Browsing by Author "Muhanji, Alex Olando"

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    Effect of Taxpayer Education, Penalty and Tax Rates on Vat Compliance amongst Micro and Small Enterprises in Nairobi City County Kenya, 2020
    (Kenyatta University, 2025-07) Muhanji, Alex Olando
    In many countries, tax is an essential aspect and revenue collected from these taxes aids any nation in provision of general public and social goods to the citizens and holistic growth of its economy. VAT is a major indirect tax head in Kenya contributing much revenue to the total collections. Notably, Kenya has not been able to collect substantial value added taxes as expected despite many taxpayers who have registered for the obligation because of the high informality in the micro and small enterprises sector. The incidence of not complying with tax rules remains a grim concern to the country. Non-compliance undermines both voluntary efforts and resource mobilization in an economy. The medium and small enterprises, in particular, can generate a lot of value added tax collections for the state; however, it has not been the scenario due to widespread non-compliance. This problem of non-compliance led to the Kenya Revenue Authority to design and implement programme of education of the medium and small enterprises. However, the Kenya Revenue Authority also uses tax rates, fines and penalties also influence tax compliance. Although the successes of these initiatives are imperative for revenue mobilisation in the country, their effects on tax compliance are yet to be looked at. Given the above justification, this study aims at looking into how payer education has affected vat compliance by medium and small and (or) micro businesses operating in Kenya by examining medium and small enterprises in Nairobi Central Tax. The key objectives are to determine how taxation knowledge and tax awareness affect value added tax compliance among mid-sized and small businesses in Nairobi Business Centre, to find out effect of the tax fines, penalties on value added tax compliance amongst the medium, small enterprises in the specified area of research, and to determine effect of change of tax rates on medium and small enterprises value added taxes compliance in Nairobi Central Business. The research will be cross section involving collected data from the chosen sample of medium and small enterprises in Nairobi Central Business. Regression analysis will be used to estimate equations. Relevant diagnostic tests such heteroscedasticity, autocorrelation, multi-collinearity and normality of the error terms will be undertaken. From the regression analysis, Tax education coefficient was positive and of statistical significance at five percent confidence level in explaining the variation tax compliance. The results on imposition of penalties and fines implied that it does not increase the likelihood of compliance while having the changes in tax rates increases the likelihood of compliance and VAT collection but subject to laffer-curve effect.