Tax Compliance By Small And Medium Enterprises In Nairobi North Tax Region, Kenya

ABSTRACT

Taxes are an involuntary charge levied by the government on individual workers income, business profits and on transactions of goods and services. Unfortunately, Kenya does not collect all the taxes that it ought to. This is mostly attributed to high levels of tax non-compliance. In Kenya, the biggest block of taxpayers on the business sector are the Small and Medium Enterprises (SMEs) which are estimated to be at 34.4% of total businesses in Kenya and they account for 77% of employment statistics. This study aimed at assessing the tax compliance by SME‟S in the Nairobi North tax region. The study was guided by three objectives: to assess the effect of the current law in Kenya on the tax compliance of SME‟s in Nairobi North tax region; the level of tax knowledge and its effect on tax compliance and the tax compliance costs and its effect on the tax compliance of SME‟s. The study was guided by the planned behavior theory. This study adopted a descriptive research design. The target population was 1500 SME‟s and the sample size was 150 who were divided into two. Data was collected by the use of a structured questionnaire with both closed and open ended questions and analyzed using both descriptive and inferential statistics. Statistical package for social science (SPSS) was used to subject the data to quantitative analysis. The Pearson‟s correlation co-efficient was used to check the relationship between variables and a logit model fitted to check the relationship between the dependent and the independent variables. Data was presented in the form of frequency distribution tables, graphs and pie chart. The results of the study was documented economic and social factors that affect small and medium-scale tax compliance. Therefore, the findings of this study not only provided vital information on further research in this area of study, but also contributed to the theoretical development of the field of tax compliance.