Relationship Between Tax Awareness and Value Added Tax Compliance Among Registered Manufacturing Firms in Nakuru East, Kenya: Moderating Role of Perceived Taxpayer Trust
DOI:
https://doi.org/10.70619/vol5iss7pp38-52-663Keywords:
Tax Awareness, Value Added Tax Compliance, Perceived Taxpayer Trust, Manufacturing FirmsAbstract
This study was conducted to investigate the effect of tax awareness on Value Added Tax (VAT) compliance among registered manufacturing firms in Nakuru East, Kenya, with a focus on the moderating role of perceived taxpayer trust. The study employed an explanatory research design, utilizing both descriptive and inferential analyses. Data was collected from 204 respondents using a structured questionnaire with a 5-point Likert scale. The sample was drawn from a target population of 415 manufacturing firms in Nakuru East, employing simple random sampling, and Data analysis included descriptive and inferential statistics. Descriptive statistics revealed high levels of tax awareness and perceived taxpayer trust among respondents. Regression analysis revealed that tax awareness (β = 0.35, p < 0.05) and perceived taxpayer trust (β = 0.40, p < 0.05) significantly influenced VAT compliance. Perceived taxpayer trust was found to moderate the relationship between tax awareness and VAT compliance, indicating its crucial role in shaping taxpayer behavior. To enhance compliance, tax authorities should prioritize taxpayer education programs that focus on VAT regulations, deadlines, and penalties. Clear communication channels, such as workshops, seminars, and digital platforms, can bridge knowledge gaps and empower taxpayers to meet their obligations. Additionally, tailored educational materials for small and medium-sized enterprises (SMEs) are essential, as these firms often face resource constraints.
References
Adegbie, F. F., Egwakhe, A. J., & Ojutawo, I. R. (2020). Companies' Income Tax Volatility and Economic Growth in Nigeria. International Journal of Research Science and Management, 7(4), 19-32.
Adhikari, N. R. (2020). Taxpayer awareness and understanding of taxpayer compliance in Nepal. Management Dynamics, 23(1), 163-168.
Ajzen, I. (1991). The theory of planned behavior. Organizational behavior and human decision processes, 50(2), 179-211.
Bawa, F. J., & Boachie, C. (2024). Exploring the Role of Tax Education in Enhancing Reporting Compliance among SMEs in Ghana’s Informal Sector.
Bobek, D. D., Roberts, R. W., & Sweeney, J. T. (2007). The social norms of tax compliance: Evidence from Australia, Singapore, and the United States. Journal of Business Ethics, 74(1), 49-64.
Dom, R., Custers, A., Davenport, S., & Prichard, W. (2022). Innovations in tax compliance: Building trust, navigating politics, and tailoring reform. World Bank Publications.
Gebrihet, H. G., Gebresilassie, Y. H., & Woldu, G. T. (2023). Trust, corruption, and tax compliance in fragile states: On a quest for transforming Africa into a future global powerhouse. Social Sciences, 13(1), 3.
International Monetary Fund. (2022). Revenue mobilization in developing economies. IMF Policy Paper.
IRS (2020). IRS: The tax gap
KRA. (2023). Annual Revenue Performance Report 2022/2023. Kenya Revenue Authority.
Lutfi, A., Alshira’h, A. F., Alshirah, M. H., Al-Ababneh, H. A., Alrawad, M., Almaiah, M. A., . . . Alardi, M. W. (2023). Enhancing VAT compliance in the retail industry: The role of socio-economic determinants and tax knowledge moderation. Journal of Open Innovation: Technology, Market, and Complexity, 9(3), 100098.
Martínez, Y. U., Arzoz, P. P., & Arregui, I. Z. (2022). Tax collection efficiency in OECD countries improves via decentralization, simplification, digitalization, and education. Journal of Policy Modeling, 44(2), 298-318.
Muhammad, K., Salawu, R. O., & Ndagire, S. (2024). Sustainability Of Tax Reforms In Developing Countries: The Ugandan Case. Islamic University Journal of Social Sciences, 3(3), 276-295.
Munyao, D. (2022). Factors affecting Value Added Tax compliance among manufacturing firms in Meru County.
Musimenta, D. (2020). Knowledge requirements, tax complexity, compliance costs, and tax compliance in Uganda. Cogent Business & Management, 7(1), 1812220.
Niang, B. B., & Mbaye, A. A. (2020). Senegal: Making Domestic Resource Mobilization Work to Sustain Growth and Improve Service Delivery (No. 165b). Center for Global Development.
Njuguna, G. W. (2020). Factors influencing Value Added Tax compliance among small and medium business enterprises in Thika Town.
Njunwa, P., & Batonda, G. (2023). Effect of Taxpayer Education on Voluntary Tax Compliance Among Small and Medium Enterprises, Mwanza City, Tanzania. Global Scientific and Academic Research Journal of Economics, Business and Management, 2(11), 148-198.
Nkurunziza, S. (2022). Audit Standards ‘Compliance and Efficiency of Government Agencies in Rwanda: A Survey of Government Agencies (Doctoral dissertation, University of Rwanda).
OECD. (2020). Consumption tax trends 2020. Organization for Economic Co-operation and Development.
OECD. (2022). Building trust to reinforce democracy: Main findings from the 2021 OECD survey on drivers of trust in public institutions. OECD Publishing. https://doi.org/10.1787/b407f99c-en
Ogungbade, O. I., Enitan, A., & Adekoya, A. C. (2021). Tax Awareness, Taxpayers' Perceptions and Attitudes, and Tax Evasion in the Informal Sector of Ekiti State, Nigeria. International Journal of Financial Research, 12(5), 24-40.
Ojo, M., & Shittu, A. (2023). VAT compliance and manufacturing firms’ tax behavior in Nigeria. International Journal of Economics and Finance, 15(5), 102-113.
Putra, I. D. G. A., & Setiawan, P. E. (2020). Factors influencing corporate taxpayer compliance. Journal of Accounting and Investment, 21(1), 99-110.
Saad, N. (2014). Tax knowledge, tax complexity, and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.
Sanusi, S., Abdullah, N., Chin, L., Rastam, F., & Rozzani, N. (2021). Tax awareness among students from higher learning institutions in Malaysia: Education area as a moderator. International Journal of Economics and Management, 15(1), 89-102.
SARS (2020). ANNUAL REPORT
Sharma, A., Sharma, P., & Singh, J. (2023). Analysing the framework of tax compliance: A study of attitudinal determinants. Metamorphosis, 22(1), 7–17.
Sniehotta, F. F., Presseau, J., & Araújo-Soares, V. (2014). Time to retire the theory of planned behaviour. Health psychology review, 8(1), 1-7.
Wadesango, N., & Chirebvu, C. (2020). An analysis of factors affecting tax compliance among SMEs in Zimbabwe. Journal of Business Management and Economics, 8(3), 35–43.
Yiallourou, K. (2019). The limitations of the VAT gap measurement. EC Tax Review, 28(4).
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Leah Wanjiru Kamau, Stephen Chelogoi, Irungu Macharia
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
