Abstract:
Excise duty compliance level in Kenya has been a major government concern. The
Government through the Kenya Revenue Authority has implemented a number of
policy and administrative reforms. KRA has aimed at increasing efficiency and
boosting tax revenue collections. Excise duty has generally been limited to goods,
which are luxuries or a risk to health or morals. However, over the years, this has
become a key revenue earner contributing a sizable percentage of many countries
national budgets. There has been a concern on the compliance levels of excise duty.
Over the last five years, there has been a diminishing rate of increase year on year.
The revenue from excise duty as a percentage of Kenya’s GDP is way below that of
many Lower middle-income countries in Africa. The general objective of this study
was to examine operational and deterrence determinants of excise duty tax
compliance among water manufacturing companies in Nairobi County. The specific
objectives of the study was to find out the effect of the reconciliation of excise duty
stamps, automation of excise duty stamps, deterrence measures, and automated
product marking on excise duty compliance. The study was anchored on three
theories; the Allingham and Sandmo Theory, Technology Acceptance Theory (TAT),
and Benefits Theory of Taxation. The study employed explanatory research design.
The target population of the study was 185 registered water producers in Nairobi
County in Kenya. Primary data was used with closed ended questionnaires. The data
was analyzed using descriptive and inferential statistics to determine the association
between variables, with the measurement of variables based on 5-point Likert Scale.
The results indicated that reconciliation of excise duty stamps, automation of excise
duty stamps, deterrence measures, and automated product marking is significant with
an standardized beta coefficient of β1 = 0.225, p = 0.001; β2 = 0.273, p = 0.000; β3 =
0.317, p = 0.003; and β4= 0.260, p = 0.000. The study concluded that there was
significant effect of reconciliation of excise duty stamps, automation of excise duty
stamps, deterrence measures, and automated product marking on excise duty
compliance. The study recommends that that KRA and the government should put in
place policies and regulations that guide the overall growth of the economy and to
come up with relevant and informed policies that enhance excise duty compliance.
More importantly, the study recommends that KRA should put more efforts on
systems automation as opposed to the monthly manual excise duty reconciliation.
The study noted that future studies should be carried out to examine the effect of tax
incentives on excise tax compliance among mineral water producers as well as
including a moderating variable of compliance costs.
