Effect of digitalization effectiveness on turnover Tax Compliance among Textile Small and Medium size enterprises in Eastleigh, Nairobi County

Abstract

Taxes are an important way for both developed and developing economies to raise money for government projects that help them grow. The main purpose of this study was to determine the effect of digitalization effectiveness on turnover tax compliance among small and medium size enterprises in Eastleigh, Nairobi County. The specific objectives that guided the research were: to study the relationship between technological ease of use and turnover tax compliance; to establish the relationship between technology usefulness and turnover tax compliance and to examine the relationship between system security mechanism and turnover tax compliance among small and medium size textile enterprises. This study was grounded on Technology Acceptance Model and Unified theory of Acceptance and use of Technology. Explanatory research design was applied in this study. The target population was textile enterprises operating in Eastleigh. Stratified sampling technique was utilized since the population itself was stratified in nature. Yamane's (1973) formula was used to determine the sample size of 243 textile SMEs. Data was collected using questionnaires and analyzed descriptively. To establish the relationship between study variables correlations and regression analyses were carried out. The study showed that regression coefficient (β = .098, t (171) = 1.343, p>.05) for technological ease of use, implying that a single unit improvement in technological ease of use improves turnover tax compliance by 9.8%. However, this was found to be insignificant (P=0.181>0.05). On the other hand, regression coefficient for technology usefulness was (β = .311, t (171) = 0.002, p<.05); implying that technology usefulness accounts for 31.1% of the variance in turnover tax compliance. This was found to be significant and thus, affirms that technology usefulness have a significant relationship with turnover tax compliance among small and medium size textile enterprises in Eastleigh, (P=0.002<0.05). On system security mechanism, the regression coefficient showed (β = .129, t (171) = 0.151, p>.05), implying that a single unit system security mechanism improves turnover tax compliance by 12.9%. However, this was found to be insignificant (P=0.151>0.05).The study concludes that technology had removed the effort for users to become compliant and they were open to accept new technology that would enable them become compliant. This study recommends that KRA need to ensure that their digital systems are easy to use and useful to taxpayers. KRA also need to ensure that their online system is reliable, functional and effective. This may increase the efficiency and convenience of filing taxes which may lead to positive experience and attitude that would facilitate compliance.