EFFECT OF EDUCATING TAXPAYERS ON VALUE ADDED TAX COMPLIANCE (A
CASE STUDY OF WATER BOTTLERS IN NAIROBI COUNTY)
MARGARET CHEPTOO
HDB 336-C016-3117/2017
A RESEARCH PROJECT SUBMITTED TO THE TAX DEPARTMENT IN PARTIAL
FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF POSTGRADUATE
DIPLOMA IN TAX ADMINISTRATION OF KENYA SCHOOL OF REVENUE
ADMINISTRATION
OCTOBER 2021
i
DECLARATION
I declare that this research project is my original work and has not been presented for a post
graduate diploma award in any other University.
Date.................................................................. Signed……………………………………
NAME: ……………………………………...REG NO: ……………………………………
This research project has been submitted for examination with my approval as a university
supervisor
Date.........................................
Sign........................................
Name: …………………………
ii
DEDICATION
I dedicate this research project to my classmates and family who have been encouraging me
throughout to work harder and press on despite the tight schedule.
iii
ACKNOWLEDGEMENT
I would like to thank God for His care, protection and provision throughout my studies and for
giving me the strength and endurance to undertake this research project. I am grateful to my
supervisor, Dr. Marion Nekesa, for her wise counsel and availability for guidance in the process
of carrying out this project.
I am also grateful to Kenya School of Revenue Administration for facilitating my studies in this
course. My sincere gratitude goes to all the lecturers who taught and facilitated the various units
in the post graduate diploma in Tax Administration. To My Friends your contribution to making
this project a success cannot be overlooked. Last and not least thanks to my course mates and
colleagues at work.
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Table of Contents
DECLARATION........................................................................................................................... ii
DEDICATION.............................................................................................................................. iii
ACKNOWLEDGEMENT ........................................................................................................... iv
LIST OF TABLES ..................................................................................................................... viii
LIST OF FIGURES ..................................................................................................................... ix
ABBREVIATIONS ....................................................................................................................... x
OPERATIONAL DEFINITION OF TERMS ........................................................................... xi
ABSTRACT ................................................................................................................................. xii
CHAPTER ONE: INTRODUCTION ......................................................................................... 1
1.0: Introduction .......................................................................................................................... 1
1.1 Background of the Study ....................................................................................................... 1
1.1.1
Effect of Tax Payer Education on Value Added Tax Compliance ........................... 2
1.2 Statement of the Problem ...................................................................................................... 3
1.3 Objectives of the Study ......................................................................................................... 5
1.3.1 General Objective ........................................................................................................... 5
1.3.2 Specific Objectives ......................................................................................................... 5
1.4 Research Questions ............................................................................................................... 5
1.5 Justification of the Study ....................................................................................................... 6
LITERATURE REVIEW ............................................................................................................ 7
2.0 Introduction ........................................................................................................................... 7
2.1 Theoretical Review ............................................................................................................... 7
2.1.1 Theory of Reasoned Action ............................................................................................ 7
2.1.2 Fisher Tax Compliance Model ....................................................................................... 7
2.1.3 Fiscal Exchange Theory ................................................................................................. 8
2.3: Conceptual Framework ...................................................................................................... 10
................................................................................................................................................... 11
2.3.1 Social Media ................................................................................................................. 11
2.3.2 Taxpayer Sensitization Programs ................................................................................. 13
2.3.3 Electronic/ print media education ................................................................................. 13
2.3.4 Tax Compliance ............................................................................................................ 14
CHAPTER THREE .................................................................................................................... 16
v
RESEARCH METHODOLOGY .............................................................................................. 16
3.0 Introduction ....................................................................................................................... 16
3.1 Research Design .................................................................................................................. 16
3.2 Target population ................................................................................................................ 16
3.3 Sample Size and sampling Design ...................................................................................... 16
3.4 Data Collection .................................................................................................................... 17
3.5 Pretesting ............................................................................................................................. 17
3.5.1 Validity of Research Instruments ................................................................................. 18
3.5.2 Reliability ..................................................................................................................... 18
3.6 Data analysis and presentation ............................................................................................ 18
3.6 Ethical Considerations......................................................................................................... 20
CHAPTER FOUR ....................................................................................................................... 21
DATA ANALYSIS, FINDINGS AND DISCUSSION ............................................................. 21
4.0 Introduction ......................................................................................................................... 21
4.1 Response Rate ..................................................................................................................... 21
4.2 General Information ............................................................................................................ 21
4.2.1 Gender .......................................................................................................................... 22
4.2.2 Education Level ............................................................................................................ 22
4.3.3 Years the Enterprise has been in Operation.................................................................. 23
4.3 Effectiveness of Using Various Taxpayer Education Programmes .................................... 23
4.3.1 Social Media Platforms ................................................................................................ 23
4.3.2 Taxpayer Sensitization Programmes ............................................................................ 24
4.3.3 Electronic/print media education .................................................................................. 25
4.5 Karl Pearson Correlation ................................................................................................. 26
4.6 Descriptive Statistics ........................................................................................................... 27
4.6.1 Effect of Social Media Platforms on VAT compliance in Nairobi Water Bottlers ...... 27
4.6.2 Effect of Taxpayer Sensitization Programmes on VAT compliance in Nairobi Water
Bottlers................................................................................................................................... 28
4.6.3 Effect of Electronic/print media Education on VAT compliance in Nairobi Water
Bottlers................................................................................................................................... 30
4.6.4 VAT compliance in Nairobi Water Bottlers ................................................................. 32
4.7 Multiple Regression Results ............................................................................................... 34
CHAPTER FIVE ........................................................................................................................ 38
vi
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............................................ 38
5.0 Introduction ......................................................................................................................... 38
5.1 Summary of the Study’s Key Findings ............................................................................... 38
5.1.1 Effect of Social Media Platforms on VAT compliance ................................................ 38
5.1.2 Effect of Taxpayer Sensitization programmes on VAT compliance ............................ 39
5.1.3 Effect of Electronic/Print Media Education on VAT compliance ................................ 40
5.2 Conclusions ......................................................................................................................... 40
5.3 Recommendations ............................................................................................................... 41
5.4 Suggestions for Further Research ....................................................................................... 42
REFERENCES ............................................................................................................................ 43
APPENDICES ............................................................................................................................. 49
APPENDIX 1: QUESTIONNAIRE ....................................................................................... 49
APPENDIX II: LIST OF NAIROBI WATER BOTTLER COMPANIES ........................ 53
vii
LIST OF TABLES
Table 4.1: Gender of the Respondent……………………………………………………………..22
Table 4.2: Education level of respondents……………………………………………………….22
Table 4.3: Years of operation…………………………………………………………………….23
Table 4.4: Effectiveness of social media platforms………………………………………………24
Table 4.5: Effectiveness of the taxpayer sensitization programmes……………………………...25
Table 4.6: Effectiveness of the electronic/print media education…………………………………25
Table 4.7: Karl Pearson correlation results………………………………………………………26
Table 4.8: Social media platforms and VAT compliance…………………………………………28
Table 4.9: Taxpayer sensitization programmes and VAT compliance…………………………...30
Table 4.10: Electronic/print media education and VAT compliance……………………………32
Table 4.11: VAT compliance among the Water bottlers in Nairobi County……………………...33
Table 4.12: Overall goodness of the fit model……………………………………………………34
Table 4.13: Overall NOVA table…………………………………………………………………35
Table 4.14: Regression coefficients……………………………………………………………....37
viii
LIST OF FIGURES
2.1: Conceptual Framework………………………………………………………………….11
ix
ABBREVIATIONS
VAT:
-Value Added Tax
SPSS:
-Social Statistical Packages for Social Sciences
K.R.A:
- Kenya Revenue Authority
x
OPERATIONAL DEFINITION OF TERMS
Tax non-compliance: This includes a range of activities that are unfavorable to a government's
tax system (Johns& Slemrod, 2010).
