Factors affecting turnover tax compliance among smes in kenya. Acase study of smes in migori county

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 identify the factors that influence tax compliance in Kenya, specifically focusing on SME’s operating within Migori County. Migori, Ombo, Oruba Area. The study outlined a detailed literature review and identified the variables for this research to be availability of tax information, tax compliance cost and attitude of SME’s. The research was a descriptive survey. Given the population of 680 registered taxpayers in Migori, Oruba, Ombo area, a sample size of 68 was picked as representative, to be the focus of this study. Data was collected using self -administered questionnaires. The collected data was consequently analyzed using chi-square the findings of the research presented using tables. The findings of the study revealed that with regard to lack of readily available information relating to tax matters accounted to a great percent as a reason for non-compliance. The lack of information contributed to the inability of the taxpayers to correctly calculate the taxes payable; another form of non-compliance. The SMEs view that if more information would be availed to them in form of tax seminars and literature, this would demystify the complex concept of tax and greatly motivate them to be compliant. The findings of this study further revealed that 58.3% of the SMEs interviewed incur more than Ksh.50, 000 monthly, as costs of tax compliance. Some of these costs include bookkeeping, installation of software and internet costs, additional cost of hiring professional staff such as auditors and tax experts, accounting for the largest proportion of these costs. With regard to SMEs attitude as a factor affecting tax compliance, the respondents do agree and feel that they do have access to public utilities which are made available by the taxes paid to the government to some extent; hence they do not enjoy benefits of the taxes they pay. The findings of the study further revealed that the respondents feel that their attitude to tax affect compliance to a great extent However, the taxpayers do feel and strongly agree that the taxation system in Kenya is in great need of improvement. By gaining an understanding of these underlying factors, KRA and the government will be able to make changes that will greatly improve taxpayers’ tax compliance level, with the end result being increased government revenues, allowing the tax authority to give quality service to tax.