Abstract:
Tax avoidance is carried out to make financial institutions to appear to be financially stronger. This practice is considered to be an ethical behavior. Carrying out research on tax avoidance practices among financial institutions in Narok county will help the players in accounting profession to empirically understand the motivations behind practice of tax avoidance in Kenya, (Mbaire;2012) .This research singled out tax avoidance as one of major factors influencing the income of the financial institutions.The main objective of this study was to examine the effects of tax avoidance practices among the financial institutions in Narok County. The main theory found to relate with this research is the Prospect theory which relate tax payment practices with the tax payers’ ability to pay: that is rates of taxes should be based on the tax payers’ capability. The research targeted the financial institutions in Narok County and a sample populations of 52 employees of various financial institutions were used. Only 36 0f the respondent to the questionnaires issued. The researcher randomly collected data among various financial institutions in Narok County and analyzed from thirty six employees working in various financial institutions in Narok. The researcher found out that tax avoidance is highly practiced in financial institutions. The reasons for tax avoidance practice were found to be, that it increases the incomes of the financial institutions, it reduces tax burden, increased in profits as a result of tax avoidance practice can be used to perform social corporate responsibilities like promotion of education use of fair rates of taxes, provision of tax incentives, education programs on the importance of tax payment to the government. The data was analyzed by use of descriptive statistics.Financially, the researcher recommended that more education programs on the importance of payment of taxes to the government should be made so as to curb the problem of tax avoidance practices. In conclusion the research ascertain that tax avoidance was the major factor that reduces the government revenues and the area of further research could include studies in other countries on tax avoidance practices and in other institutions other than financial institutions.
