Abstract:
Domestic excise tax performance has fluctuated over the years, with varying growth rates
and inconsistencies in reported figures. In FY 2020/21, there was a 12.0% growth
following a 6.4% decline the previous year, largely attributed to the reopening of the
economy and increased sales in bars and restaurants. However, by FY 2022/23, growth
slowed to just 2.8%. The performance discrepancies underscore the need for more
consistent reporting and clear attributions in tracking domestic excise revenue. One of the
key challenges in Kenya is the persistent issue of tax compliance among water
manufacturing companies, marked by underreporting and fraudulent reporting, which
significantly affects excise tax collection and exacerbates revenue gaps. This study
explored effects of revenue collection strategies on excise tax compliance in Nakuru,
Kenya's water manufacturing sector. It focused on the effects of excise stamps, audits and
digital tracking systems on excise tax compliance. Using an explanatory design, the
research was based on deterrence theory, agent theory, and the Technology Acceptance
Model (TAM). A sample of 194 participants was selected using Yumane’s (1967)
technique. Data was analyzed via multiple linear regressions, with findings presented in
charts, tables, and graphs. The study's findings revealed that Excise stamps had a beta
value of 0.391, indicating a positive and substantial effect on excise tax compliance; audit
and inspection strategies had a strong influence, with a beta value of 0.447 and Digital
tracking and tracing systems with a beta value of 0.300 also contributing positively.
Overall, the model accounted for 50.7% (R² = 0.507) of the variation in excise tax
compliance, suggesting that these factors play a significant role, although other variables
not included in the model account for the remaining 49.3%. The study recommends
improving excise tax compliance and reducing evasion, the government should enhance
excise stamp design and security features while launching a public education campaign to
emphasize their societal benefits. Audit and inspection strategies should be strengthened
through more frequent audits, a risk-based approach, and the use of digital tools like AI
to optimize resource allocation and enhance transparency. Additionally, expanding the
use of digital tracking systems, investing in infrastructure, incentivizing businesses to
adopt these technologies, and providing training and public awareness campaigns will
ensure accurate reporting and compliance across sectors
