Effect of technology adoption on tax compliance among small and medium enterprises in Eldoret Central Business Unit (CBD)

Abstract

Tax compliance entails taxpayers' decision to comply with tax laws and regulations by paying tax timely and accurately. Tax compliance is an integral component of fiscal policy and administration in any economy and taxation influences the operations of the National Government and the grass roots. It is the fuel of every government as it is the main instrument through which government funding is ensured. Technology involves enormous opportunities for regulatory authorities on tax compliance to enforce the noncompliance by the SME. The main objective of this study was to examine the effect of technology adoption on tax compliance among small and medium enterprises in Eldoret CBD, Kenya. This study was guided by the following specific objectives; To determine the effect of perceived ease of use of technology on tax compliance, to examine the effect of ICT user skills on tax compliance, to investigate the extent to which perceived usefulness of technology affect tax compliance, to determine the effect of electronic tax filing system cost on tax compliance and to determine the effect of ICT infrastructure on tax compliance by small and medium enterprises in Eldoret CBD. This study is anchored on the Technology Acceptance Model (TAM), Diffusion of Innovation (DOI) theory and Unified Theory of Acceptance and use of Technology. The study area was Eldoret CBD, Uasin Gishu County. This study adopted an explanatory research design. The study yielded quantitative research. The target population for this study comprised of 320 owners/managers from the 320 small and medium enterprises (SMEs) operating within Eldoret central business district in Uasin Gishu County. The sample size for this study was 178 SMEs. Primary data was collected using questionnaires. Data was analyzed using descriptive and inferential statistics. Descriptive statistics was analyzed through measures of central tendency such as mean and standard deviation while inferential statistics such as Pearson Correlation Coefficients and Multiple regression models were used. The regression analysis results indicated that perceived ease of use of technology (β1 = 0.222, P = 0.000 <0.05), perceived usefulness (β2= 0.156, P = 0.000 < 0.05) and ICT infrastructure β5 = 0.209, P=0.000 had a positive impact on tax compliance while ICT user skills and electronic tax filing system cost were not significant. The study concludes that a combination of technology adoption aspects including perceived ease of technology, perceived usefulness and ICT infrastructure are necessary for enhancing tax compliance in the SMEs, whereas ICT skills and electronic tax filing system cost do not influence tax compliance in the SMEs. The study recommends that adequate measures related to technology should be availed to the SMEs in Eldoret CBD and the country at large and also the need by the government to develop policies that guide on technology adoption in relation to tax compliance and related procedures.