Influence of Knowledge of Taxation System on Turnover Tax Compliance among Small and Medium Enterprises in Embakasi Region, Nairobi Kenya
DOI:
https://doi.org/10.47941/jacc.3694Keywords:
Taxpayer Knowledge of Taxation System, Formal Tax Education, Turnover Tax ComplianceAbstract
Purpose: To examine the effect of taxpayer knowledge of taxation system and turnover tax compliance among small and medium enterprises (SMEs) in Embakasi Region, Nairobi.
Methodology: The study adopted an explanatory research design. The target population was 15,839 SMEs, with a sample size of 390 respondents. Primary data was collected using structured questionnaires and analyzed using descriptive, inferential statistics, and multiple regression analysis.
Findings: Findings showed that understanding turnover tax regulations significantly enhances tax compliance among MSMEs. This statement has a mean response of 4.09 (SD = 0.509), indicating that respondents strongly agreed that understanding turnover tax regulations improves compliance. Findings also established that knowledge of the taxation system significantly influences compliance (β = 0.173, p = 0.009). Findings also reveal a positive and statistically significant relationship between knowledge of the taxation system and turnover tax compliance (r = 0.579, p = 0.000 < 0.05).
Unique Contribution to Theory, Policy and Practice: The study contributes to theory as it established that knowledge of the taxation system had a significant influence compliance with turnover tax among small and medium enterprises (SMEs) in Embakasi Region, Nairobi. The study recommends that government policies foster trust through transparent tax administration and equitable enforcement. KRA should enhance taxpayer support services, including SME help desks and mobile tax clinics, to improve knowledge dissemination. SMEs should proactively train employees and owners on tax matters to strengthen compliance.
Downloads
References
Alabede, J. O. (2021). Taxpayer attitudes, compliance behaviour, and moderating effects of knowledge: Evidence from Nigeria. Journal of Accounting and Taxation, 13(2), 45–56.
Alm, J., & Torgler, B. (2006). Culture Differences and Tax Morale in the United States and in Europe. Journal of Economic Psychology, 27(2), 224-246.
Andreoni, J., Erard, B., & Feinstein, J. (2020). Tax compliance. Journal of Economic Literature, 49(1), 818-860.
Chebii, R. K. (2020). Tax incentives and growth of small and medium sized enterprises in nairobi county. Journal of Economics, 4(1), 77-92.
Cnossen, S. (2020). Excise taxation for domestic resource mobilization (No. 8442). CESifo Working Paper.
Elford, A. C., & Daub, C. H. (2020). Solutions for SMEs challenged by CSR: A multiple cases approach in the food industry within the DACH-region. Sustainability, 11(17), 4758.
Hofmann, E., Hoelzl, E., & Kirchler, E. (2013). Preconditions of Voluntary Tax Compliance: Knowledge and Evaluation of Taxation, Norms, Fairness, and Motivation to Cooperate. Journal of Psychology, 221(4), 260-267.
Kirchler, E. (2007). The economic psychology of tax behaviour. Cambridge University Press.
Kochanova, A., Hasnain, Z., & Larson, B. (2020). Does e-government improve government capacity? Evidence from tax compliance costs, tax revenue, and public procurement competitiveness. The World Bank Economic Review, 34(1), 101-120.
Kostic, R., & Mihajlovic, M. (2021). Tax Gap as a Consequence of Unpaid Tax Liabilities. Kultura Polisa, 18, 375.
KRA, 2021. Turnover Tax Designed to Make Small Businesses More Compliant.
Lutomia, E. (2021). Factors Affecting Value Added Tax Compliance Among Mechanics IN Nairobi County (Doctoral dissertation).
McNabb, K., A. Oppel, and D. Chachu (2021). Government Revenue Dataset (2021): Source Selection.
Mpofu, F. Y. (2022). Sustainable mobilisation of tax revenues to enhance economic growth in Sub-Saharan Africa: Challenges, opportunities, and possible areas of reform. International Journal of Research in Business & Social Science, 11(9), 222-231
Mwangi, M., & Njeru, A. (2019). The impact of tax training on turnover tax compliance among SMEs in Kenya. African Journal of Business and Economic Research, 14(1), 89–104.
Mwangi, P., Gachoka, I., & Siagi, H. (2020). Turnover Tax in Kenya: A Review. Research and Corporate Planning.
Myles, G. D., & Naylor, R. A. (1996). Tax Evasion and Incomplete Preferences. Journal of Public Economics, 60(3), 369-386.
Ndoinjeh, M. A. (2025). The Impacts of Incremental Tax Rates on the Sustainability and Growth Possibilities for Small and Medium Enterprises (SMEs) in Sierra Leone (PhD Dissertation, Liberty University).
Nyawira, J., & Munyoki, P. (2022). Determinants of turnover tax compliance among small businesses in Nairobi County, Kenya. International Journal of Economics and Finance Studies, 14(2), 103–118.
Toyon, M. A. S. (2021). Explanatory sequential design of mixed methods research: Phases and challenges. International Journal of Research in Business and Social Science, 10(5), 253-260.
Varpio, L., Paradis, E., Uijtdehaage, S., & Young, M. (2020). The distinctions between theory, theoretical framework, and conceptual framework. Academic medicine, 95(7), 989-994.
Waskita, G. S., & Ashari, D. R. W. (2025). Taxation and SMEs in Emerging Markets-Case Study Approach to Compliance, Growth, and Sustainable Development. Journal of Economics and Banking ESPAS, 2(1), 1-17.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Catriona Akinyi Onyango, Dr. Marion Nekesa, Prof. Ronald Bonuke
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
