Internal factors affecting performance of the collection of local value added tax revenue in Nairobi
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Date
2014-08-08
Authors
Karanja, Margaret. N.
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Abstract
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.
Description
Department of Business Administration, 90p.2012, HJ 3043 .K3