Tax compliance, enforcement and taxpayer service in Kenya: the case of self-employed individual income taxpayers
Date
2014
Authors
Nyaga, Anne Gichuku
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The purpose of this study is to explore the relationship between enforcement policies and
taxpayer service on tax compliance. The argument is that while enforcement policies are tried
and tested means of ensuring compliance, taxpayer service is not. Thus, including taxpayer
service as a variable in determining the level of tax compliance would offer insight into the
compliance behavior of taxpayers. Therefore, the study also aims to explore the relationship
between tax enforcement and taxpayer service. Previous studies have found tax compliance and
its analogous subject of “why people pay taxes” a puzzle. Inconclusive empirical results on
enforcement policies of audit, penalty and criminal sanctions are common, leaving researchers
and practitioners wondering what influences tax compliance. All the while, studies on taxpayer
service are rare. This study makes use of simple regression analysis of aggregate variables
representing tax compliance against audit, penalties, criminal sanctions and taxpayer service. The
period between years 2003 and 2012 is choice due to the availability of data. At the individual
level, the effect of prior audit and penalty charge is regressed against tax compliance. Prior audit
and penalty charges exist as categorical variables. Audit and penalties have a positive
relationship with tax compliance; taxpayer service and criminal sanctions have a negative
relationship with tax compliance. All estimators apart from the audit rate are non-significant; this
would indicate that even in Kenya, tax compliance is a puzzle. With variability in audit rate
accounting for only 31% of the variability in tax compliance and all other estimators showing
non-significant predictions, why taxpayers comply in Kenya remains an interesting question. At
the individual level of analysis, both variables representing prior audit and penalty charge have a
negative relationship with tax compliance however; they are non-significant for all but three
years.
Description
Submitted in partial fulfillment of the requirements for the degree of Master of Commerce
Keywords
Taxation, Kenya, Taxpayers, Tax compliance, Self employed