Effect of Domestic Tax Reforms on Tax Compliance Among Micro and Small Enterprises in Nairobi County, Kenya

Abstract

This paper assessed the effect of domestic tax reforms on Micro and Small Enterprises tax compliance in Kamukunji market in Nairobi, Kenya. The study was premised on the economic theory, neo-classical theory, psycho sociological theory and benefit theory. The target population was 1,240 Micro and Small Enterprises operating in Kamukunji market. Yamane (1967) formula was employed to come up with a representative sample size of 302 SMEs for the population. Primary data was collected using questionnaires. To ensure questionnaire validity, questionnaire inconsistencies that arose from pilot study were rectified. The coded data was then fed into SPSS version 26 for reliability testing. It was found that there was linearity, multicollinearity test results were satisfactory, that is, between 1and 10 and there was no heteroscedasticity at 5% degree of freedom. Inferential and descriptive statistics were used in data analysis. Model significance was tested using simple regression and variance analysis, correlation and, coefficient of determination. The study found out that domestic tax reforms have a significant influence on Micro and Small Enterprises tax compliance, that is, F (3, 298) = 18.660, p = 0.000 <0.05. The study recommended that Kenya Revenue Authority should administer tax education and conduct compliance audit checks. These findings are important to tax administrators in enacting tax reforms, Micro and Small Enterprises in making investment decisions and researchers for reference and further studies