Abstract

The purpose of the study was to analyze factors affecting Turnover Tax Compliance in micro, small and medium enterprises (MSMEs) sector in Roysambu area in Nairobi. The study was guided by three objectives namely; to determine the effects of economic factors on Turnover Tax Compliance in Roysambu area, to determine the effects of political factors on Turnover Tax Compliance in Roysambu area and to determine the effects of psychological factors on Turnover Tax Compliance on MSMEs in Roysambu area. The problem statement was to assess whether the government efforts to reach small traders by introducing turnover tax was enhancing tax compliance among MSMEs. The study was guided by economic theory, social influence theory and theory of reasoned behavior. The study will greatly benefit the government of Kenya since it will contribute to lasting solutions of non-compliance with tax laws in Kenya, this will help Kenya Revenue Authority to meet or reduce the tax revenue collection target gap. The study will also provide insights to the policy makers on the factors to consider while making laws to ensure tax noncompliance level is reduced to minimum levels, this will also go hand in hand in coming up with efficient and effective tax collection policies and systems. The study will help the taxpayers to know what they are supposed to do for them to comply, also help them to know what await them if they do not comply. The study adopted the descriptive and explanatory survey design. The target population was 11,501 respondents.  The study collected primary data from a sample of 386 taxpayers which were selected through random sampling. The data collected was tested for validity and reliability and analyzed and economic factors, political factors and psychological factors were found to have significant effect on Turnover Tax Compliance. Multiple regression analysis were performed with; economic factors on Turnover Tax Compliance on Roysambu evidence of p=0.006, ρ<0.05, on political factors on Turnover Tax Compliance Roysambu evidence of p=0.003, ρ<0.05 and psychological factors on Turnover Tax Compliance Roysambu evidence of p=0.000, ρ<0.05. The study then made conclusions on economic factors, political factors and psychological factors that all the independent variables were found to play a significant role in the Turnover Tax Compliance on MSMEs in Roysambu area. The study recommended that KRA should pay attention on Tax rates which affect compliance and amount of tax payable, KRA should also satisfy taxpayer by services offered which will make taxpayer trust the Government. Finally, KRA should look into Perceived pressure that influences Turnover Tax Compliance. Therefore, the study suggests the need for more studies to explore the contribution of determinants of Turnover Tax Compliance in Kenya in more detail.