Value Added Tax: This is a tax charged on supply of taxable goods or services made or provided
in Kenya and on importation of taxable goods or services into Kenya (Crawford, Keen & Smith,
2010)
xi
ABSTRACT
A country can develop a positive tax attitude if the tax collection authority and the taxpayers all
perform their responsibilities. Inadequate understanding of the tax obligation imposed on taxpayer
results to the rigid nature of taxpayers, lack of motivation and disillusion. To achieve satisfactory
levels of VAT compliance, taxpayers need to have knowledge of the existing tax laws and
procedures in order to create awareness on their responsibilities. Tax non-compliance is one of the
challenges that deter the development of a country especially in Kenya and this influenced the
researcher’s interest to establish the effect of educating taxpayers on value added tax (vat)
compliance among water bottlers in Nairobi County. The objectives of the study were to establish
the effect of social media education on value added tax (vat) compliance-a case study of water
bottlers in Nairobi County, to determine the effect of Tax Payer sensitization programmes on value
added tax (vat) compliance- a case study of water bottlers in Nairobi County and to investigate the
effect of electronic/print media education on value added tax (vat) compliance in Kenya- a case
study of water bottlers in Nairobi County. This research was anchored on the following theories:
Theory of Reasoned Action, Fisher Tax Compliance Model and Fiscal Exchange Theory. This
research employed a quantitative cross-sectional study design. The target population was the 34
water bottler companies located in Nairobi County. Census sampling technique was used where
all the 34 companies formed the sample size. The study used questionnaires to collect primary data
from the respondents. Data analysis was done using the SPSS software version 25.0 and
presentation made using tables. Inferential statistics such as regression analyses was performed to
ascertain the effect of the independent variables on the dependent variable. The study found that
social media education has a positive and significant effect on VAT compliance among the water
bottlers in Nairobi County (β= β=0 .464, P-value=0.000). The study also found that tax payer
sensitization programmes have a positive and significant effect on VAT compliance among the
Water bottler companies in Nairobi County (β=0.302, p-value=0.048). Further, the study found
that electronic/print media has a positive and significant effect on VAT compliance among the
Water bottler companies in Nairobi County. The overall regression model showed that taxpayer
education was a good predictor of VAT compliance. The study concluded that taxpayer education
has a significant effect on the level of VAT compliance (adjusted R-square= 0.853). Ultimately,
the study recommends that the ministry of education ought to introduce taxpayer education and
make every effort to integrate a public finance and tax courses in all departments' curricula.
Key words: Social media, Tax Payer sensitization programmes, electronic/print media education
and Value Added Tax Compliance
xii
CHAPTER ONE: INTRODUCTION
1.0: Introduction
This chapter covered background of the study, statement of the problem, objectives of the study,
research questions, justification and the study’s limitations.
1.1 Background of the Study
Tax is a levy imposed by a body appointed by government or by the government which is
compulsory on expenditure, capital assets and income without a direct benefit to the taxpayer.
Likewise, tax can be seen as a cost to the tax payer both as a corporate body and as an individual.
However, there exists a conflict in the tax collection process in that tax payers want to maximize
profits and reduce costs; on the other hand, the government wants to maximize revenue by
enhancing compliance to tax and therefore needs to come up with methods and strategies that
simplify tax requirements and procedures (Lymer and Oats, 2009).
According to Andreoni, Erard, and Feinstein (1998), tax compliance refers to a situation where the
taxpayer is willing to conform to the laws related to tax so as to attain equilibrium of the economy
of a nation. Improved tax collection allows the Government of Kenya to provide essential services
which include; Medical services, Education, better infrastructure such as bridges and roads, rural
electrification, women and youth development funds, National budgetary expenditures, and higher
education loans board (HELB) funds to ensure Kenya’s stability by reducing high dependence on
donor funds which may come with rigid conditions.
Tax evasion is the avoidance by a business or a person to comply with the tax requirements. Tax
evasion has been a major challenge to tax bodies both in developing and developed countries. It
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reduces resource mobilization needed by the states to finance essential projects in the economy
(Cummings, 2007). Even in developed economies around the globe, tax evasion substantially
undermines collection of revenue (Rile, 2011). Therefore, there is need for the government of
Kenya to reduce tax evasion in the informal sector if it intends to increase its social expenditure
(Griffiths, 2005).
1.1.1 Effect of Tax Payer Education on Value Added Tax Compliance
According to Normala (2007), educating tax payer is an essential strategy when the institution that
has been mandated to collect taxes targets to enhance revenue collection. On the contrary,
Kimungu & Kileva (2007) argues that establishing compliance and increasing collection of
revenues is a difficult undertaking (Kimungu & Kileva, 2007).
This difficulty, however, can be mitigated through tax education, which provides knowledge and
skills to taxpayers that enable them to pay taxes, including a comprehension of the knowledge of
why they should pay taxes. According to Braithwaite (2003), taxpayer compliance is highly
dependent on having a positive attitude toward the tax system.
Education on matters concerning tax is beneficial to every individual paying taxes because it
makes the whole process less complex hence less time is taken. Whilst the majority of the persons
who pay taxes are actually willing to so, Olowookere and Fasina (2013) claim that they do not
want to pay more than is necessary. According to Misra, (2004), producing the intended outcome
and increasing voluntary tax compliance among the tax payers will only be achieved if a balance
is put in place between educating the tax payers and the institutions established to enforce
compliance. Administration of tax is a critical obligation and affects residents' and businesses'
daily lives. Because most people are not aware of what constitutes of taxes income, failure to grasp
taxation system leads to lower compliance. People will be more likely to comply if they are
2
educated about the entire taxation process and why they should pay taxes. The majority of
taxpayers are likely to respond favorably to tax collection efforts and a drop in evasion. According
to Ogundele (2004), taxpayers need to be adequately informed on tax issues in order to comply
with tax legislation. As a result, tax authorities must consider ongoing education programs as well
as appropriate monitoring measures to ensure that taxpayers are sufficiently informed.
1.2 Statement of the Problem
A country can ensure a positive tax attitude if the tax collection authority and the taxpayers all
perform their responsibilities. Insufficient comprehension of the tax obligation levied on taxpayer
results to the rigid nature of taxpayers and lack of motivation. This results to low level of tax
compliance which has become a crucial concern for majority of policy makers especially in the
third world countries (Togler, 2003). According to the Kenya Revenue Authority, (2018), revenue
collection trend has been reducing every year in spite of the fact that the government has channeled
a lot of effort in a bid to fortify value added regulations. The survey indicated that the SMEs of
which water bottlers falls under has been leading in the VAT non-compliance by 54% in the
country. Despite the increased number of SMEs in Nairobi County, their non-compliance has
greatly hampered revenue collection (KRA, 2018). Various reasons for tax payer non-compliance
have been advanced. According to Aksnes, (2011), low tax payer education, complicated tax rules,
manipulation of various taxable activities aimed at averting tax and a low risk of being caught are
some of the reasons for VAT non-compliance.
V.A.T is one of the vital contributors to the total tax revenues that a government collects as it
accounts for over 30% of the revenues. For successful implementation and adherence to the VAT
regulations, the cooperation of the tax payers is of essence and this makes tax payer education very
important. Revenue collections received from V.A.T usually hit low levels because of illiteracy,
3
poor relationship between tax authorities and the tax payers and the presence of untrained and
incompetent accountants among the staff of various firms (Odusola, 2006). V.A.T noncompliance
and the challenge of evading tax has been the main contributor of revenue loss in Kenya. The
Annual KRA report (2013) reveals that ksh 108 billion was lost as a result of tax evasion by the
informal sector.
According to Onditi, (2013), 30% of all the tax payers normally fail to submit their V.A.T returns
and majority of them end up being prosecuted for that each year. Water bottlers in Nairobi County
is characterized by SMEs and the sector is unregulated hence posing a big challenge on tax
administration by tax authorities. This has paved a way for loopholes in which the firms use to
engage in tax evasion (Mwambingu, 2013). The low levels of tax compliance by water bottlers has
been attributed to reasons such as insufficient knowledge in accounting and tax laws (Maina,
2007). According to Gachie, (2013), water bottler firms face challenges in tax compliance because
of inadequate knowledge on the administration of V.A.T tax.
Taxpayer knowledge on taxation is presumed to be vital for the purposes of preference and the
overall attitude shown towards taxation and compliance (Olowookere & Fasina, 2013). Despite
this fact, very little research has been carried out that clearly describes how educating taxpayers
influences V.A.T compliance among water bottlers in Nairobi County. Most of prior studies on
tax compliance have focused on how the behavior of the tax payer can be changed in order make
them more compliant using different strategies such as delivery of quality service strategies and
audit. Simiyu (2003) carried out a study on factors influencing taxpayers’ voluntary compliance
among local authorities. This study concentrated on other factors that influence tax compliance
other than taxpayer education. Further, Bernard, Memba, & Oluoch (2018), did a study on the
influence of tax knowledge and awareness on tax compliance among investors in the Export
4
Processing Zones in Kenya. However, this study was conducted in a different sector. In addition,
the study adopted a different research methodology which makes generalization impossible due to
inconclusive findings. Therefore, it is on this background that this study was conducted to fill-in
the knowledge gap by seeking to establish the effect of educating taxpayers on value added tax
(vat) compliance a case study of water bottlers in Nairobi County.
1.3 Objectives of the Study
1.3.1 General Objective
The general objective of this study was to;
Establish the effect of educating taxpayers on value added tax (vat) compliance in Kenya, a case
study of water bottlers in Nairobi County
1.3.2 Specific Objectives
This study was based on the following specific objectives:
i.
To establish the effect of social media platforms education on value added tax (vat)
compliance in Kenya, a case study of water bottler in Nairobi County
ii.
