Factors Affecting Rental Income Tax Compliance among Landlords in Kilifi Municipality

Abstract

An effective and efficient tax administration system is integral to any country's well being. There are many challenges that hamper the setting up of an efficient and effective tax system in Kenya. Despite the fact that there are many studies related to tax compliance for developed country, there is however paucity of study on tax compliance for developing countries especially for Kenya. The general objective of this study was to investigate factors affecting rental income tax compliance among landlords in Kilifi Municipality in Kenya. This study adopted a descriptive survey design. The target population of this study was all landlords in Kilifi municipality while the accessible population was those landlords residing within the municipality. Simple random sampling and convenience sampling was used to identify individual respondents. The study aimed to reach out to a sample of at least 400 respondents but only 163 responded and returned the questionnaires. Primary information was gathered by use of a structured questionnaire. Questionnaire responses were sorted, coded and input into the statistical package for social sciences (SPSS) for production of diagrams, tables, descriptive statistics and inferential statistics. Microsoft excel was also used to complement SPSS especially in production of diagrams and tables; The results revealed that landlords felt that they should not be taxed like other Kenyans because they were doing a housing duty which should be provided by the Government. This was further supported by landlords who strongly felt that rental income. tax rate was not equitable compared to other business taxes. They felt aggrieved by the tax arrangements and viewed the tax as a burden placed on them by the Government without adequate considerations and consultations. Majority of the respondents felt that payment of taxes was not commensurate of the benefits they get from Government. Also the landlords did not have a very healthy perception towards the revenue authority and the Government in regards to taxation matters and approach. Landlords felt that the Government was not providing them with the investment incentives which are given to other sectors while they were required to meet the same tax obligations. It recommended top the Government and KRA to employ strategies that would improve the perception and integrity of tax payers. The management of taxes should be devolved to very local levels in order for KRA to appreciate the difficulties landlords face when developing their properties in order to know the incentives required to enhance compliance. It is recommended that a further study be conducted to establish whether political regime has an influence of tax compliance while also a replica cross sectional study is also recommended to establish whether the same factors explain tax compliance across various counties in Kenya.