Abstract: Taxes are an important source of revenue for the state and all government agencies. It helps the state meet its financial obligations and also serves the general public by providing serves such as health, infrastructure, and education, as well as stability and order. This study sought to determine the factors affecting tax compliance on SMEs in Kood Boor District Hargeisa, Somaliland. The specific objectives of the study were; to establish the effects of taxpayer knowledge, tax rate, tax fines and penalty and tax accountability on tax compliance of SMEs in Kood Boor District Hargeisa Somaliland. The study adopted descriptive research design. A sample of 127 SMEs was drawn using simple random sampling. The target populations of the study were the 190 registered in Ministry of Trade, Industry and Tourism. Primary data was collected using questionnaires. Data was analyzed using binary logistic regression model to determine the association that existed between the independents and dependent variable. The study was guided by following theories; economic based theory, institutional anomie theory and resource based theory. The study findings indicates that tax payers knowledge was statistically insignificant (Exp (B) = 2.014, p=.254) at 5 percent level of significance. This implies that the odds ratio for tax payer’s knowledge indicates that every unit increase in tax payer’s knowledge is associated with an increase in the odds of tax compliance in SMEs in Kood Boor District Hargeisa, Somaliland as per the sample. The study further showed that tax rate was statistically significant (Exp (B) = 0.135, p=0.002) at 5%. The study findings also examined tax fines and penalties and found that is statistically insignificant (Exp (B) = 0.447, p=0.121) at 5%. Finally, the study established that tax accountability was statistically significant (Exp (B) = 0.206, p= 0.023) at 5%. The odds ratio for tax rate, tax fines and penalty and tax accountability indicates that every unit increase in tax rate, tax fines and penalty and tax accountability respectively is associated with decrease in the odds of tax compliance of SMEs in Kood Boor District Hargeisa Somaliland as per the sample. The study recommends that on tax rates, the government should come up with better reforms on tax rates to cushion the tax payer from heavy burden. Also by reducing the taxes rates this will increase the purchase power of the citizens which in turn leads to better living standards and thus tax compliance. On accountability, the study recommended that there should be more public dialogue on taxation policy and practices. The study further recommend that to strength the taxation policy and practices in Somaliland then the community actors, such as clan elders, business owners and religious leaders, should be involved in the formulation and the implementation of tax policy. Furthermore the study recommends that the Auditor General should unsure and enforce on policies that advocates for both private and public entities to publish their audited annual financial reports.
Keywords: Tax Knowledge, Tax Rate, Tax Fines and Penalty, Tax Accountability, Tax Compliance, Logistic Regression Model, SMEs.
Title: Factors Affecting Tax Compliance on Small Medium Sized Enterprises in Koodboor District in Hargeisa Somaliland
Author: Mahad Abdikadir Muhumed, Dr. Nathan Wamalwa Wafula
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 11, Issue 1, April 2023 - September 2023
Page No: 291-302
Research Publish Journals
Website: www.researchpublish.com
Published Date: 08-July-2023
