Effect of taxpayer education on value added tax compliance among small and medium entreprises in Ekerenyo, Nyamira County,Kenya.

Abstract

Tax Compliance concerns are as old as taxes themselves and will remain an area of discovery as long as taxes exist. Compliance refers to fulfilling all tax obligations as required by the tax laws. There has been no charging of taxes proportionately among small and medium enterprises (SMEs) internationally. High compliance costs, inadequate understanding, high tax rates and tax penalties are some of the variables that can lead to tax evasion and tax fraud. KRA has not been able to meet it’s set revenue target set by the National treasury. This trend clearly shows that there is a need for the government and the tax authority to review its efforts to foster compliance among the taxpayers to be able to meet its revenue targets. The key aim of the current study is to investigate the effect of taxpayer education on tax compliance among Small and Medium Enterprises in Ekerenyo, Nyamira County . The specific objectives were to evaluate effect of Face-to-Face Taxpayer Education, electronic tax education, Taxpayer sensitization and print media taxpayer education on value added tax compliance. The study is anchored on the theory of the fishers Model, economic deterrence theory, theory of reasoned action and social influence theory. The study adopted explanatory research design. The target population for this study consisted of all 326 licensed SMEs operating along Ekerenyo, Nyamira County.” A sample size of 180 was drawn from this population using Yamane’s formula. The study used primary data, collected through questionnaires administered through drop and pick later method. The data collected was analyzed using both descriptive and inferential statistics. A Multiple linear regression model was used to establish the strength of the relationship between independent and dependent study variables. The results indicated that Face-to-Face Taxpayer Education, electronic tax education, Taxpayer sensitization and print media taxpayer education is significant with an unstandardized beta coefficient = 0.280, p = 0.000; = 0.387, p = 0.000; = 0.225, p = 0.000; and = 0.295, p = 0.001. The study concluded that there was significant effect of Face-to-Face Taxpayer Education, electronic tax education, Taxpayer sensitization and print media taxpayer education on value added tax compliance. The study recommends that social and religious institutions be engaged in taxpayer education to improve the consumption of the printed materials for knowledge gain and tax compliance. Therefore, Future studies may be conducted on other subsets of enterprises forming sectors of the economy to form basis of comparison in Value Added Tax performance.