dc.description.abstract |
Value-added tax (VAT) withholding tax is a significant instrument used in various tax
administrations to control revenue leakages that originate from taxpayers that charge
VAT on their services and supplies and then fail to remit it to revenue authorities. The
Kenya Revenue Authority (KRA) implemented VAT withholding in 2014 with the
expectation that it would positively impact VAT revenue collection and compliance.
The motivation of this study therefore arises from the knowledge that a number of
developing countries are considering implementing a withholding tax mechanism on
VAT revenue. The main objective of the study was to establish the impact of
withholding VAT on VAT revenue in Kenya. The specific objectives included: to
determine the effect of VAT withholding administration on VAT revenue collection in
Kenya, to establish the effect of VAT withholding reform on VAT revenue collection
in Kenya, to assess the effect of VAT withholding rates on VAT revenue collection in
Kenya. The study was anchored on the ability to pay theory, the sacrifice theory and
economic deterrence theory. The target population of the study was employees at KRA
in Nairobi County. The study targeted 60 KRA employees involved in administration,
collection and refund of VAT revenue. All the employees participated in the study;
hence it was a census. Primary data was collected using a structured questionnaire. The
study applied quantitative methods to analyse data. These included descriptive statistics
such as percentages, means and standard deviation. Further, inferential statistics
including correlation and regression analyses were conducted to determine the
relationship between the independent variables and the dependent variable. The
findings indicated that withholding VAT administration (β=0.347, p=.012),
withholding VAT reforms (β=0.284, p=.034), and withholding VAT rates (β=0.34,
p=0.017) had a positive and significant effect on VAT revenue. The study concluded
that withholding VAT had a significant influence on VAT revenue in Kenya. The study
recommended that the government through the necessary agencies such as KRA and
Treasury ministry should strengthen VAT policies relating to withholding VAT
administration, reforms and rates. The focus should be; Itax system, monitoring &
evaluation, and compliance audit, VAT exemptions, number of tax collectors, penalties,
audit skills, zero rated supplies, goods and services exemptions. Out of the limitations
of the study, areas of further research have been pointed out. For instance, a study on
the effect Withholding VAT system on the VAT refund/credit |
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