Influence of Information Communication Technology Adoption on Tax compliance among small and medium Manufacturing enterprises in Nairobi, Kenya

Abstract

Globally taxes account for significant part of governments’ revenue whereby up to 80% of the total revenue and over 50% of total revenue at least in each country even though important, under performance still affects many nations. The study aimed at investigating the influence of information communication technology adoption on tax compliance among small and medium taxpayers in Nairobi County. The specific objectives of the study were to establish the influence of ITax system influence on tax compliance, the influence of online tax filing knowledge on tax compliance and the influence of internet accessibility on tax compliance small and medium taxpayers in Nairobi County. The study was anchored on fiscal exchange theory, technology acceptance model (TAM) theory and the theory of planned behavior (TPB). The study adopted explanatory research design methods to collect, analyze data and present the study findings. The population of the study included 450 small and medium taxpayers where a sample size of 205 participants was drawn. Data was collected using a 5-point Likert scale with closed ended questions. Descriptive data was presented in tables while the inferential statistics was analyzed using regression and correlation analysis. Multiple regression analysis established a positive significant linear relationship between iTax systems and tax compliance among small and medium taxpayers in Nairobi County with evidence of p=0.000, ρ<0.05; with beta 0.289. Still, there was a positive significant linear relationship between online tax filing knowledge and tax compliance with evidence of p=0.000, ρ<0.05 with beta 0.430, and similarly a positive significant linear relationship between internet accessibility and tax compliance with evidence of p=0.049, ρ ≤ 0.05 with beta 0.214. The study revealed that ITax systems, online tax filing knowledge and internet accessibility had a positive relationship with tax compliance up to 89.8% or (R= 0.898). In addition, the results revealed that ITax systems, online tax filing knowledge and internet accessibility caused a variation of 81% or (R2=0.807 and adjusted R2 =0.803) on tax compliance. This implied that the remaining only 9% of the change was caused by other factors not included in the model. These other factors could be taxpayers perception on technology adoption, perception about the government tax expenditure, and other behavioral factors such as fear of the unknown in the use and adoption of technology. The regression equation showed that a constant change of 0.404, a unit change in ITax systems causes an increase of 0.275 in tax compliance while a unit change in online tax filing knowledge causes an increase of 0.377 in tax compliance. A unit change in internet accessibility caused an increase of 0.178 in tax compliance. The study concluded that iTax systems, online tax filing knowledge and internet accessibility played a significant role in tax compliance among small and medium taxpayers in Nairobi, Kenya. The study recommended that more efforts should be done on improving the interaction of the ITax systems with the taxpayers to achieve higher tax compliance effectively and efficiently. Further studies should be done to a larger population in other counties in Kenya for comparative purposes.