To determine the effect of tax payer sensitization programs on value added tax (vat)
compliance in Kenya, a case study of water bottlers in Nairobi County
iii.
To investigate the effect of electronic/print media education on value added tax (vat)
compliance in Kenya, a case study of water bottlers in Nairobi County
1.4 Research Questions
i.
How does social media platforms education affect value added tax (vat) compliance in
Kenya, a case study of water bottler in Nairobi County?
5
ii.
What is the effect of Stakeholder sensitization programs on value added tax (vat)
compliance in Kenya, a case study of water bottlers in Nairobi County?
iii.
How does the electronic/print media education affect value added tax (vat) compliance in
Kenya, a case study of water bottlers in Nairobi County?
1.5 Justification of the Study
The government requires tax revenues to cater for public health, security, infrastructure and
education. For this reason, there is need for the government to ensure effective and efficient
sources of revenue. This study’s findings will aid the state to come up with the right measures both
administrative and legislative that will be aimed at improving compliance in tax payments. KRA
aims at boosting collection of revenue and therefore this study will help come up with policies,
measures and initiatives to abolish non-compliance and increase collection of taxes. Tax experts
helps taxpayers to understand tax laws perceived as being complicated and also filling their returns.
This study will help practitioners know various challenges that taxpayers face when they
voluntarily comply and aid them give best response to the customers. The survey is a basis for
further research especially to those intending to determine the relationship that exist between
education for tax payers tax compliance.
6
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter looks at the tax compliance models and theories, concept of Tax compliance,
Conceptual Framework, Factors influencing Tax Non- Compliance and the critique of existing
literature.
2.1 Theoretical Review
2.1.1 Theory of Reasoned Action
This theory was propounded in 1980 by Fishbein and Ajzen. It was introduced in order to improve
on the theory by Anderson called Information integration. The enhancement stems from
preexisting people attitudes and behavioral intention. A person’s response may be predicted by
their intentions therefore, the behavior of an individual will be influenced or be affected by both
his perceptions and his expectations (Ajzen & Fishbein, 2004). In accordance to this theory, human
intentions and behavior are influenced by three factors; personal opinion on a behavior being good
or bad; unfavorable or favorable; positive or negative. The attitude of the individual must be
specific in order to allow the prediction of resulting behavior. Behavior intention is regarded as
the determinant of the actual behavior which shows that an individual will behave according to the
behavioral intention developed individual. Actions of individuals are influenced by attitudes and
perception as shown by the theory of Reasoned Action. It also recognizes that attitudes indicate
specific behavior and may be contradicted by perceived social norms (Ogjen, 2003).
2.1.2 Fisher Tax Compliance Model
This theory was advanced in 1986 by Milliron and Jackson where 14 core factors that offer
guidance on the taxpayer’s conduct as far as complying with tax regulations is concerned. This is
7
after a research on behavior on tax compliance was carried out. Fischer, Wartick, and Mark (1992)
broke these factors into four structures. These are non-compliance chances, attitudes related to the
demographic, perception and the structure of the tax in consideration. The theory helps understand
the effect that psychology factors have on the social economic choices of the taxpayer.
2.1.3 Fiscal Exchange Theory
Instead of coerced compliance, the fiscal exchange method claimed that negotiating over taxes is
crucial for creating cordial association between society and the state based on the sharing of rights
and responsibilities (Cobham, 2005). According to the concept, contentment or discontent with the
government's terms of trade influences taxpayer compliance behavior (Ali et al., 2013). According
to Torgler (2007), a taxpayer's readiness to collaborate with the tax authority increases if the
authority views itself as a service provider by delivering high-quality services and views taxpayers
as partners. Delivering high-quality services to taxpayers will boost their propensity to voluntarily
comply with tax rules and regulations, resulting in increased tax compliance
2.2 Empirical Review
According to a research carried out by Martin (2012), social media has evolved into an important
news platform and education platform on a variety of issues. While the reliability of some sources
can clearly be questioned, the KRA tweets and information on key tax-related events are authentic
and hence can be relied upon. Because the bulk of tax payers are on social media, information is
more readily available to them.
A study carried out by Tuten (2015) contends that social media has facilitated contact between
institutions and their clients and therefore it is hard to do away with it. Due to time and space
constraints, it makes it possible for persons to interact and pass information more frequently than
8
ever before. People, institutions, cities, and continents can easily communicate with one another,
allowing them to experience other cultures and learn more from one another.
According to Katz & Lazars feld (2016), social media has been phenomenal in promoting literacy.
People who begin to use social media platforms acquire excellent communication skills and
become more informed in general. This is a positive trend, and owing to the vast amount of simple
and sophisticated information available on the internet, everyone can become as knowledgeable
or brilliant as they choose.
Ming et.al, (2010), did a study on the skills related to ICT that a person who is freshly graduating
needs to have before being employed in a tax firm as well as the use of electronic tax
applications in tax practice and the views of tax experts on the integration of ICT and e-tax
applications. The research used a questionnaire-based survey research design that was done
online. Students' understanding of IT and computerized systems of tax had a vital effect on
compliance, according to the study. Television, radio and the internet are examples of electronic
media that take advantage of electronic technology. However, this study was done in a different
country and therefore may not be effectively applied in Kenyan context.
Deborah, Gray Christina (2003) carried out a research to find out what behavioral and economic
related factors influence taxpayer compliance. Data was collected by use of a questionnaire.
The study's goal was to figure out what factors influence tax the taxpayer’s compliance who are
eligible for a tax penalty leniency. According to the study findings, lack of knowledge on the
existing laws related to tax, a feeling of unfavorable rates of tax levied on taxpayers and
ambiguity of the tax’s system were identified as factors that caused respondent’s failure to
honor their duties of paying taxes on time as stipulated.
9
Machogu and Amayi (2013) conducted research among Nairobi CBD motor vehicle spare parts
sellers on the effect that education on taxpayer has on voluntary tax compliance. The research
examined the level of taxpayer education among Nairobi CBD motor vehicle spare parts sellers,
the amount of voluntary tax compliance among Nairobi CBD motor vehicle spare parts dealers,
and the impact of taxpayer education on voluntary tax compliance for entrepreneurs. Primary and
secondary data were employed in the investigation. According to the findings, 85 percent of those
surveyed stated that they had gained a better comprehension of vital laws related to tax. Further,
78.7percent of the participants claimed that education relating to tax aided them comprehend their
rights and duties as taxpayers; and 83 percent acknowledged that tax education aided them
comprehend clearly the payment of tax criteria. Furthermore, as a result of the tax education, 80
percent of returns were filed on time, with 67 percent declaring accurate tax liabilities. However,
this study by Machogu and Amanyi were conducted in a different sector (vehicle dealers) as
opposed to what is being investigated in this study (water bottlers).
2.3: Conceptual Framework
According to Wong and Wai-Yee, (2015), conceptual framework refers to a collection of general
concepts and principles drawn from several fields of study and utilized to organize a subsequent
presentation. Tax system education will be measured in terms of the use of manual and automatic
systems, taxpayer sensitization program will be measured in the form of seminars and workshops
adopted by KRA. Electronic/ print media education will be accessed in terms of Internet news,
various tax booklets and newspapers.
10
Independent Variable
Dependent Variable
Social Media Platforms



Facebook
Twitter
You Tube
Tax Payer sensitization
programmes


Seminars
Workshops
Value Added Tax Compliance

Timely Filing of returns

Increased levies collected
Electronic/print media
education



Internet news
Tax booklets
Newspapers
Figure 2.1 Conceptual Framework
2.3.1 Social Media
The term "social media" is often used to characterize new forms of media that promote interactive
participation (Manning, 2014). According to Gillin (2016), social media is a shift in how people
access, use, and disseminate information and content. Social media, as depicted by Gillin (2016)
11
is a synthesis of sociology and technology that shifts flow of information from monologue (one to
many) to dialog (many to many). Because of the development of digital and mobile technologies,
individual interaction has never been simpler; as a result, a new media age has evolved, with
engagement at the heart of new media functions. Individuals now have the ability to seek
information from multiple sources such as Facebook, Twitter, and YouTube, and to dialogue with
others about the information posted, thanks to the low cost and accessibility of new technology
(Manning, 2014). Kenya Revenue Authority has been in the forefront of this ongoing social media
revolution, utilizing various social media platforms to post educational information about taxes.
For example, numerous tax-related announcements are shared on Facebook or Twitter, with public
comment welcomed. According to Adoyo (2015), the usage of social media among people is on
the rise, prompting the KRA to utilize social media as a strategy for educating tax payers on tax
issues in order to promote tax compliance. This is due to the fact that this new mode of
communication is gaining popularity at a rapid rate. As a result, it's critical to investigate the impact
of social media on VAT compliance in Kenya.
