Abstract: Developing and developed countries of the world have been relying on revenue collected from the formal and informal sectors to develop the economy. Economic growth among developing countries has been associated with Compliance of Micro and Small Enterprises with VAT. However, despite the role of VAT in economic developments among developing countries, majority of Small Enterprises have continued to evade in complying with VAT thus posing a great challenge to the economies of developing countries. This study aimed at establishing the influence of taxpayers΄ knowledge and value added tax compliance among Micro and Small Enterprises in Embu county, Kenya. The specific objective of the study was to establish the effect of education of taxpayers on VAT compliance among micro and small enterprise in Embu County, Kenya. This study was anchored on rational choice theory. The study adopted cross-sectional research design since it facilitates discovery of new knowledge thus prediction and control of the problem. The target population of the study was 557 micro and small enterprises as per the records of Ministry of Trade in Embu County. Stratified sampling technique was used to select the sample size of the population. To arrive at the ideal sample size of 233, scientific formula proposed by Israel was adopted. Unit of analysis were owners of registered micro and small enterprises in Embu County while unit of observation were registered micro and small enterprises in Embu County. The primary data was collected using a structured questionnaire consisting of close and open-ended questions. In addition, secondary data was collected using content analysis method. The analysis of data was done using Statistical Packages for Social Sciences (SPSS Version 24). Data was analyzed descriptively in form of mean scores, standard deviation, frequency table and percentages. Further, multiple regression analysis was conducted at 95% confidence level and 5% significance level to establish the statistical relationship between variables. Qualitative data obtained from published content was reviewed and deductive arguments were made in relation to the research objective. The analyzed quantitative data was presented in tables and figures. Findings of this study revealed that there exists a positive significant relationship between education of taxpayers and value added tax compliance among micro and small enterprises in Embu County, Kenya. The study concludes that despite that fact that there exists a positive relationship between taxpayers’ knowledge and value added tax compliance, numerous challenges were experienced such as lack of awareness, complexity of technology and lack of willingness from taxpayers to submit VAT on time. This study recommends that Kenya Revenue Authority should partner with other agencies like ICT firms, County Governments and law reinforcement agencies to promote the spirit of VAT compliance among small scale traders in Kenya, thus sustainable social economic developments.
Keywords: Taxpayers knowledge and Value Added Tax Compliance.
Title: TAXPAYERS KNOWLEDGE AND VALUE ADDED TAX COMPLIANCE AMONG MICRO AND SMALL ENTERPRISES IN EMBU COUNTY, KENYA
Author: PATRICK N. MASAKU, STEPHEN KIRIINYA
International Journal of Social Science and Humanities Research
ISSN 2348-3156 (Print), ISSN 2348-3164 (online)
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