Kiman, Samuel Karimi2024-09-102024-09-102024-04https://ir-library.ku.ac.ke/handle/123456789/28759A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration in Finance of Kenyatta University, April 2024. Supervisor Fredrick WaruiThe purpose of this project was to study the factors affecting tax morale and compliance behaviour, among small and medium enterprises in Nairobi City County, Kenya. The study objectives included investigating the impact of automation of tax filing process on tax compliance, examining how taxpayers’ perceptions on tax laws affects tax compliance, and establishing the effect of tax penalties on tax compliance among small and medium enterprises in Nairobi City County. The objectives sought to provide a guide towards examining high cases of tax non-compliance among small and medium enterprises despite the eligibility to pay taxes. The researcher used models of taxpayers’ behavior, including economic deterrence, fiscal exchange, and the comparative treatment theory that explains the inclination of decision to comply with taxes remittance. The researcher employed the survey research design. Primary data through structured questionnaire was obtained from the selected small and medium enterprises offices where interviews were conducted on different representatives of the enterprises. The data was regressed using Statistical Package for the Social Sciences version 26. The findings were used to show the relationship between tax morale factors and the accrued effects on tax compliance among small and medium enterprises. The scope of the study included a target population of 114 employees and a sample of 89 respondents from 3 small and medium enterprises. The researcher also paid attention to all ethical guidelines to ensure integrity during the research study including seeking informed consent for interviews, providing authentic data, maintaining anonymity, and using the data for academic use only. The research results demonstrate a notable correlation between the automation of tax procedures and adherence to tax regulations. Additionally, there is a substantial connection between individuals' perceptions of tax policies and laws and their compliance with tax regulations. Moreover, a notable association is present between the implementation of tax penalties and adherence to tax obligations. Therefore, the study concludes that automation of the tax filing process can be used to simplify tax administration, reduce related tax reporting costs, improve the relationship between Kenya Revenue Authority and the SMEs, help in filing the returns online irrespective of geographical location, and overall increase tax compliance. The research also determines that tax policies and laws influenced by patriotism play a role in shaping the outcome, perception of the fair and equitable implementation of tax laws, perceived social pressure on payment of taxes, governments method of tax law enforcement, and continuous civic education and sensitization campaigns on the role of tax laws and taxes by Kenya Revenue Authority increases tax compliance. The research ultimately suggests that consistent enforcement of tax penalties and the possibility of offering alternatives and equitable penalties influence taxpayers' behavior and enhance adherence to tax regulations. Taxpayers' knowledge of tax penalties and application methods and the likelihood of providing alternatives and fair tax fines control taxpayers' attitudes and increase tax compliance. The study makes the following recommendations; Kenya Revenue Authority automate the tax filing process to simplify tax administration, reduce related tax reporting costs, ensure accessibility of the service to all, and strengthen the systems to minimize delays and lengthy processes. Tax policies and laws should be subjective to patriotism, implementation and enforcement of tax laws should be fair and equitable, and Kenya Revenue Authority should continuously provide civic education and sensitization campaigns on the role of tax laws. The study also recommends curbing corruption and impunity against set tax laws to improve tax compliance levels of small and medium enterprises. The study recommends that Kenya Revenue Authority ensure regular application of tax penalties and provide taxpayers with alternatives and fair tax penalties to control taxpayers' attitudes and increase tax compliance. It also recommends that Kenya Revenue Authority sensitize taxpayers on tax penalties and application methods.enThesis