Relationship Betweeen Business Financial Attributes And Uptake Of Electronic Tax Registers Among Selected Enterprises In Kisumu City, Kenya

ABSTRACT

Although law makes it mandatory for businesses registered for VAT to issue tax invoices and/or cash sale receipts which must be ETR generated or supported by ETR receipts, the Treasury’s budget policy statement (2019) reports that KRA collected to Kshs 633.7 billion in the first half of the FY 2017/18, which was equivalent to 6.3 percent of GDP, against a target of Kshs 677 billion indicating a shortfall which may be attributed to poor business performance precipitating to low uptake of ETRs. Previous studies focus on the comparative analysis of revenue loss and non-compliance in developing countries, they employ technology acceptance model (TAM). Given that the law makes it mandatory for businesses registered for VAT to issue tax invoices and/or cash sale receipts which must be ETR generated or supported by ETR receipts, the relationship between firm size; business income levels; financial constraints and uptake of ETR are not known. Kisumu city is the suitable area of this study on the basis that majority of the business firms utilize electronic tax registers for the purpose of reporting VAT to the Kenya Revenue Authority. Therefore the purpose of this study was to assess the relationship between enterprise financial attributes and uptake of ETRs by enterprises in Kisumu city. The specific objectives of the study were to: establish the relationship between firm size and uptake of electronic tax registers; determine the relationship between business income levels and uptake of electronic tax registers and assess the relationship between financial constraints and uptake of electronic tax registers among enterprises in Kisumu city. The study was guided by the theory of reasoned action framework. The study employed correlational research design. The target population was 610 enterprises in Kisumu city. A sample of 334 entrepreneurs from 334enterprises will be selected using stratified random sampling technique. Primary data will be collected using self-administered questionnaires. A pilot test with 30 traders was used test for reliability which yielded a Cronbach’s alpha of more than 0.7 and validity was tested using expert opinion. Data was analyzed using descriptive statistics such as mean, standard deviation, percentages and frequencies and inferential statistics as Pearson correlation analysis. The findings were that relationship between firm size and utilization of ETRs is positive and significant (r = 0.475, p = 0.008, n = 220) implying that firm size influences utilization of ETRs positively; the relationship between income levels and utilization of ETRs is positive and significant (r = 0.597, p = 0.000, n = 220) meaning that income levels of tax payers influence utilization of ETRs positively and the relationship between financial constraints and utilization of ETRs is negative and significant (r = -0.728, p = 0.003, n = 220) implying that financial constraints facing tax payers influence utilization of ETRs negatively. The study concludes that firm size and income levels of tax payers positively influences utilization of ETRs whereas financial constraints facing tax payers influence utilization of ETRs negatively. Results are presented in the form of tables, charts and graphs. The results may be useful to academicians, scholars and government for policy formulations.