Determinants of tax compliance among commercial property owners in Dagoretti North, Nairobi County, Kenya

Abstract

v ABSTRACT Taxation on rental income by the Kenya Revenue Authority has been in existence since implementation of income tax act of 1973. However, majority of commercial property owners have not been complying with the Act due to lack of government mechanisms to identify and bring landlords into the tax net. The key aim of the study was to find out determinants of tax compliance among commercial property owners in Dagoretti North Nairobi County, Kenya. The specific objectives were to establish the effect of taxpayer education, system automation and enforcement measures on tax compliance among commercial property owners in Dagoretti North Nairobi County while Age and Gender were used as a Control variable. The choice of Dagoretti North, Nairobi was due to the high number of commercial properties. The study was anchored on the following theories: Ability to pay Theory, Theory of Technology Acceptance, fiscal exchange theory and Economic Deterrence Theory. The study adopted an explanatory research design. The target population was 4021 commercial property owners in Dagoretti North, Nairobi County. A sample size of 433 was drawn from this population using Yamane‟s formula. The study used primary data, collected through questionnaires administered through a drop and pick later method. The data collected was analyzed using both descriptive and inferential statistics. Multiple linear regression model was used to establish the strength of the relationship between independent and dependent. The study found that Tax payer education had a positive and significant effect on tax compliance among commercial property owners in Dagoretti North, Nairobi County β1 = .355 p = 0.002<0.05. The study also found that System automation had a positive and significant effect on tax compliance among commercial property owners in Dagoretti North, Nairobi County β2 = .614 p = 0.000<0.05. Further the study found that enforcement had a positive and significant effect on tax compliance among commercial property owners in Dagoretti North, Nairobi County β3 = .305 p = 0.000<0.05. The study finally found that Age and Gender had a positive and statistically significant control effect on the relationship between tax payer education, system automation, enforcement measures, and tax compliance among commercial property owners in Dagoretti North, Nairobi County. The study recommends that KRA and the government should adopt and implement policiespo that put more emphasis on ssystems automation.tax payer education and enforcement measures, in order to enhance tax compliance .It is recommended that academic institutions and research organizations such as KESRA should conduct further studies. It was recommended that further research should be conducted using other variables such as influence of compliance cost on rental income tax compliance.