The concepts that govern behavior, engagement, and assistance will continue to evolve as social
media evolves. The primary function of social media will always be to create communities and
facilitate communication and education among its members. Gorry and Westbrook (2013) identify
social media technologies such as Facebook, Twitter and You tube. KRA has a Facebook page
under the name (Kenya Revenue Authority) which has more than 244,000 followers, a twitter page
under the name KRA Care (@KRACare) and a You Tube channel with more than 61400
subscribers (Africa Check, 2019). The use of these social media platforms by KRA have enabled
more than friendly conversation and individual expressions on matters of tax. They facilitate
remarkably diverse and broad participation while accelerating the formation of effective
12
collaborations and more oftently, KRA has succeeded on educating its members (tax payers) on
matters of tax compliance through its occasional updates via the platforms.
2.3.2 Taxpayer Sensitization Programs
Kenya Revenue Authority has in the recent past engaged the taxpayers through workshops. This
has been aimed at creating awareness, encouraging and also teaching them on the importance of
being tax compliant. Through these workshop events, KRA is able to better comprehend their
administrative processes and also collect the people’s opinions on what ought to be improved
regarding the tax system. Thereafter, the views and the opinions are consolidated and usually aid
the institution in their planning process. In addition, KRA organizes conferences, consultation
forums, peer reviews and facilitates memorandum of understanding between the institution and
key stakeholders to discuss matters concerning tax compliance. It is during these events that those
in
attendance
are
education
on
various
tax
issues
including
compliance
(http//www.kra.go.ke/portal). Taxpayer education through seminars and other stakeholder ways
aids water bottlers in Nairobi County to be more tax compliant because they are major stakeholders
in tax affairs and can affect or be affected by tax organizations' activities, aims, and policies.
2.3.3 Electronic/ print media education
The media campaigns’ effectiveness, the usage of information related to tax publications and
newspapers will increase the compliance of the tax payers and consequently, filing of returns will
be done on time. Tax related reports have been standardized and include pertinent and critical
information. Records will now be published electronically and centrally, with all relevant agencies
being eligible to access them if need be. This will drastically aid with compliance follow-ups and
avoiding audit recurrences (http://www.kenyaflowercouncil.org). According to Sas (2007), a
concise overview of taxpayers by use of electronic tools will enhance compliance through the
13
application of proactive and extensive procedures. This technique, according to the literature,
would make it possible for an organization to gain a single perspective of the individual paying
taxes, enhance efficiency and effectiveness of the auditing process, boost policy analysis, and
achieve quality management.
2.3.4 Tax Compliance
Tax compliance refers to a taxpayer's desire to follow tax regulations so that the country's economy
to achieve equilibrium. Andreoni, Erard, & Feinstein, 2011). According to Kircler (2007), tax
compliance is defined as a taxpayer's willingness to pay taxes truthfully. Tax evasion on contrary
is defined by Cummings (2007) as a taxpayer's failure to comply with a tax obligation. Tax evasion
undermines collection of revenue, (Rile, 2011); Tax evasion also diminishes government’s
resource mobilization. William and Round (2009) The main reasons leading to tax evasion and
fraud include inadequate understanding, tax penalties, high costs of compliance and high tax rates.
Developing economies should make sure that tax system is effective and efficient for SMEs and
don’t negatively affect them. Most authorities face challenges of poor tax policies and system. Tax
policy is aimed at making organizations and individuals comply with tax laws with trust and
convenience (James & Alley, 2004). In this study, tax compliance will be measured in terms of
timely filing of returns and increased levies collected which will in turn lead to more revenue
collection.
Businesses are essential for a country’s economic development and growth because they create a
favorable environment for competition and also create jobs. The Economic Survey Report (2016)
shows that businesses constitute 70% of Gross Domestic Product in Kenya, the business sector
also employs about 80% of its population. The requirement for registration of SMEs in Kenya is
company registration, trade licenses, acquiring PIN and VAT with KRA and local authority
14
licenses, Doing Business in Kenya Report (2017). Small Businesses in Nairobi take advantage of
their size thus don’t declare and submit their tax to KRA. Taxpayer education is undertaken is to
make people more aware on importance of tax remittance.
15
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter covers the methodology, procedures that were used, an outline of the study
population, sample size, sampling techniques, data sources, research instruments, data collection
procedures, data analysis and presentation.
3.1 Research Design
A quantitative cross-sectional study approach was used in this research. The information was
collected at a certain point in time with the goal of characterizing the current state of affairs,
identifying the benchmarks against which current conditions may be measured, and determining
the relationship between specific occurrences (Orodho, 2009).
3.2 Target population
A population, according to Mugenda & Mugenda (2003), is "a full set of individuals, cases, or
objects with some shared observable qualities." This study’s target population was the 34 water
bottler
companies
located
in
Nairobi
County
as
listed
on
the
website
https://www.businesslist.co.ke/category/bottled-water/city:nairobi as at December 2020. The
website also provides the postal address, their business phone number and their location within
Nairobi. The respondents for the study comprised of the owners or operators of the registered water
bottlers in Nairobi County. The unit of analysis was the owners or the operators of the water
bottlers while the unit of observation comprised of the water bottlers in Nairobi County.
3.3 Sample Size and sampling Design
The process of selecting units of analysis for research purposes is known as sampling, and the
findings of the representatives usually represent the population from which they were chosen
16
(Mugenda and Mugenda, 2003). The 34 mentioned water bottlers in Nairobi County were
investigated using a census technique. Census technique was useful to this study as it involved
studying the entire population whereby each individual firm was studied. Therefore, a total of 34
water
bottler
companies
in
Nairobi
County
listed
on
the
website
https://www.businesslist.co.ke/category/bottled-water/city:nairobi were studied.
3.4 Data Collection
This research relied solely on primary data. Because the information sought is directly acquired
from the respondents, primary data is frequently relied upon because of its credibility. The data
for this study was gathered using a questionnaire that included closed ended questions that were
properly constructed. Closed-ended questions helped to ensure consistent responses, which made
data processing easier. To allow sufficient time for filling, the questionnaires were dropped at the
offices and picked after three days.
3.5 Pretesting
A pilot test, according to Kothari (2004), is the first step in the data collection phase of the research
process. It was undertaken to ensure that various errors resulting from faulty interview guide
construction, any difficulty in answering various questions and unclear terms are omitted. The
primary goal of conducting a pilot test is to identify issues before they turn out to be costly
blunders. It also provides an estimate of the amount of time that will be required to complete the
field work. A pilot research is carried out when only a few participants are given a questionnaire
with the goal of pre-testing the questions (Bobbie, 2007). For this study, pilot testing was
conducted before the actual research was carried out. The intention was to test the research
instrument’s validity. According to Bryman, (2003), it is recommended to carry out a pilot study
before the questionnaire or the interview guide is administered to the study sample. This is mainly
17
done so as to obtain sufficient feedback on their effectiveness and to ascertain if the respondents
understood it. The participants for the pilot study were obtained from outside the main sample of
the study but within the target population and their feedback was used to enhance the questionnaire.
3.5.1 Validity of Research Instruments
Validity refers to the level to which the data supplied by research instruments accurately represents
the study variables and theoretical concepts (Mugenda and Mugenda, 2003). Further, Mugenda
and Mugenda, (2003) noted that upon confirmation of validity, the inferences and the conclusions
drawn from such data is accurate and meaningful. Greener, (2008) argued that expert judgment is
used to determine content validity. In this study, university supervisors who have enormous
expertise in the field of research aided in checking the validity of the data collection instruments.
3.5.2 Reliability
Reliability is the consistency of the results received from a study measuring instrument (Kothari
& Garg, 2014). In order to be reliable, each data collection instrument should be able to measure
consistently the factors for which they were initially intended to measure (Greener, 2008). The
Cronbach's alpha was applied in examining the reliability of data collection instruments in this
study. It assesses the internal consistency by determining whether or not a given item measures
the same construct. An Alpha of above 0.7 is deemed acceptable in measuring reliability (George
& Mallery, 2003).
3.6 Data analysis and presentation
To offer information for analysis, primary data was employed. The data was obtained using a
questionnaire. In order to establish existing statistical correlations, the acquired primary data was
coded, cleaned, and tabulated. Analysis of the quantitative data was done by use of descriptive
statistics and displayed using tables. This was achieved through the use of means, frequency
18
distributions, standard deviations and percentages. The relationship existing between the research
variables was established through the use of inferential statistics and the tests conducted using
ANOVA, F-test, and t-test. In order to determine the effect of the independent variables on the
study's dependent variable, the least square regression analysis was used and interpretation was
made. The influence of taxpayer education on VAT compliance among the water bottler
companies in Nairobi County was studied using inferential statistics.
