Moderating effect of taxpayer awareness on factors affecting customs duty performance in Nairobi County, Kenya

Abstract

Tax is an important stream of revenue for government’s development projects and therefore all efforts must be made by governments to ensure that it is accurately and efficiently collected so as to facilitate the government’s operations. This study sought to determine the moderating effect of taxpayer awareness on factors affecting customs duty performance Nairobi County, Kenya. The specific objectives were to establish the effect of Integrated Customs Management System (ICMS) transaction cost infrastructure on customs duty performance in Nairobi County, Kenya. while the moderating variable was Tax awareness. The theories supporting the study were: Economic Based Theory, Technological Determinism Theory and Comparative Theory of International Trade. The study employed explanatory research design. The target population of this study was 438 respondents comprising of customs head of departments, customs officers and customs agents Embakasi Inland Depot, Nairobi. with a sample size of 209, out of which 173 respondents correctly filled the questionnaires and submitted them accordingly. The primary data was collected by use of questionnaires with close ended questions. The data collected was analysed through regression analysis, descriptive and inferential statistics. A Multiple linear regression model was used to establish the strength of the relationship between independent and dependent study variables. The coefficient study showed that a unit change in ICMS increases customs duty performance significantly β =0.271 p-value =0.039144<0.05. The coefficient study also showed that a unit change in transaction costs decreases customs duty performance significantly β = -0.344 p-value =0.000<0.05. The coefficient study showed that a unit change in infrastructure increases customs duty performance significantly β =0.079 p-value =0.000<0.05. The study further found that taxpayer awareness improves customs duty performance significantly β =0.370 p-value =0.000<0.05. The study further found that taxpayer awareness moderates the relationship between Integrated Customs Management System on customs duty performance β =0.173 p-value =0.000<0.05. The study also shows that taxpayer awareness moderates the relationship between transaction cost on customs duty performance β = 0.294 p-value =0.000<0.05. Lastly the study found that that taxpayer awareness moderates the relationship between infrastructure on customs duty performance β = 0.039 p-value =0.000<0.05. Recommendations of study are that the KRA and the government of Kenya prioritize the continuous improvement of the Integrated Customs Management System (ICMS). Furthermore, the study recommends that the government of Kenya takes a strategic focus on reducing transaction costs. The study also recommends that the government of Kenya makes Investments in infrastructure as robust transportation networks, ports, and customs facilities are essential for efficient customs operations. The study also recommends that the KRA undertakes comprehensive taxpayer education and engagement initiatives. Future research should investigate other factors that could affect customs duty performance, such as political stability, regulatory frameworks, and international trade agreements. Studies could also examine the role of digital transformation and artificial intelligence in further enhancing customs efficiency.