Determinants of excise duty compliance among cigarette Importers in Kenya

Abstract

Many economies around the world still have low rates of excise duty compliance, with revenue authorities falling short of their yearly objectives. This study's primary objective was to identify the factors that influence Kenyan cigarette importers' compliance with excise duties. The precise objectives were to ascertain the impact of taxpayer education, tax audits, automation of systems, and enforcement methods on Kenyan cigarette importers' compliance with excise duties. The ability to pay theory, the optimal taxation theory, the diffusion of innovations theory, social learning theory, and economic deterrence theory all served as guiding principles for the study. In order to gather primary data for the study, structured questionnaires were used in an explanatory research design. Twenty-one Kenyan importers of cigarettes were the target group. Four questionnaires were distributed to each of the 21 importers of cigarettes by the study. Thus, making a total of 84 respondents who included accounts manager, accounts officers, operations manager, operations officer. Since the study population was small, census was used, and therefore, no sampling was required. A questionnaire on a 5-point Likert scale was used to gather the data. The study used a questionnaire to gather primary data. Tables and charts were used to display descriptive statistics. Inferential statistics were analyzed using Pearson Correlation and multiple regressions. The study found that enforcement measures (β=0.278, P=000), system automation (β=0.165, P=010), tax audits (β=0.225, P=007), and taxpayer education (β=0.172, P=002), have a positive and significant effect on excise duty tax compliance. The study concluded that enforcement measures, system automation, tax audits, and taxpayer education contribute significantly to improved excise duty compliance among cigarette importers in Kenya. The study therefore recommends that the management of the Kenya Revenue Authority put up strategies that will lead to more enforcement measures, expanded automation and tax audits, and increased taxpayer education programs to increase compliance. The policy makers were also recommended to formulate the right policies that will lead to an increment in excise duty tax compliance. Further research can be conducted to examine other determinants such as those related to the demographic characteristics of respondents such as level of education, culture, gender and economic determinants such as the income and also introduction of taxpayer perception as a moderator.