In this study, Pearson correlation coefficient was used as a linear correlation measure. It is usually
denoted by (r) and typically ranges from -1 to +1. A value of 0 demonstrates that no linear
relationship exists. The correlation coefficient squared (coefficient of determination), abbreviated
as R2, was used to assess the extent of variation in the dependent variable as a result of the
independent variables
The general regression model for predicting the effect of taxpayer education on VAT compliance
for water bottlers is represented by the following:
Y = α +β1X1 + β2X2+ β3X3 + ε
Where;
Y= VAT compliance (Dependent variable)
α = Constant
X1= aggregate mean of social media platforms
X2= aggregate mean of taxpayer sensitization programs
X3= aggregate mean of electronic/print media education
β1, β2, and β3 represent the regression coefficients to be estimated in the SPSS software
19
ε =Error term
3.6 Ethical Considerations
The researcher sought the informed respondent’s consent to participate in the study by offering
verbal and written explanations the main purpose of the data. In addition, the researcher obtained
an introduction letter from Kenya School of Revenue Administration confirming that the research
was purely for academic purposes.
20
CHAPTER FOUR
DATA ANALYSIS, FINDINGS AND DISCUSSION
4.0 Introduction
Based on the data gathered, the chapter summarizes the study's findings. The chapter was
organized explicitly as follows: response rate of the research, the study variable’s demographic
characteristics, analysis of data normality, independent variable descriptive statistical statistics,
correlation of variables and regression analysis
4.1 Response Rate
In total, 31 questionnaires were presented to the respondents. However, only 28 were returned and
after scrutiny, all of them were judged to be suitable for analysis, translating to 82.3 percent
response rate. This implies a high response rate, which Greener (2008), considers acceptable. In
order to ensure that the data collection questionnaire was reliable, a pre-test was done on the
respondents. Mugenda and Mugenda (2008) pointed out that to arrive at the number of
questionnaires that are adequate for pilot testing, the researcher should use between 1- 10% of the
questionnaires and this would be adequate for yielding reliable data for gauging the reliability of
the instruments. This study pretested 5 questionnaires (14.5%) on the water bottlers in Kiserian
town, Kajiado County. The pilot results were tested for the internal consistency using Cronbach
alpha test. The results revealed an alpha figure of 0.85 which indicated that the research instrument
used was reliable.
4.2 General Information
This section outlines the findings of the general demographic and relevant taxpayer education
dynamics of the study population.
21
4.2.1 Gender
The gender of the respondents was examined, and the results shown in table 4.1. Most of those
interviewed were females (57.1 %) while (42.9 %) were males.
Valid Male
Female
Total
Frequency
12
16
28
Percent
42.9
57.1
100.0
Valid
Percent
42.9
57.1
100.0
Cumulative
Percent
42.9
100.0
Table 4.1: Gender of the Participants
4.2.2 Education Level
The study also looked at the respondents' education level, and the results shown in table 4.2.
Majority (78.6%) of the respondents had a bachelor’s degree certificate, 17.9% had a masters
degree while only 3.6 % had a secondary school certificate. From the findings of the study, none
of the respondents had a PhD.
Frequency Percent
Valid Secondary certificate
1
3.6
Bachelor's degree
22
78.6
Masters
5
17.9
Total
28
100.0
Table 4.2: Education Level of the Respondents
Valid
Percent
3.6
78.6
17.9
100.0
Cumulative
Percent
3.6
82.1
100.0
22
4.3.3 Years the Enterprise has been in Operation
The years that the respective enterprises had been in operation was sought and the responses were
as shown in table 4.3. Majority of the enterprises have been in operation for period of between 711 years (42.9%), followed by those that have been in operation for a period of above 12 years
(28.6%). Those in operation for a period of less than one years accounted for 17.9%. Only 10.7%
of the enterprises have been in operation for a period of between two to six years.
Frequency
Valid Less than 1 year
5
2-6 years
3
7-11 years
12
Above 12 years
8
Total
28
Table 4.3: Years of operation
Percent
17.9
10.7
42.9
28.6
100.0
Valid
Percent
17.9
10.7
42.9
28.6
100.0
Cumulative
Percent
17.9
28.6
71.4
100.0
4.3 Effectiveness of Using Various Taxpayer Education Programmes
4.3.1 Social Media Platforms
On a scale of 1 to 5, the researcher purposed to determine the extent to which respondents viewed
different social media platforms used by KRA as being effective in achieving the objective of
educating the taxpayers, (where 5= very great extent, 4=great extent, 3=moderate extent, 2=little
extent and 1= no extent). It was found that majority of the respondents acknowledged that social
media platforms are effective at a moderate extent at (53.6%), followed by those who
acknowledged that social media is effective at a very great extent (21.4%). 17.9% affirmed that
social media platforms are effective in achieving the objective of educating taxpayers to a great
extent while only 7.1% affirmed that social media is effective to a little extent. The information is
presented in table 4.4
23
Valid Little extent
Moderate extent
Great extent
Very great extent
Total
Frequency
2
15
5
6
28
Percent
7.1
53.6
17.9
21.4
100.0
Valid
Percent
7.1
53.6
17.9
21.4
100.0
Cumulative
Percent
7.1
60.7
78.6
100.0
Table 4.4: Effectiveness of Social Media Platforms
4.3.2 Taxpayer Sensitization Programmes
On a scale of 1 to 5, the researcher aimed at determining the extent to which respondents viewed
different taxpayer sensitization programmes used by KRA as being effective in achieving the
objective of educating the taxpayers, (where 5= very great extent, 4=great extent, 3=moderate
extent, 2=little extent and 1= no extent). It was found that majority of the respondents
acknowledged that taxpayer sensitization programmes are effective to a great extent (60.7%),
followed by those who acknowledged that taxpayer sensitization programmes are effective at a
moderate extent (25.0%). 17.1% affirmed that taxpayer sensitization programmes are effective in
achieving the objective of educating taxpayers to a very great extent while 7.1% of the respondents
also affirmed that taxpayer sensitization programmes are effective to a little extent. The
information is presented in table 4.5.
24
Valid Little extent
Moderate extent
Great extent
Very great extent
Total
Frequency
2
7
17
2
28
Percent
7.1
25.0
60.7
7.1
100.0
Valid
Percent
7.1
25.0
60.7
7.1
100.0
Cumulative
Percent
7.1
32.1
92.9
100.0
Table 4.5: Effectiveness of Tax Payer Sensitization Programmes
4.3.3 Electronic/print media education
On a scale of 1 to 5, the researcher sought to ascertain the extent to which respondents viewed
electronic/print media used by KRA as being effective in achieving the objective of educating the
taxpayers, (where 5= very great extent, 4=great extent, 3=moderate extent, 2=little extent and 1=
no extent). It was found that majority of the respondents acknowledged that electronic/print media
education is effective to a very great extent (50.0%), followed by those who acknowledged that
electronic/print media education is effective at a moderate extent (28.6%). Only 21.4% of the
respondents affirmed that electronic/print media education is effective in achieving the objective
of educating taxpayers to a great extent. The information is presented in table 4.6.
Valid Moderate extent
Great extent
Very great extent
Total
Frequency
8
6
14
28
Percent
28.6
21.4
50.0
100.0
Valid
Percent
28.6
21.4
50.0
100.0
Cumulative
Percent
28.6
50.0
100.0
Table 4.6: Effectiveness of Electronic/Print Media Education
25
4.5 Karl Pearson Correlation
According to the findings, each component of taxpayer education has a positive relationship with
VAT compliance. Taxpayer sensitization programmes and VAT compliance were shown to have
the strongest relationship (r = 0.851); P < 0.01; followed by social media with (r=0.805); P< 0.01;
then finally electronic/print media and VAT compliance (r = 0.711); P < 0.01. All of the predictor
variables were found to be significant with the dependent variable at the 0.01 confidence level.
The results for Karl Pearson Correlation also affirm that the independent variable’s correlation was
below the recommended threshold of 0.8 and hence the study data did not reveal substantial
multicollinearity. The Pearson correlations for the relationship between various taxpayer education
components and VAT compliance are shown in table 4.7.
Effectiveness of social
media
Effectiveness of tax
payer sensitization
programmes
Effectiveness of
electronic/print media
education
VAT compliance
Effectiveness
Effectiveness of
Effectiveness of tax payer electronic/pri
of
social sensitization nt media
media
programmes education
Pearson Correlation 1
.112**
.203*
Sig. (2-tailed)
.000
.034
**
Pearson Correlation .112
1
.198**
Sig. (2-tailed)
.000
.000
VAT
compliance
.805**
.000
.851**
.000
Pearson Correlation .203*
Sig. (2-tailed)
.034
Pearson Correlation .805**
Sig. (2-tailed)
.000
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
.198**
.000
1
.711**
.000
.851**
.000
.711**
.000
1
Table 4.7: Karl Pearson Correlation Results
26
4.6 Descriptive Statistics
The study investigated three conceptualized components of taxpayer education and their effect on
VAT compliance among the Nairobi water bottlers. These include social media platforms,
taxpayer sensitization programmes and electronic/print media education. Standard deviations as
well as the means, were employed in presenting the study’s descriptive statistics.
