Relationship between Online Tax System and Tax Compliance among Medium Sized Enterprises in Kericho County, Kenya

Abstract

Major revenue administration reforms have been and are being initiated by revenue authorities around the world in an attempt to strengthen revenue administration, especially for Medium Sized Enterprises (MSEs). MSEs pose challenges for tax administration due to their large numbers and the informal nature of their businesses. The worst part is that the opportunities for tax evasion are high. A key feature of revenue administration reforms among others includes increased use of information and communication technologies by the revenue authorities. This study focuses on establishing whether tax compliance among medium-sized enterprises in Kericho County, Kenya, is associated with the online tax system, as the general objective. This research was built with four specific objectives which were to establish if registration for tax online and tax compliance among medium-sized enterprises in Kericho County Kenya are related, to ascertain if filing of tax online and tax compliance among medium-sized enterprises in Kericho County Kenya are related, to determine whether payment of tax online and tax compliance among medium-sized enterprises in Kericho County Kenya are related and to examine if the link between online tax system stability and tax compliance exist. This research adopted a correlational design. The target population was 102 registered MSEs located in Kericho County. Census survey was adopted while structured questionnaire was used to collect primary data. Validity and reliability of the data instrument was ascertained through pretesting. Descriptive statistics such as mean and standard deviation were used to summarize data while inferential statistics such as correlation coefficient and regression analysis were used to test noncausal and causal relationships respectively. Findings were presented using tables, graphs and discussions. SPSS software aided in data analysis. The study findings indicated that online tax registration, online tax filing and online tax payment had a positive and significant influence on tax compliance among MSEs. Online tax system stability had a negative and statistically significant influence on tax compliance among MSEs. Kenya. Conclusions can be made that online tax filing of VAT, individual income tax and rental income tax has significantly influenced tax compliance by MSEs. It can be concluded that MSEs operators’ embracement of online payment of taxes will lead to increased compliance. This method is convenient as there is no need to travel to banks. Recommendations are made that KRA agency should encourage those taxpayers who have registered for tax obligations to file returns online in due dates so as to minimize cases where taxpayers go beyond due dates without having filed their returns. It is also recommended that KRA agency needs to enlighten the taxpayers on the advantages of online tax payments so that the taxpayers get to know how important it is for one to embrace online tax payment to enable them avoid unnecessary penalties and interests.