow SMEs, also value the payment of taxes to the government to some extent. However, the
taxpayers do feel and strongly agree that the taxation system in Kenya is in great need of
improvement. By gaining an understanding of these underlying factors, KRA and the
government will be able to make changes that will greatly improve taxpayers’ tax compliance
level, with the end result being increased government revenues, allowing the tax authority to give
quality service to taxpayers and the government as a whole providing more and improved
utilities to the public. | en_US |
