Determinants of Adoption of Online Tax Services by Taxpayers in Kisumu City of Kenya

ABSTRACT 

Developing countries are faced with the need for more government revenue due to population pressure, growing fiscal deficit, unsustainable national debt coupled with challenges of globalization, HIV/AIDS and increasing poverty levels among other reasons. In order to deal with these challenges, revenue collection agencies must come up with the most effective tax collection methods that are convenient and efficient to the taxpayers. To achieve this, Kenya Revenue Authority embarked on tax modernization programme that encompassed automation of processes and development of a professional workforce in order to meet taxpayers’ expectations as well as increase revenue collected for the government. As part of the automation of processes, Kenya Revenue Authority rolled out online tax services that are available to all taxpayers on the internet. This study aimed at establishing determinants of adopting the online tax services by taxpayers in Kisumu city of Kenya by testing a modified Technology Acceptance Model (TAM) adopted from Technology Acceptance Model (Davis, 1989). This study extended TAM by concentrating on perceived ease of use, perceived usefulness, attitude and behavioral intentions of taxpayers towards use online tax services. By use of questionnaires, a sample of 50 taxpayers from Kisumu were surveyed to establish why and how they are adopting the online tax services. The data obtained was analyzed using descriptive statistics and then compared with the factors proposed by technology acceptance model to see ifthe adoption follows the modified Technology Acceptance Model. It was established that perceived ease of use of online tax services, perceived usefulness and attitude towards the online tax services and their influence on behavioral intentions to use online tax services are the determinants of adopting online tax services by taxpayers in Kisumu city of Kenya.

TABLE OF CONTENTS

DECLARATION

APPROVAL BY THE SUPERVISOR iii

ACKNOWLEDGEMENT iv

ABSTRACT v

LIST OF ABBREVIATIONS vi

DEFINATION OF TERMS vii

LIST OF FIGURES

LIST OF TABLES ix

CHAPTER ONE

INTRODUCTION

1.1.1 Background to the Study 1

1.1.2 What Taxes are and their Purpose 1

1.1.3 History of Taxation 1

1.1.4 Tax Reforms in Kenya 3

1.1.5 Information technology and online services 4

1.1.6 Statement ofthe Problem 6

1.1.7 Objectives of the Study 7

1.1.8 Research Questions 7

1.1.9 Scope of the Study 7

1.1.10 Significance ofthe Study 8

1.2 Conceptual Framework 8

CHAPTER TWO

REVIEW OF RELEVANT LITRETURE

2.1 Introduction 10

2.2 Tax Reforms in Kenya 10

2.3 Theoretical Framework 12

2.3.1 Theory of Reasoned Action (TRA) 14

2.3.2 Theory of Planned Behavior (TPB) 16

2.3.3 Unified Theory of Acceptance and Use of Technology (UTAUT) 17

2.3.4 Task-Technology Fit (TTF) 20

2.3.5 Diffusion of Innovations Theory 22

2.3.6 Cognitive Fit Theory (CFT) 24

2.3.7 Technology Acceptance Model (TAM) 26

2.4 Summary 28

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Design 30

3.2 Target Population and Sampling 30

3.2~1 Sampling Procedure 31

3.3 Methods of Data Collection 31

3.4 Validity and Reliability 31

3.5 Data Collection Procedures 32

3.6 Data Analysis 32

3.7 Limitations 32

CHAPTER FOUR

DATA ANALYSTS AND INTERPRETATION

4.0. Introduction 33

4.1. Response Rate 33

4.2. Frequency of Use of Online Tax Services 34

4.3 Attitude towards Using Online Tax services 35

4.3.1 Perception of the Online Tax services as a Good Idea 35

4.3.2 Perception that Online Tax Services are a Beneficial Idea 36

4.3.3 Perception that Online Tax Services are a Wise Idea 37

4.3.4 Perception of Online Tax services as a Positive Idea 38

4.3.5 Summary Results for Attitude towards Online Tax Services 38

4.4 Perceived Ease of Use of Online Tax services 39

4.4.1 Learning to Operate the Online Tax Services 39

4.4.2 Interaction with the Online Tax Services 40

4.4.3 Working with Online Tax Services 40

4.4.4 Skillfulness while using Online Tax Services 41

4.4.5 Clarity and Understandability of the Online Tax Services 42

4.5 Perceived Usefulness of Online Tax Services 43

4.5.1 Speed in Making of Tax Returns 43

4.5.2 Accuracy of Online Tax Services 44

4.5.3 Productivity as a Result of Using Online Tax Services 44

4.5.4 Overall Usefulness of Online Tax Services 45

4.5.5 Summary Results for Perceived Usefulness of Online Tax Services 45

4.6 Behavioral Intentions 46

4.6.1 Intention to Use Online Tax Services 46

4.6.2 Intention to Use Online Tax Services Frequently 47

4.7 Benefits 48

4.7.1. Overall, the Perception that the use of Online Tax Services is Beneficial 48

4.8 Wrap up of the findings 49

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0. Introduction 51

5.1. Summary of Major Findings 51

5.2. Conclusion 54

5.3 Recommendations 54

5.4 Suggestions for Further Research 55

REFERENCES 56

Appendix A - Questionnaire 60

Appendix B —Kisumu City 62

Appendix C — Budget 63

Appendix D — Letter of Introduction_ 64