Effect of Tax Morale on Corporation Tax Compliance among Manufacturing Firms in Ruaraka Sub-County, Nairobi, Kenya
DOI:
https://doi.org/10.70619/vol5iss5pp33-43Keywords:
Manufacturing Firms, Tax Morale, Corporation Tax ComplianceAbstract
Corporation tax is a key source of revenue for most governments across the globe that enables them to provide public goods and services such as free education, subsidized medical services, and infrastructure. Despite the tremendous growth of the manufacturing industry for the past few years, the corresponding tax collection from the sector has remained very low. The key aim of the study was to determine the effects of tax morale on corporation tax compliance among manufacturing firms in Ruaraka Sub-County, Nairobi, Kenya. The study was anchored on the Tax Morale. An explanatory research design was employed in this study, and the study population was 219 manufacturing firms in Ruaraka Sub-County, Nairobi. A census survey was used in this study. The response rate for the questionnaire was 79.9%, with 175 out of 219 participants accurately filling and submitting the questionnaires, while the non-response rate was 20.1%. The study used primary data collected through questionnaires. The data collected was analyzed using descriptive statistics, inferential statistics, and multiple linear regression analysis, and presented through tables and charts. The study found that tax morale has a significant positive effect on corporation tax compliance (β = 0.495, p-value = 0.024). The study recommends that policymakers prioritize initiatives that foster intrinsic motivation among taxpayers. This can be achieved by promoting transparency, fairness, and trust in the tax system through public awareness campaigns and stakeholder engagement programs. Further studies could also explore the influence of cultural factors and social norms on tax compliance.
References
Alm, J., & Torgler, B. (2004). Culture differences and tax morale in the United States and Europe. Journal of Economic Psychology, 25(2), 224–246. https://doi.org/10.1016/S0167-4870(02)00164-2
Arachi, G., & Alworth, J. S. (2001). Taxation and the location of multinational firms: Evidence from Italian microdata. Oxford University Centre for Business Taxation Working Paper, 01/12.
Balla, H. M. (2017). The impact of taxation on economic growth in Nigeria (1981–2015) [Master’s thesis, Ahmadu Bello University].
Besley, T., Jensen, A., & Persson, T. (2014). Norms, enforcement, and tax evasion. CEPR Discussion Paper No. DP10172.
Bilgin, M. H. (2021). The role of tax compliance costs in tax compliance behavior: Evidence from Turkey. Journal of Accounting and Taxation, 13(2), 72–81.
Borg, W. R., & Gall, M. D. (2007). Educational research: An introduction (8th ed.). Pearson.
Creswell, J. W. (2003). Research design: Qualitative, quantitative, and mixed methods approaches (2nd ed.). Sage Publications.
Cummings, R. G., Martinez-Vazquez, J., McKee, M., & Torgler, B. (2019). Effects of tax morale on tax compliance: Experimental and survey evidence. Public Finance Review, 45(1), 121–145.
Doerrenberg, P., & Peichl, A. (2023). Tax morale and compliance behavior: Evidence from a randomized survey experiment in Germany. International Tax and Public Finance, 30(2), 287–309.
Hassett, K. A., & Hubbard, R. G. (2022). Tax policy and investment behavior: Evidence from company-level data. Brookings Institution Press.
HM Revenue & Customs (HMRC). (2024). Annual report and accounts 2023–24. https://www.gov.uk/government/publications
Horodnic, I. A. (2021). Tax morale and compliance behavior: A systematic review. Journal of Economic Surveys, 35(1), 1–32.
Kenya Association of Manufacturers (KAM). (2015). Taxation handbook for Kenyan manufacturers. Nairobi: KAM.
Kandie, M. (2011). Tax reforms and revenue productivity in Kenya (1991–2010) [Master’s thesis, University of Nairobi].
Kinuthia, P. (2011). Tax compliance by small and medium enterprises in Nairobi [Master’s thesis, Kenyatta University].
Kothari, C. R. (2004). Research methodology: Methods and techniques (2nd ed.). New Age International Publishers.
Kenya Revenue Authority (KRA). (2024). Revenue performance report 2023/2024. https://www.kra.go.ke/
Lipsey, R. G., & Chrystal, K. A. (2007). Economics (11th ed.). Oxford University Press.
Luttmer, E. F. P., & Singhal, M. (2014). Tax morale. Journal of Economic Perspectives, 28(4), 149–168.
McGee, R. W. (2006). Three views on the ethics of tax evasion. Journal of Business Ethics, 67(1), 15–35.
Muazu, M. A., Danjuma, I., & Sulaiman, L. (2022). Determinants of tax compliance among SMEs in developing countries: Evidence from Nigeria. International Journal of Accounting and Taxation, 10(1), 45–60.
Musgrave, R. A. (2023). The theory of public finance: A study in public economy. McGraw-Hill.
Organisation for Economic Co-operation and Development (OECD). (2013). Tax and development: What drives tax morale?. OECD Publishing.
Rosen, H. S. (1995). Public finance (5th ed.). McGraw-Hill.
Schmӧlders, G. (1970). Survey research in public finance: A behavioral approach to fiscal theory. Public Finance, 25(2), 300–306.
Sekaran, U. (2003). Research methods for business: A skill-building approach (4th ed.). John Wiley & Sons.
Siripurapu, A. (2021). What is tax policy? Council on Foreign Relations. https://www.cfr.org/
Strümpel, B. (1969). The contribution of survey research to public finance. In A. T. Peacock (Ed.), Quantitative analysis in public finance (pp. 13–32). Praeger.
Torgler, B. (2011). Tax morale and compliance: Review of evidence and case studies for Europe. World Bank Publications.
Torgler, B., & Schneider, F. (2020). Shadow economy, tax morale, governance and institutional quality: A panel analysis. Journal of Economic Psychology, 80, 102–112.
Torgler, B., Demir, I. C., Macintyre, A., & Schaffner, M. (2007). Causes and consequences of tax morale: An empirical investigation. Economic Analysis and Policy, 37(2), 313–339.
Yew, B. P., Ching, K. L., & Tong, C. Q. (2020). Tax compliance intention among SMEs in Malaysia: A proposed conceptual framework. International Journal of Business and Society, 21(3), 1063–1078.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Tarmohamed Shamsudin, Dr. Naomi Koske, Dr. Kenneth Langat
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