4.6.1 Effect of Social Media Platforms on VAT compliance in Nairobi Water Bottlers
The aim of the study was to examine the effect of social media platforms on VAT compliance in
Nairobi water bottlers. Respondents were asked to react to important statements by expressing the
extent to which they agreed with them in order to attain this objective. Responses were gathered
using a five-point Likert scale (where: 5-strongly agree 4-agree, 3-moderately agree, 2-disagree 1strongly disagree). Mean scores of 1 to 2.9 indicate that the respondents disagreed with the
statements, 3.0 to 3.4 indicates that the respondents moderately agreed with the given statements,
3.5 to 4.4 indicates that the respondents agreed with the given statements and mean values of 4.5
to 5.0 indicate that the respondents strongly agreed with the statements. This was then analyzed
using mean and standard deviation. According to Boone and Boone (2012), descriptive statistics
including mean, mode and standard deviation are appropriate for analyzing Likert scale data. As
shown in table 4.8, most of those who responded agreed with assertions on the impact of social
media platforms on VAT compliance in Nairobi Water bottlers. In particular, the respondents
agreed that; the use of various social media platforms such as Facebook, Twitter and YouTube to
educate tax payers is an effective way to enhance VAT compliance (3.79), they learnt on the
requirements for VAT compliance via the KRA updates and posts on their YouTube channel
(3.79), they learnt on the requirements for VAT compliance via KRA updates and posts on their
twitter page (3.75), that Facebook updates by KRA have enabled them get crucial information that
27
have helped them remain VAT compliant and that the use of different social media platforms to
educate tax payers has resulted to enhanced VAT compliance (3.54).
Table 4.8: Social Media Platforms and VAT compliance in Nairobi Water Bottlers
Attribute
Mean
Std.
Deviation
Facebook updates by KRA have enabled us get crucial 3.71
.600
information that have helped us remain VAT compliant
We learnt on the requirements for VAT compliance via KRA 3.75
1.041
updates and posts on their twitter page
We learnt on the requirements for VAT compliance via the 3.79
.995
KRA updates and posts on their YouTube channel
Use of various social media platforms such as Facebook, 3.79
.686
Twitter and YouTube to educate tax payers is an effective way
to enhance VAT compliance
Use of different social media platforms to educate tax payers 3.54
has resulted to enhanced VAT compliance
.838
Source: research data (2021)
4.6.2 Effect of Taxpayer Sensitization Programmes on VAT compliance in Nairobi Water
Bottlers
The aim of the study was to examine the effect of taxpayer sensitization programmes on VAT
compliance in Nairobi water bottlers. Respondents were asked to react to important statements by
expressing the extent to which they agreed with them in order to attain this objective. Responses
were gathered using a five-point Likert scale (where: 5-strongly agree 4-agree, 3-moderately agree,
28
2-disagree 1-strongly disagree). Mean scores of 1 to 2.9 indicate that the respondents disagreed
with the statements, 3.0 to 3.4 indicates that the respondents moderately agreed with the given
statements, 3.5 to 4.4 indicates that the respondents agreed with the given statements and mean
values of 4.5 to 5.0 indicate that the respondents strongly agreed with the statements. This was
then analyzed using mean and standard deviation. According to Boone and Boone (2012),
descriptive statistics including mean, mode and standard deviation are appropriate for analyzing
Likert scale data. As shown in table 4.9, majority of the respondents strongly agreed with assertions
on the impact of taxpayer sensitization programmes on VAT compliance in Nairobi Water bottlers.
In particular, the respondents strongly agreed that; Use of workshops and seminars to educate tax
payers is an effective way of enhancing VAT compliance (4.39) and that tax payer sensitization
programmes such as workshops have resulted into increased tax compliance (4.25). The rest of
those who responded agreed that indeed tax payer sensitization programmes have played a key
role in changing the attitudes of taxpayers resulting into improved tax compliance (3.79), tax payer
sensitization programmes have enhanced taxpayer VAT compliance (3.71) and that tax payer
sensitization programmes such as seminars have enlightened the public on the need to pay taxes
(3.36).
29
Table 4.9: Taxpayer sensitization Programmes and VAT compliance in Nairobi Water
Bottlers
Attribute
Mean
Tax payer sensitization programmes such as seminars have 3.36
Std. Deviation
.731
enlightened the public on the need to pay taxes
Tax payer sensitization programmes such as workshops have 4.25
.799
resulted into increased tax compliance
Tax payer sensitization programmes have played a key role in 3.79
.876
changing the attitudes of taxpayers resulting into improved tax
compliance
Use of workshops and seminars to educate tax payers is an 4.39
.786
effective way of enhancing VAT compliance
Tax payer sensitization programmes have enhanced taxpayer 3.71
VAT compliance
.810
Source: research data (2021)
4.6.3 Effect of Electronic/print media Education on VAT compliance in Nairobi Water
Bottlers
The objective of the study was to examine the effect of electronic/print media on VAT compliance
in Nairobi water bottlers. Respondents were asked to react to important statements by expressing
the extent to which they agreed with them in order to attain this objective. Responses were gathered
using a five-point Likert scale (where: 5-strongly agree 4-agree, 3-moderately agree, 2-disagree 1strongly disagree). Mean scores of 1 to 2.9 indicate that the respondents disagreed with the
statements, 3.0 to 3.4 indicates that the respondents moderately agreed with the given statements,
30
3.5 to 4.4 indicates that the respondents agreed with the given statements and mean values of 4.5
to 5.0 indicate that the respondents strongly agreed with the statements. This was then analyzed
using mean and standard deviation. According to Boone and Boone (2012), descriptive statistics
including mean, mode and standard deviation are appropriate for analyzing Likert scale data. As
shown in table 4.10, some of the respondents strongly agreed with assertions on the effect of
electronic/print media education on VAT compliance in Nairobi Water bottlers. In particular, the
respondents strongly agreed that; use of print/electronic media to educate taxpayers is an effective
way of enhancing VAT compliance (4.11). The Majority of the respondents agreed that they have
learnt about the new system of filing returns (itax) via the internet (3.82), Print/electronic media
education has resulted to more VAT compliance among the taxpayers (3.75) and that tax
information obtained via the internet has been instrumental in enhancing our VAT compliance
(3.54). Ultimately, the rest of the respondents moderately agreed that they have known which
income should be included or excluded in determining the taxable income through the KRA tax
booklets (3.36).
31
Table 4.10: Electronic/print Media and VAT compliance in Nairobi Water Bottlers
Attribute
Mean
I have known which income should be included or excluded in 3.36
Std. Deviation
.932
determining the taxable income through the KRA tax booklets
I have learnt about the new system of filing returns (itax) via 3.82
.819
the internet
Tax information obtained via the internet has been 3.54
.508
instrumental in enhancing our VAT compliance
Use of print/electronic media to educate taxpayers is an 4.11
.629
effective way of enhancing VAT compliance
Print/electronic media education has resulted to more VAT 3.75
compliance among the taxpayers
.928
Source: research data (2021)
4.6.4 VAT compliance in Nairobi Water Bottlers
The study aimed to examine the level of VAT compliance in Nairobi water bottlers. Respondents
were asked to react to important statements by expressing the extent to which they agreed with
them in order to attain this objective. Responses were gathered using a five-point Likert scale
(where: 5-strongly agree 4-agree, 3-moderately agree, 2-disagree 1-strongly disagree). Mean
scores of 1 to 2.9 indicate that the respondents disagreed with the statements, 3.0 to 3.4 indicates
that the respondents moderately agreed with the given statements, 3.5 to 4.4 indicates that the
respondents agreed with the given statements and mean values of 4.5 to 5.0 indicate that the
respondents strongly agreed with the statements. This was then analyzed using mean and standard
deviation. According to Boone and Boone (2012), descriptive statistics including mean, mode and
32
standard deviation are appropriate for analyzing Likert scale data. As shown in table 4.11, some
of the respondents strongly agreed with assertions on VAT compliance in Nairobi Water bottlers.
In particular, the respondents strongly agreed that there are dishonest tax collectors and hence may
be demotivated to file returns in time (4.25). In addition, majority of the respondents agreed with
the statements posed about the VAT compliance in Nairobi Water bottlers. More specifically, the
respondents agreed that tax payer education has resulted to timely filing of returns (3.86), that it is
unfair to pay taxes and therefore payment should be forfeited (3.82), tax payer education has led
to increased levies collected (3.75) and that tax rates are too high and hence low tax compliance
instances may be witnessed (3.57).
