Abstract:
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ABSTRACT
Kenyan government through Kenyan revenue authority (KRA) has been
working effortlessly to improve turnover tax compliance as a result of an
increase in government projects and a global economic slump. However, despite
much intervention, according to KRA report compliance of turnover tax has
been low with shortfall of Ksh 14.6 billion Shillings in the period 2021-2022.
Therefore, the general objective of this study was to determine effect of
perceived tax fairness on turnover tax compliance: the role of ease of use of
electronic tax system among SMEs in Nairobi. The study specifically
determined; the effect of procedural tax fairness on turnover tax compliance,
effect of distributive tax fairness on turnover tax compliance, effect of
retributive tax fairness on turnover tax compliance and determine moderating
effect of perceived of ease of use of electronic tax system on the relationship
between perceived tax fairness and turnover tax compliance. The study was
informed by the equity theory and technology acceptance model. The study
employed explanatory research design. The target population were 4821
registered SMEs in Nairobi Central Business District, Kenya. Stratified and
random sampling techniques were employed to select 376 owners/managers
SMEs. Questionnaires were used to collect data. Validity and reliability of the
research instruments was tested using factor analysis and Cronbach alpha. Data
was analysed using means, standard deviation, Pearson correlation and multiple
regression analysis. The finding revealed that procedural tax fairness (β= 0.421,
p=.000<.05), distributive tax fairness (β= 0.154, p=.000<.05) and distributive
tax fairness (β = 0.439. p=.000<.05) positively influences the turnover tax
compliance among the SMEs in Nairobi. Further findings revealed that
perceived ease of use of the electronic tax system was found to have a
moderating effect on the relationship between procedural tax fairness and
turnover tax compliance (β= 0.45, p=.000<.05, R2Δ = 0.046) suggesting the
importance of user-friendly and accessible digital tax systems in facilitating
compliance. However, perceived ease of use of the electronic tax system did not
moderate the relationship between distributive tax fairness and turnover tax
compliance (β= 0.04, p>.05, R2Δ = 0.00) and retributive tax fairness and
turnover tax compliance (β= 0. 5, p=.>.05, R2Δ = 0.00). Therefore, the study
recommended for policymakers and the Kenya Revenue Authority to continue
providing fair and transparent tax procedures, while also ensuring that the
electronic tax system is easy to use and understand for SME owners. Also,
emphasis should be on improving the perceived fairness of the tax system,
ensuring that lower-income SMEs receive adequate support. Also, efforts
should be made to improve the perception of tax fairness among SMEs by
ensuring equitable distribution of tax burden