Compliance of Local Authority Tax by Small and Medium Enterprises (Smes) in Nairobi

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COMPLIANCE OF LOCAL AUTHORITY TAX BY SMALL AND MEDIUM ENTERPRISES (SMES) IN NAIROBI

(Case of Single Business Permit within Kasarani Constituency)

By
CAMERON KAGEHA

KMU/EMBA/550/2002

ABSTRACT
For decades, tax researchers have investigated why some people pay taxes and others do not. Through experiments, random surveys, and available tax databases, researchers have identified characteristics of noncompliant taxpayers and factors that motivate tax compliance both from economic and behavioral perspective. We add to this stream of research by adopting tax administration efficiency and institutional capacity approach to explain factors affecting compliance of the Single Business Permit Tax by Small and Medium Enterprises (SMEs) in Nairobi’s Kasarani Constituency, a jurisdiction within City Council of Nairobi.

The theoretical underpinning on tax compliance and related factors are extensively covered in the literature review. The review indicates that majority of the studies have adopted both the economic and socio-behavioral schools of thought to explain tax compliance but have failed to incorporate the revenue authority’s institutional capacity. This gap forms the background for the conceptual framework.

The researcher will adopt descriptive survey method in conducting the study. Stratified sampling technique will be used to sample the population of the study. The target population will consist of 8000 SMEs. Stratified random sampling technique will be used to select a sample of 80 respondents. A pilot study of 10 respondents will first be done.

Questionnaires will be the main data collection instrument for the research. The questionnaire will have both open ended and closed questions. Data will be collected through drop and pick later method. Data analysis will be done using descriptive statistics (frequencies, mean and percentages) in Statistical Package for Social Scientists (SPSS) programme to identify the factors that affect SBP compliance by SMEs.

Table of Contents
Title………………………………………………………………………………………...i Abstractii
Table of Contentsiv
List of Tables and Figuresvi
List of Abbreviationsvii
Definition of Termsviii

CHAPTER ONE: INTRODUCTION
1.1 Background information1
1.2 Statement of the problem4
1.3 Objectives of the study ………………………………………………..............5 1.4 Research Questions6
1.5 Significance of the study……………………………………….6 1.6 Scope of the study6

CHAPTER TWO: LITERATURE REVIEW
2.1 introduction8
2.2 Concept of Tax Compliance8
2.3 Factors Affecting Tax Compliance 8
2.3.1 Tax Procedures8
2.3.2 Incentives10
2.3.3 Computerization of Tax Administration11
2.3.4 Tax Education12
2.3.5 Tax Sanctions 13
2.4 Empirical Literature on Tax Compliance14
2.5 Summary and Gaps to be Filled by the Study15
2.6 Conceptual Framework 16

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction18
3.2 Research design19
3.3 Target population…………………………………………………19 3.4 The Sample design and Sampling Technique………………………………….20 3.5 Data collection …………………………………………20 3.6 Research Procedures…………………………………………………………….20 3.7 Data analysis and Presentation…………………………………………………..20 3.8 Variable definition……………………………………20

References………………………………………………………………………………..21 Appendix i: Research Work Plan………………………………………………………25 Appendix iii:Questionnaire………………………………………………………………26 Appendix iv:Single Business Permit (Kenya Gazette 1999)………………………….....32

LIST OF TABLES AND FIGURES

Table 1.1: Revenue from SBP………………………………………………… 4 Table 3.1: Target Population……………………………………………………17...
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