African Tax and Customs Review

Tax gap analysis and way of expanding tax base among micro and small enterprises in Kamukunji Jua-Kali metal in Nairobi County, Kenya

2022-10-25T16:36:25+03:00

This research analysed the tax gap and way of expanding tax base among Smes in Kamukunji Jua-Kali Metal in Nairobi County, Kenya. The research study specific objectives were to: identify the effect of legislation, establish the effect of corruption, explore the effects of knowledge and to establish the effect of low income on tax gap among SMEs in Kamukunji Jua-Kali Metal in Nairobi County, Kenya. The study findings are of significance to the government, importers, exporters, researchers and scholars. This study applied a mixed methods research approach. The study targeted 4000 SMEs dealing in agricultural products, building supplies, Kitchen wares (cooking) and Electrical Appliances. Primary data was used and triangulated with secondary data in the study. Primary data was collected by the use of questionnaires and the secondary data was collected from the relevant books and journals that aided the researcher in conducting the study. Multiple regression was used to represent the relationship between the dependent and independent variables of the study. Tables and graphs were used to represent data in this study. The findings show that SMES have complied with the existing laws on taxation although majority of respondents were neutral. On whether SMEs have upheld high tax morality, majority of respondents disagree. On whether SMEs have knowledge on various taxes they should pay, majority of respondents disagreed. Majority of respondents disagreed that SMEs have been experiencing low profitability. The study concludes that, SMEs have not fully complied with the existing taxation laws thus increasing the tax gap. They have not fully complied with the existing taxation policies thus increasing the tax gap. The tax authority has not invested resources in tax education which contributed to little knowledge on various taxes that SMEs should pay, this contributes to increase in tax gap. SMEs had registered some profitability but failed to comply with taxation. They did not benefit from tax subsidies since they had not complied with the relevant taxation laws thus leading to increased tax gap. This study, therefore, recommends that SMEs need to comply with the existing laws and policies so as to reduce the tax gap. Kenya revenue authority should carry awareness among SMEs on the importance of tax morality. Stiff penalties and even jail terms should be imposed on those who colluded to engage in tax immorality. KRA should invest resources aimed at creating awareness on the importance of tax compliance among the SMEs and also come up with an effective method of measuring the profitability of SMEs to ensure that the right taxes are paid.

Forecasting Tax Revenues, Frequency of Observation Matter

2022-10-25T16:36:25+03:00

This paper intends to examine whether using higher frequency data has more power in forecasting than low frequency data. The sample size ranges from 1996 to 2016 and 2000 to 2015. Ordinary Least Square (OLS) method was used to forecast three components of tax revenues including total revenue (TR), Pay As You Earn (PAYE) and Value-added Tax (VAT). The results show that, both TR and PAYE forecasts are slightly better when using low frequency data. However, for VAT, forecasting power is slightly better when using higher frequency data. Also, the nature of the tax can have different implications in selection of data frequency.

Factors affecting adoption of green procurement practices in energy sector in Kenya

2022-10-25T16:36:26+03:00

This study sought to determine factors affecting adoption of green procurement practices in energy sector in Kenya; a case study of Kenya Pipeline Company. The specific objectives were to investigate the effect of technological advancement, procurement policies, employee competencies, financial performance and operational cost on adoption of green procurement practices in energy sector in Kenya. The study will be of significance to the management of Kenya Pipeline Company, and other researchers.

The study adopted a descriptive research design. The target population for the study was 300 employees of Kenya Pipeline Company, from which a sample size of 75 respondents was selected using stratified random sampling method. The instruments of data collection were questionnaires. The questionnaire comprised of both open ended and closed ended questions. The study findings were analyzed using quantitative and qualitative methods and presented in form of tables and figures.

According to the findings of the study 87% of the respondents agreed that technology advancement affect adoption of green procurement practices in energy sector in Kenya while 13% disagreed, procurement policies by 84% while 16% disagreed, employee competencies by 89% while 11% disagreed, 83% of the respondents agreed that financial performance affects adoption of green procurement practices in energy sector in Kenya. Ninety-four percentage (94%) of the respondents agreed that operational cost affect adoption of green procurement practices in energy sector in Kenya while 6% disagreed.

The study recommends the management should have their systems automated. In regard to procurement policies the study recommends the management to review legislations to ensure compliance with the international procurement systems requirement. In regard to employee competencies the study recommends that the management should employ professional trained procurement staff and continuously train the staff on emerging issues on public procurement practices. In regard to financial performance the study recommends that the management provide a good working environment for employees so as to enhance their efficiency and performance. In regard to operational costs the study recommends that the management should make use of automation so as to reduce their operational costs.