Table 4.11: VAT compliance in Nairobi Water Bottlers
Attribute
Mean
It is unfair to pay taxes and therefore payment should be 3.82
Std. Deviation
.723
forfeited
Tax payer education has resulted to timely filing of returns
3.86
.705
Tax payer education has led to increased levies collected
3.75
.967
Tax rates are too high and hence low tax compliance instances 3.57
.634
may be witnessed
There are dishonest tax collectors and hence may be 4.25
demotivated to file returns in time
.518
Source: research data (2021)
33
4.7 Multiple Regression Results
Multiple regression analysis was done among the variables to determine the degree of effect of the
various components of taxpayer education and VAT compliance. The regression model was as
follows:
Y = α + β1X1 + β2X2 + β3 X3 + є
Where:
α = Constant
X1 Represent social media platforms
X2 Taxpayer sensitization programmes
X3 Represent electronic/print media education
ɛ = Error term
By regressing all of the independent variables, the overall goodness of fit was found, and the results
shown in table 4.12. With an R of 0.924, the findings revealed a significant linear relationship
between all taxpayer education components and VAT compliance. Social media platforms,
taxpayer sensitization programmes and electronic/print media together explain 83.5% of variations
in VAT compliance among the Nairobi Water bottlers according to the adjusted R-square of the
model. The other factors not included in the model explain 16.5%.
Table 4.12: Overall Appropriateness of the Fit Model (Regression Analysis)
Adjusted R Std. Error of
Model R
R Square Square
the Estimate
a
1
.924
.853
.835
.286
a. Predictors: (constant), electronic/print media education,
social media platforms, tax payer sensitization programmes
b. Dependent Variable: VAT compliance
34
The overall ANOVA (table 4.13) shows that the overall regression model's calculated value of F
was 46.592 which is higher than the F-critical value (3.01). Furthermore, the p-value (0.000) was
less than 0.05 (level of significance). Thus, a conclusion is made that the model was appropriate
in predicting the effect of social media platforms, taxpayer sensitization programmes and
electronic/print media education on VAT compliance among the Nairobi Water bottlers.
Table 4.13: Overall ANOVA (Regression Analysis)
Sum of
Mean
Model
Squares
df
Square
F
Sig.
1
Regression
11.461
3
3.820
46.592
.000b
Residual
1.968
24
.082
Total
13.429
27
a. Dependent Variable: VAT compliance
b. Predictors: (constant), Electronic/print media education, Social media, Tax
payer sensitization programmes
Table 4.14 contains the data necessary to predict the effect of the predictor variables on the
response variable and assess whether the predictor variables are significant (statistically) in the
model or not. In addition, the values in the "standardized Coefficients" reflect the weight of the
predictor variables' effect on the response variable.
Y = 0.456+ 0.464X1 + 0.302X2 + 0.313X3
Where:
Y-represents VAT compliance
X1 -Represents social media platforms
X2 -Represents taxpayer sensitization programmes
X3- Represents electronic/print media education
A 0.456 rise in VAT compliance among the Nairobi Water bottlers would result from a unit change
in the use of social media platforms in educating the taxpayers. With a P value of 0.000 being less
35
than 0.05 level of significance, the relationship is statistically significant. Furthermore, the
calculated t value (4.095) was more than the critical value t (2.05). Thus, this study makes a
conclusion that social media platforms have a significant effect on the VAT compliance of Nairobi
Water bottlers. The findings are consistent with those of Martin (2012) and Katz &Lazars (2016).
It was also discovered that a 0.302 increase in VAT compliance in Nairobi Water bottlers would
result from a unit change in the use of taxpayer sensitization programmes in educating the
taxpayers. The relationship was deemed significant with value of P (0.000) being less than 0.05
(significance level). Furthermore, the calculated value of t (2.084) was higher than the critical
value of t (2.05). In this regard, the study makes a conclusion that taxpayer sensitization
programmes have a significant effect on VAT compliance in Nairobi Water bottlers.
In addition, a unit increase in the use of electronic/print media education would result in a 0.313
rise in VAT compliance in Nairobi Water bottlers. With a P value of 0.000<0.05, the relationship
was determined to be significant, showing that there is a substantial relationship between
electronic/print media education and VAT compliance in Nairobi Water bottlers. Furthermore, the
t calculated (2.822) was more than the t critical (2.05). Therefore, the study makes a conclusion
that electronic/print media education has a significant effect on VAT compliance in Nairobi water
bottlers. These findings agree with those of Ming et.al, (2016).
36
Table 4.14: Regression Coefficients
Unstandardized
Coefficients
Model
B
Std. Error
1
(Constant)
.456
.304
Social media Platforms .355
.087
Tax payer sensitization .294
.141
programmes
Electronic/print media .252
.089
education
a. Dependent Variable: VAT compliance
Standardized
Coefficients
Beta
T
1.501
.464
4.095
.302
2.084
Sig.
.146
.000
.048
.313
.009
2.822
37
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.0 Introduction
The discussion of the results, findings, and conclusions is summarized in this chapter. Areas for
future research are also discussed.
5.1 Summary of the Study’s Key Findings
The main objective of this study was to establish the effect of taxpayer education on VAT
compliance, a case study of Nairobi water bottlers. The specific objectives were to establish the
effect of social media platforms, taxpayer sensitization programmes and electronic/print media
education on VAT compliance in Nairobi water bottlers. A quantitative cross-sectional study
design was used and the target population was the 34 Nairobi water bottler companies. Census
sampling technique was used where each individual of the target population formed the sample
size. Primary data was collected using a questionnaire. Quantitative data was coded and entered
into Statistical Packages for Social Sciences (SPSS Version 25.0) and analyzed using descriptive
statistics. Presentation was done by use of tables and explanation done in prose form. Inferential
statistics such as regression analyses were carried out to ascertain the effect of the independent
variables on the dependent variable.
5.1.1 Effect of Social Media Platforms on VAT compliance
The results from the correlation analysis demonstrated that social media platforms are significantly
related to VAT compliance in Nairobi water bottler companies (r = 0. 805, p-value=0.01). The
regression results also revealed that social media platforms have a significant direct effect on VAT
compliance of Nairobi water bottlers (β=0 .464, p-value=0.000).
38
The study established that the use of various social media platforms such as Facebook, Twitter and
YouTube to educate tax payers is an effective way to enhance VAT compliance (3.79),that they
learnt on the requirements for VAT compliance via the KRA updates and posts on their YouTube
channel (3.79), they learnt on the requirements for VAT compliance via KRA updates and posts
on their twitter page (3.75), that Facebook updates by KRA have enabled them get crucial
information that have helped them remain VAT compliant and that the use of different social media
platforms to educate tax payers has resulted to enhanced VAT compliance (3.54).
5.1.2 Effect of Taxpayer Sensitization programmes on VAT compliance
The findings resulting from the correlation analysis revealed that taxpayer sensitization
programmes are significantly related to VAT compliance in Nairobi water bottlers (r = 0.851; pvalue=0.01). From the regression results, the study found out that taxpayer sensitization
programmes have a significant effect VAT compliance of Nairobi water bottler companies
(β=0.302, p-value=0.048).
It was found that majority of the respondents strongly agreed that; Indeed, the use of workshops
and seminars to educate tax payers is an effective way of enhancing VAT compliance (4.39) and
that tax payer sensitization programmes such as workshops have resulted into increased tax
compliance (4.25). The rest of those who responded agreed that indeed tax payer sensitization
programmes have played a key role in changing the attitudes of taxpayers resulting into improved
tax compliance (3.79), tax payer sensitization programmes have enhanced taxpayer VAT
compliance (3.71) and that tax payer sensitization programmes such as seminars have enlightened
the public on the need to pay taxes (3.36).
39
5.1.3 Effect of Electronic/Print Media Education on VAT compliance
The results derived from the correlation analysis demonstrated that electronic/print media is
significantly related to VAT compliance of Nairobi water bottlers (r = 0.711, p-value=0.01). The
regression results further revealed that electronic/print media has a significant effect on VAT
compliance of Nairobi water bottlers (β=0.3138, p-value=0.099).
The study sought to establish the effect of electronic/print media on VAT compliance in Nairobi
water bottler companies. Some of the respondents strongly agreed that the use of print/electronic
media to educate taxpayers is an effective way of enhancing VAT compliance (4.11). The Majority
of the respondents agreed that they have learnt about the new system of filing returns (itax) via the
internet (3.82), that print/electronic media education has resulted to more VAT compliance among
the taxpayers (3.75) and that tax information obtained via the internet has been instrumental in
enhancing our VAT compliance (3.54). Ultimately, the rest of the respondents moderately agreed
that they have known which income should be included or excluded in determining the taxable
income through the KRA tax booklets (3.36).
