Determinants of capital gains tax performance among property owners in Nakuru City, Kenya

Abstract

Tax compliance remains to be a very crucial subject to researchers in many parts of the world across the globe. Despite the increasing need to raise the level of revenue collection, developing countries still face the challenges of low tax compliance. Capital gains taxes for practical and political reasons are perpetually riddled with exemptions and exceptions making them complicated to administer and to comply with. The big complication is determining the true capital gain net of inflation after netting out the purchase price and the cost of maintenance and investment in the asset over the years. The main objective of this study was to establish the determinants of Capital Gains Tax performance among property owners in Nakuru City, Kenya. The specific objectives were to determine the effect of taxpayers‟ sensitization, systems automation and taxpayers‟ perception on capital gains tax performance. This study was built on the benefit theory of taxation, universal theory of acceptance and use of technology and social influence theory. The study adopted explanatory research design. The target population was 6,231 property owners with movable and immovable properties in Nakuru City where a sample of 376 property owners was drawn. Primary data collection was employed in the study using structured questionnaires. The study used descriptive statistics and multiple linear regression analysis to establish the effect of the determinants of capital gains tax performance. The study findings showed that taxpayers‟ sensitization, systems automation and taxpayers‟ perception had a statistically positive significant effect on capital gains tax performance with evidence of beta values of: taxpayers‟ sensitization (β1=0.357, p=0.000<0.05),systems automation (β2=0.261, p=0.003<0.05) and taxpayers‟ perception (β3=0.285, p=0.001<0.05).The study results concluded that taxpayers‟ sensitization, systems automation and taxpayers‟ perception had significant influence on capital gains tax performance. Based on the findings, the study recommends that KRA should pay more attention on taxpayers‟ sensitization that contributes to online payment process being efficient in payment of taxes. The study therefore suggests that future research should be conducted to investigate effect of other variables such as cost and tax knowledge on Capital Gains Tax performance.