Effect of Tax Morale on Value Added Tax Compliance Among Medium Taxpayers in North of Nairobi Tax District, Kenya

Abstract

Purpose: Tax compliance is important as it has a direct impact on revenue for most governments around the world. Despite the reforms that the Kenya Revenue Authority has been undertaking to increase revenue collection, it has of late failed to meet its revenue targets, particularly VAT targets. There has also been existence of fluctuations in VAT collection over the past couple of financial years. The objective of the study is to showcase the effect of tax morale on Value Added Tax compliance among medium taxpayers in north Nairobi tax district, Kenya. The study has been guided by the ability to pay theory. Methodology: The study adopted the explanatory research design and primary data was collected using structured questionnaires with closed-ended questions. The total target population was 2,376 VAT-registered medium taxpayers in north of Nairobi tax district, Kenya and the sample size was 342 respondents. Out of the 342 respondents targeted, 274 questionnaires were correctly filled and returned, indicating 80% response rate. Results: The study also found that tax morale had a positive and significant effect on Value Added Tax compliance β=0.173 p-value =0. 016. Conclusion: The study recommends that the government of Kenya should allocate resources towards improving taxpayer services, including helplines, online portals, and advisory services.