Adoption of turnover tax in Kenya: a snapshot of small and medium enterprises in Gikomba market, Nairobi Kenya
Jagongo, A. O.
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Turnover tax was introduced in Kenya in 2007 to enhance revenue collection, improve tax administration and reduce compliance and collection costs. On turnover tax recruitment, the performance has on average been below 50% with 2,890 SMEs registering for turnover tax against a target of 6,928 between 2009 and 2010. Despite the benefits accrued from the use of turnover tax and the low adoption, very few studies have been done on the same. This leaves a wide knowledge gap which this study seeks to fill-in. This study sought to establish the factors affecting the adoption of turnover tax in Kenya. Specific objectives were to establish whether tax administration practices, turnover tax training and tax environment policy influence the adoption of turnover tax by SMEs in Gikomba Market in Nairobi, Kenya. The target population of the study was 1405 SMEs at Gikomba market. Stratified random sampling technique was used to identify the respondents. Results revealed that most Gikomba traders did not understand the administration and actually saw the tax computation as very tedious and complicated. Tax amount were not collected in a timely manner and that enforcement powers of the staff was applied injudiciously. The study concluded that Kenya .Revenue .Authority need to fully utilize the established channels to educate the traders on importance of proper accounting systems and tax compliance. Simplifying registration of businesses would enable majority of the small enterprise operators to comply with tax payment making it easy for adoption of turnover tax.