Shadow Economy Practices Effects on Economic Security in Nairobi City County, Kenya

Loading...
Thumbnail Image
Date
2023-10
Authors
Chepkosgei, Stellah
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The economic security of any country relies heavily on the minimal existence of shadow economy practices which affects revenues collected to sustain a country’s development and other government expenditures. Economic security plays a crucial role in the development of any economy as it ensures the consolidation of the required resources. However, the shadow economy is viewed as a major threat to economic security in both developed and developing nations. In order to optimize economic security amidst shadow economy practices there is need to explore its effect in Nairobi City County . It is against this backdrop that this study aimed at determines the effects of shadow economy practices on economic security in Nairobi City County. To do this, the study addressed three aspects namely; extent of shadow economy practices, effects of shadow economy practices, and strategies used to curtail shadow economy practices to enhance economic security. The theories which anchored the study were the Multiple Indicator Multiple Cause (MIMIC) Model and the Resource-Based View Model. The research design used for the study was the cross-sectional design which sought to use survey data to test characteristics of different phenomena and draw valid conclusions. The study targeted 110 respondents from informal businesses from Buruburu, Kariobangi South, and Roysambu with a sample size of 290 picked through random sampling technique. These regions have a high concentration of informal businesses which ultimately contribute to the underground economy and thus a threat to economic security. And for the case of validity report, the study engaged KRA officials using purposive sampling method. The study used questionnaires whose validity was ascertained through use of experts’ opinion and that of the supervisor, with reliability test being ascertained through use of Cronbach the data was collected using questionnaires, which were coded and analysed using SPSS. With a response rate of 77% and Cronbach’s Alpha of 0.65, the data employed in the study was deemed fit and reliable to conduct the analysis. The regression model indicated that shadow economy practices significantly affect economic security. From the findings, a unit increase in shadow economy practices influence the economic security significantly based on the p value of 0.046. The findings also suggest that economic security decline as shadow economy practices increases. The findings showed that shadow economy practices have a negative and significant effect on economic security. The findings indicate that the p value was 0.000. From the findings, a unit change in strategies used reduces the economic security by 0.174 times. The effect of these strategies on economic security is significant since the p value is 0.026. The study recommends that the government should educate the public on the importance of paying taxes, how to pay taxes so as to enhance compliance levels. The taxation systems should be designed in simple ways that minimise complexity and smoothen the registration and verification of taxpayers, the government should encourage businesses to formalise their operations by reducing the regulations, high taxes and offering incentives such as low-rate loans to official businesses. This will help reduce the number of businesses operating in shadow economy. Further research should be done in establishing new ways to help the government trace businesses operating in shadow economy.
Description
A Research Project Submitted to the School of Law, Arts and Social Sciences in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Security Management and Police Studies, Kenyatta University, October, 2023
Keywords
Shadow Economy Practices, Economic Security, Nairobi City County, Kenya
Citation