Internal factors affecting performance of the collection of local value added tax revenue in Nairobi
Karanja, Margaret. N.
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In Kenya, VAT collection faces various major challenges and issues which seem not to have been addressed by the various Tax and Administrative reforms that have been undertaken by the Revenue Agency for the last one decade. During this period, Domestic VAT revenue performance has mainly remained below 100%.1t is currently the worst performing Tax head with a revenue performance shortfall of about five billion in the first quarter of the financial year 2011/2012. It is argued that declining VAT productivity in Kenya could be caused by structural problems which tax reforms have failed to address and that the tax is yet to find its position in Kenya's tax system as the tax of the future. This study therefore sought to establish how the internal factors influence domestic VAT collection in Nairobi- Kenya. This study was a descriptive survey and was conducted in Nairobi's Domestic Taxes department offices. The target population was the 662 technical staff stationed in Domestic Taxes Department (DTD) - Nairobi, classified into top management, senior management, Middle management and Operative staff. A sample population of 67 respondents was obtained using stratified sampling method to get the respective number of respondents in each stratum. The respondents from each stratum were selected using simple random sampling. Data was collected using a semi structured questionnaire which was pre-tested for reliability and validity during a pilot test. Collected data was checked for errors of omission and commission. The data collected was classified, measured and analyzed using descriptive statistical techniques. Qualitative data was analyzed using content analysis. Software Package for Social Sciences (SPSS) Version 12.0 was used in data analysis. Sixty (60) out of the sample population of 67 responded. The study found out that majority of the revenue administration staff were university graduates. In additional all the staff had undergone induction, refresher, or desk training and job experience played a significant role in enhancing the collection of domestic VAT. DTD had moderate administrative policies which somehow facilitated the enhancement of domestic VAT collection in Nairobi- Kenya. However, the number of staff managing domestic VAT collection was not sufficient to ensure that VATwas effectively and efficiently collected. All factors of organizational structure were influential in enhancing VAT collection at DTD -Nairobi. Further, DTD did not have sufficient defaulter information and nor could the information be availed in time to ensure effective and efficient VAT enforcement, leading to low follow up of the VAT defaulters and subsequent low VAT performance. There was inefficiency in the provision of support services used for domestic VAT collection. The study recommended that DTD administration should review the administrative policies, increase the staff managing domestic VAT collection, improve the VAT defaulter information system, introduce staff development programmes and enhance provision of Support services especially the VAT management information system and transport of technical staff to the taxpayers' locations. Further research should be conducted to evaluate why DTD enforcement measures have failed to enhance domestic VAT collection performance and the influence of external factors on domestic VAT collection performance.