Taxpayers Knowledge and Value Added Tax Compliance Among Micro and Small Enterprises in Embu County, Kenya
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Date
2019-06
Authors
Masaku, Patrick N.
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Despite efforts of the government to maximize on revenue collection through value added
taxes, it is indicated in literature that little has been achieved due to non-compliance to
value added tax regulation. Inability of tax institutions to meet revenue targets annually is
attributed and non-committal of micro and small scale traders to comply to value added tax
regulations are issue of concern. This study aimed at establishing the influence of
taxpayers΄ knowledge and value added tax compliance among Micro and Small
Enterprises in Embu county, Kenya. The specific objectives of the study were to establish
the effect of taxpayers’ education, taxpayers’ awareness, tax system structure and
taxpayers’ regulations on value added tax compliance among micro and small enterprise in
Embu County, Kenya. Theories adopted to inform this study included theory of planned
action, economic deterrent theory and rational choice theory. The study adopted crosssectional
research design since it facilitates discovery of new knowledge thus prediction
and control of the problem. The target population of the study was 557 micro and small
enterprises as per the records of Ministry of Trade in Embu County. Stratified sampling
technique was used to select the sample size of the population. To arrive at the ideal
sample size of 233, Israel scientific formula was adopted. Unit of analysis was registered
micro and small enterprises while unit of observation was owners of registered micro and
small enterprises in Embu County. The primary data was collected using a structured
questionnaire consisting of close and open-ended questions. In addition, secondary data
was collected using content analysis method where key themes of the published content
were reviewed to make deductive arguments on the findings of the study. The analysis of
data was done using Statistical Packages for Social Sciences (SPSS Version 24).
Descriptive statistics such as mean scores, standard deviation, frequency table and
percentages were used to analyze data. Further, inferential statistics such as coefficient of
determination (r2) was used to analyze data at 95% confidence level and 5% significance
level. The analyzed data was presented in tables and figures. The findings revealed that
there exists a positive significant relationship between taxpayers’ education (r = .616, p <
0.023), taxpayers’ awareness (r = .642, p < 0.011), tax system structure (r = .581, p <
0.020) and taxpayers’ regulations (r = .481, p < 0.000) on VAT compliance among micro
and small enterprises in Embu County, Kenya. The study concludes that despite that fact
that there exists a positive relationship between taxpayers’ knowledge and value added
tax compliance, numerous challenges were experienced such as lack of awareness,
complexity of technology and lack of willingness from taxpayers to submit value added
tax on time. This study recommends that Kenya Revenue Authority should partner with
other agencies like information and communication technology firms, County
Governments and law reinforcement agencies to promote the spirit of value added tax
compliance among small scale traders in Kenya, thus sustainable social economic
developments.
Description
A Research Project Submitted to The School of Business in Partial Fulfillment of The Requirements for The Award of the Degree of Masters of Business Administration (Finance
Option) Of Kenyatta University June, 2019