5.2 Conclusions
Based on the findings, the study concludes that social media platforms have a direct and significant
effect on VAT compliance of Nairobi Water bottlers. The study established that taxpayer education
through social media platforms has been effective and has indeed played a key role in enhancing
VAT compliance of Nairobi Water bottlers by making use of the information contained in the
various KRA updates and posts made on their You tube, twitter and Facebook pages. In addition,
the study established that majority of the respondents acknowledged that they had obtained
essential information concerning compliance via the different social media platforms.
40
The study also concludes that taxpayer sensitization programmes have a positive and significant
effect on VAT compliance of Nairobi Water bottlers. The study established that taxpayer
sensitization programmes have played a significant role in enhancing the VAT compliance of the
Nairobi water bottlers. This is greatly attributable to the fact that the taxpayer sensitization
programmes such as workshops and seminars have helped in enlightening the taxpayers on the
need to pay their taxes and also played a significant role in changing their attitudes which has
resulted to more tax compliance.
The study further concludes that electronic/print media education has a positive and significant
effect on VAT compliance of the Nairobi Water bottlers.
The study established that
electronic/print media education have also played a crucial role in increasing the VAT compliance
of the Nairobi Water bottlers. This may be due to the fact that the taxpayers have been enlightened
on the use of the new system of filing tax (itax) via the internet hence increasing their compliance
and also timely filing of returns.
5.3 Recommendations
As a result of the significant role that taxpayer education plays in enhancing VAT compliance,
this study recommends that the education ministry in collaboration with KRA ought to initiate
taxpayer education and make every effort to integrate a public finance and tax courses in all
school’s curricula. One of the core sources of government’s revenue is through taxes and
therefore, since educating taxpayers results to enhanced VAT compliance, then appropriate
plans to introduce tax related lessons as compulsory in all schools should be underway.
Further, higher education credentials boost compliance since educated (knowledgeable on tax
matters) leaders are more likely to be aware of their responsibilities and the penalties that will
be levied if they do not follow tax regulations. As such, this study recommends that in order to
41
increase tax compliance across the different sectors in the country, education levels of those
heading the tax departments in such firms should be put into focus. It should be made mandatory
that they possess a specific degree of qualifications, skill, and confidence to execute their tax
responsibilities.
5.4 Suggestions for Further Research
This research was conducted and findings made in the context of Nairobi Water bottler companies
only. As a result, the study suggests that similar research be conducted with a greater scope, such
as the entire country and also incorporate firms in other sectors of the economy to establish if the
findings are consistent. Further, the researcher suggests that a similar study be conducted focusing
on the effect that tax education has on taxpayer’s compliance of income taxes and customs duty.
42
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48
APPENDICES
APPENDIX 1: QUESTIONNAIRE
This questionnaire is designed to collect data on the effect of taxpayer education on V.A.T
compliance in Kenya, a case study of water bottlers in Nairobi County. The data shall be used for
academic purposes only and it will be treated with the confidentiality it deserves. Thank you
SECTION A: DEMOGRAPHIC INFORMATION
1. Indicate your gender
a) Male [ ] b) Female [ ]
2. Level of education
Secondary Certificate [ ] Diploma level [ ] Bachelor ‘s Degree Level [ ] Masters Level [ ] PhD
[]
3. Indicate years your enterprise has been in operation? a) Less than 1 Years [ ] b) 2-6 Years
[ ] c) 7-11 Years [ ] d) Above 12 Years [ ]
SECTION B: EFFECTIVENESS OF VARIOUS TAX EDUCATION PROGRAMS
4. To what extent do you think the following modes of training used by KRA are effective
in achieving the objective of educating the tax payers?
Training Modes
Very
Great
Moderate
Little
No
Great
Extent
Extent
Extent
Extent
Extent
Social Media Platforms
Tax
Payer
programmes
sensitization
Electronic/print media education
49
SECTION C: SOCIAL MEDIA PLATFORMS
5. Using a Likert type point scale of 1-5 rank, indicate your level of agreement or
disagreement with the statements where 5 represents Strongly agree, 4 denotes Agree, 3
represents Moderately agree, 2 denotes Disagree and 1 represents Strongly disagree
Social Media Platforms
Strongly Agree Moderately Disagree
agree
Agree
Strongly
Disagree
Facebook has served a
very vital role in providing
us
with
essential
information
that
has
helped us to always remain
VAT compliant
We
learnt
on
the
requirements for VAT
compliance via KRA
updates and posts on their
twitter page
We
learnt
on
the
requirements for VAT
compliance via KRA
updates and posts on their
You Tube channel
Use of various social
media platforms such as
Facebook, twitter and You
Tube
in
educating
taxpayers is an effective
way of enhancing tax
compliance
Use of different social
media
platforms
to
educate tax payers has
resulted to enhanced VAT
compliance
50
SECTION D: TAXPAYER SENSITIZATION PROGRAMS
6. Please rate the following statements in regards to Taxpayer sensitization programs
Using a Likert type point scale of 1-5 rank, indicate your level of agreement or disagreement with
the statements where 5 represents Strongly agree, 4 denotes Agree, 3 represents Moderately agree,
2 denotes Disagree and 1 represents Strongly disagree
Tax payer sensitization programs
Strongly Agree Moderately Disagree Strongly
agree
agree
disagree
Taxpayer sensitization programs such
as seminars have enlightened the
public on the need to pay taxes
Taxpayer sensitization programs such
as workshops have resulted into
increased tax compliance
Taxpayer sensitization has played a
vital role in changing the attitudes of
taxpayers resulting into more tax
compliance.
Use of workshops and seminars to
educate tax payers is an effective way
of enhancing VAT compliance
Tax payer sensitization programmes
have enhanced tax payer VAT
compliance
SECTION E: ELECTRONIC/PRINT MEDIA EDUCATION
7. Please rate the following statements in regards to electronic/print media education
Using a Likert type point scale of 1-5 rank, indicate your level of agreement or disagreement with
the statements where 5 represents Strongly agree, 4 denotes Agree, 3 represents Moderately agree,
2 denotes Disagree and 1 represents Strongly disagree
51
Electronic/print media
Strongly
agree
Agree Moderately Disagree Strongly
agree
disagree
I have known which income
should be included or excluded in
determining the taxable income
through tax booklets
I have learnt about the new system
of filing returns (itax) via the
newspapers and KRA tax
booklets
Tax information obtained via the
internet has been instrumental in
enhancing VAT compliance
Use of print/electronic media to
educate tax payers is an effective
way
of
enhancing
VAT
compliance
Print/electronic media education
has resulted to more VAT
compliance among the tax payers
SECTION F: V.A.T COMPLIANCE
8. Please rate the following statements in regards to V.A.T compliance. Using a Likert type
point scale of 1-5 rank, indicate your level of agreement or disagreement with the
statements where 5 represents Strongly agree, 4 denotes Agree, 3 represents Moderately
agree, 2 denotes Disagree and 1 represents Strongly disagree
Strongly Agree
agree
Moderately
agree
Disagree Strongly
disagree
It is unfair to pay taxes and
therefore payment should be
forfeited
Tax laws should be respected by
every tax payer
Tax revenues are not spent on
public services as should be
52
Tax rates are too high and hence
low levies collected
There are dishonest tax collectors
and hence many are demotivated
to file returns within the
stipulated time
Thank you for your participation
APPENDIX II: LIST OF NAIROBI WATER BOTTLER COMPANIES
Source: (https://www.businesslist.co.ke/category/bottled-water/city:nairobi)
1) Aberdares Water Ltd
2) African Oasis Spring Water Ltd, The
3) ALPHINE HOLDINGS LTD
4) Alpine Coolers Ltd
5) Aquamist Ltd
6) AQUAPURE MINERAL WATER
7) AQUATAB AGENCIES
8) Aviano East Africa Ltd
9) Baraniki Investments Ltd.
10) Bounty Kenya ltd
11) Broomhill Springs Water
12) Clean Water Services
13) Delsa Ltd
14) E & A Industries Ltd
15) EAUX DE AFRICA LTD
53
16) Fine Blendz
17) Grange Park Mineral Water
18) Halisi Mineral Water Ltd
19) Harsi Limited
20) Highlands Mineral Water Co Ltd-Depot
21) Intelecom Africa Ltd
22) JOSABUSMART SOLUTIONS LIMITED COMPANY
23) Keringet Pure Natural Mineral Water
24) Keringet Pure Natural Mineral Water
25) Kilimanjaro Beverage Co Ltd
26) Kisima Mineral Water Ltd
27) Liztan Enterprises Ltd
28) MINERAL WATER MARKETING SERVICES
29) Morning Dew Mineral Waters
30) Nestle Pure Life
31) OASIS MINERAL WATER CO LTD
32) Roof Arts Limited
33) Winde Springs Purified Drinking Water
34) Wonderworks Ltd.
54