Effects of Taxpayer Education on Tax Compliance of Small and Medium Enterprises in Meru Town

2022-10-25T16:36:26+03:00

Governments are striving to rally greater tax revenue domestically by increasingly reaching out to inform and engage taxpayers, aiming to foster an overall culture of compliance, in which citizens understand paying taxes as an essential aspect of their connection with their government. Taxpayer education is the channel linking tax administration and citizens and a significant tool to change tax culture. Studies done on tax compliance globally revealed that the level of the SMEs tax compliance in the developed nations is higher due to tax education. In Africa, the SMEs tax compliance rate is low and majority of the revenue authorities are unable to meet the tax targets due to inadequate tax education. SMEs have the potential to produce a lot of government revenue in Kenya, but this is not the case. It poses a huge threat to the country’s growth as a whole. Against this background, the purpose of this study was to uncover the effects of taxpayer education on tax compliance in Meru Town among SMEs. In particular, the study aim was to determine the effect of electronic taxpayers, taxpayer’s awareness programs and print media education on tax compliance among small and medium-sized enterprises in Meru Town, Kenya. The theories used include Theory of Planned Behaviour, economic deterrence theory and vroom’s expectancy theory. A stratified random sampling research design was used. The target population was 2,100 licensed SMEs in Meru Town according to Meru County Revenue Board (MCRB) county licensed sme’s report 2019 statistics source; a sample size of 384 SMEs was selected. The data was distributed to administrators, compliance officers and accountants of SME companies through the use of standardized questionnaires. Using descriptive and inferential statistics, data was analysed and multiple regression model was used to assess the relationship between the research variables. The results showed an R squared of 0.683, suggesting that 68% of differences in tax compliance are explained by all predictor variables. The outcome also revealed that electronic taxpayer education (β1 = 0.242, P = .000); stakeholder sensitization programme (β2= 0.349, P =.000); and print media education (β3= 0.132, P =.014) had a positive and significant effect on tax compliance among small and medium enterprises. The study concluded that when combined, electronic taxpayer education, stakeholder sensitization programme and print media education positively and significantly impact tax compliance among the small and medium enterprises. In particular, stakeholder sensitization programme was identified as the most significant predictor of tax compliance, followed by electronic taxpayer education and lastly print media education. The study recommended the need for the KRA management to strengthen aspects relating to electronic taxpayer education including having adequate tax materials in the internet, enhancing itax system and use of tax advertisements. It should also strengthen strategies relating to stakeholder sensitization programme such as seminars, workshops and road shows. Finally, the management should strengthen aspects relating to print media education including taxpaying culture, ethical attitudes and public awareness. This study makes significant contribution to theory, policy and practice in the area of tax education and compliance.

The Effects of Adoption of Customs Electronic Procedures on Trade Facilitation by Clearing and Forwarding Agents in Nairobi, Kenya

2022-10-25T16:36:26+03:00

The study aimed at determining the impact of the adoption of customs electronic procedures by customs officers in Kenya. The research had three specific objectives which were; to determine the effects of harmonization of customs electronic procedures on Trade facilitation by clearing and forwarding agents in Nairobi, to examine the automation of Customs Electronic procedures on Trade facilitation, to establish how the adoption of Cargo Information System on Customs Electronic procedures by customs officers, affects trade facilitation.. The overall objective of the study was to establish the effects of trade facilitation in Kenya. The research was anchored on the three theories namely; Technological change theory, Technological acceptance theory, and theory of reasoned action. The research employed a descriptive research design and had a target population of 892 officers in the clearing and forwarding firms within Nairobi. This research used structured questionnaires as a primary source of data. A pilot study was carried out on 20 officers that did not form part of the target population to test the reliability and validity of the research instrument. The study used Cronbach’s alpha (α) coefficient to test reliability, while the face and content validity were used for checking for validity of the research instrument. The primary data collected was analyzed with the use of SSPS version 28. Data analysis was conducted using descriptive statistics and inferential statistics by use of moderated multiple regression analysis. The study revealed that the harmonization of customs electronic procedures, automation of Customs Electronic procedures, and the adoption of cargo Information systems had a major influence on trade facilitation in Kenya. It was also discovered that harmonization of customs electronic procedures, automation of Customs Electronic procedures, and the adoption of cargo Information System had a variation of 93.5% on facilitation of trade implying that since the automation of the customs procedures by Customs administration has had a significant increase in revenue collection hence effective trade facilitation. This resulted in greater border control hence a significant growth in regional trade. There is a need for tight enforcement measures in the implementation of the new system to enhance growth in revenues by the customs administration. In conclusion, the adoption of electronic customs procedures requires an investment in technology, training, security enhancement, and management of hitches hence the adoption of these systems will facilitate trade growth in the region. Harmonization and adoption of electronic procedures regionally allow data sharing and competitiveness globally. The research recommends that it’s important for future researchers to undertake the same or replicate empirical studies in the harmonization of electronic customs procedures on the operational performance in East Africa to validate the findings and conclusions of this study. The study provides future researchers with a useful conceptual and methodological reference to carry out studies in this area of adoption of customs electronic procedures.