Technological Tax Reforms and Compliance Among Small and Medium Enterprises in Bungoma County, Kenya

Abstract

Tax compliance is an area of concern in Kenya because of increased burden on borrowing from abroad. Kenya has struggled with persistent budgetary deficits due to an imbalance between government revenue and expenditure. High levels of non-compliance by SMEs have prevented the economy from receiving the necessary funds to address the ongoing imbalance. The Kenyan government has made an effort to bring SMEs under the tax net unfortunately overall level of compliance among SMEs is still low. This study therefore assessed the effect of technological tax reforms on tax compliance among Small and Medium Enterprises in Bungoma County. The study was guided by the Economic Deterrence, Social Influence and Adam smith canons of taxation theories. The study took into account a ten year period from 2011 to 2021 during which the revenue authority had implemented a wide range of tax reforms in an effort to address several tax compliance issues. A descriptive survey design was adopted where a survey was conducted on 1,527 Small and Medium Enterprises in Bungoma County, Out of this target a sample of 317 enterprises was established through Yamane formula and then randomly sampled. Quantitative primary data was obtained through a structured questionnaire then analyzed by both descriptive and inferential statistics. The results of the multiple regression analysis demonstrated that technological tax reforms (β = 0.780, P < 0.05) has a positive and statistically significant effect on tax compliance among Small and Medium Enterprises in Bungoma County. Pearson correlation analysis revealed that there is a moderate positive and statistically significant relationship between technological tax reforms and tax compliance among SMEs in Bungoma county as supported by (r=0.554, p<0.05). This led to the conclusion that an increase investment by Kenya Revenue Authority towards technological tax reforms has a positive results towards tax compliance among SMEs in Bungoma County. Based on that, the study recommends expanded taxpayer education on I tax matters and employing simpler payment methods such as Mobile money services and other mobile banking advancements.