Tax Attributes and Tax Compliance of Independent Oil Marketing Firms in Nairobi City County, Kenya
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Date
2025-03
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Kenyatta University
Abstract
The petroleum industry in Kenya is characterized by intense competition, with independent oil marketing firms playing a significant role in the distribution and retail of petroleum products. However, these firms face numerous challenges in complying with tax regulations, which affects both their operations and government revenue. This study sought to establish the effect of tax attributes on tax compliance among independent oil marketing firms in Nairobi City County, Kenya. Specifically, the study examined the influence of tax rates, tax awareness, taxpayers' attitudes, and deterrence measures on tax compliance. The study was guided by three theoretical frameworks: the Economic Deterrence Theory, the Ability-to-Pay Theory, and the Fiscal Exchange Theory. A census design was employed, targeting all 52 independent oil marketing firms in Nairobi City County. Data was collected using semi-structured questionnaires administered to managing directors, finance managers, and operations managers. Secondary data was obtained from published financial records and Kenya Revenue Authority (KRA) reports. Data analysis was conducted using descriptive and inferential statistics, including regression analysis. The findings revealed that tax rates, tax awareness, taxpayers' attitudes, and deterrence measures significantly influence tax compliance among independent oil marketing firms. Specifically, higher tax rates were found to reduce compliance, while increased tax awareness and positive taxpayers' attitudes enhanced compliance. Deterrence measures, such as penalties and audits, were also found to positively impact compliance, though their effect was less pronounced compared to tax awareness. The study concludes that tax compliance among independent oil marketing firms is a multifaceted issue influenced by both economic and behavioral factors. Based on the findings, the study recommends that the government should consider reducing tax rates to reflect the economic realities faced by independent oil marketing firms. Additionally, tax authorities should enhance taxpayer education and awareness programs to improve understanding of tax obligations. The study also suggests that the Kenya Revenue Authority (KRA) should adopt a more facilitative approach to tax enforcement, focusing on building trust and cooperation with taxpayers rather than relying solely on punitive measures. Finally, independent oil marketing firms should be encouraged to form associations to advocate for favorable tax policies and share best practices on compliance. This study contributes to the existing body of knowledge by providing insights into the specific challenges faced by independent oil marketing firms in complying with tax regulations. The findings have practical implications for policymakers, tax authorities, and industry stakeholders in designing effective strategies to enhance tax compliance in the petroleum sector.
Description
A Research Project Submitted In Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration (Finance Option), School of Business, Economics and Tourism, Kenyatta University, March 2025.
Supervisor
Joseph Theuri