Factors affecting Tax debt collection in Kenya Revenue Authority

Abstract

There is growing concern about the Kenya Revenue Agency's ability to manage the tax debt. This is indicated by the high level of tax arrears that are currently owed to these institutions and the many companies that have collapsed with so many taxes owed. This shows that tax administration still needs to be improved to deal with the ever-increasing tax arrears. Therefore, this study aimed to determine the factors that influence the collection of tax obligations by the Kenya Tax Authorities. Its specific objectives are to determine the impact of taxpayer data quality, preventive measures, monitoring of taxpayer compliance, and access to information on tax debt collection in Kenya's Inland Revenue. The theories that underlie this research are prevention theory, agency theory and moral hazard theory. This study uses an explanatory research design and the target group is 371 debt handlers from corporate taxpayer accounts. All respondents are counted. Primary data was collected through giving questionnaires. Descriptive statistics including percentages, averages and standard deviations are used. Pearson's correlation analysis was performed to establish the relationship between the research variables. Multiple linear regression is used to test the effect of the independent variables on the dependent variable. Regression of coefficients showed that payer data quality (β=0.253, p=0.000), deterrence measures (β=0.306, p=0.000), taxpayer compliance monitoring (β=0.345, p=0.000), and information access (β=0.138, p=0.001) had a positive and significant effect on tax debt collection. The study concluded that validation of taxpayer’s data during registration enhances tax debt collection. The study concluded that deterrence measures had a positive and also significant relationship on tax debt collection. Further, conducting compliance checks on tax payers by KRA has helped in reducing default rate. Also, raising of audit assessments on tax payers reduces tax debt. The study came to the conclusion that taxpayers' ability to access tax information is a critical factor in their willingness to pay taxes, and that it is impossible to imagine effective turnover tax collection in the absence of adequate taxpayer information. KRA management should provide accurate information to the tax payers; should facilitate the validation of data collected from the tax payers; should use deterrent measures on defaulters. The government should allow KRA managers to deactivate pins of the tax defaulters. The KRA management should ensure easy access of tax information to the tax payers. The study also suggests that in order to increase tax collection, KRA management should make sure that tax payers have access to third-party information. The study findings make significant contribution to theory, policy, and practice in the field of tax administration. Since the R square was not 100%, it means that other additional factors could enhance the model for tax debt collection in Kenya Revenue Authority. Future studies could therefore focus on other factors that affect tax debt collection in Kenya Revenue Authority such as use of technology, and tax knowledge.