Effect of Tax Enforcement Mechanisms on Tax Compliance Level among Small and Medium Enterprises in Dagoreti North Sub-County
DOI:
https://doi.org/10.70619/vol6iss3pp31-43-800Keywords:
Tax Enforcement mechanisms, Tax audits, Digital tax monitoring, Tax ComplianceAbstract
Tax compliance among SMEs remains a challenge in developing countries like Kenya. Kenya Revenue Authority (KRA) has experienced significant revenue losses due to weak enforcement mechanisms, loopholes in tax policies, and widespread corruption, which allowed tax evasion and fraud to thrive. Tax enforcement mechanisms are one of the initiatives being implemented by KRA to address this problem. Hence, the study objective was to establish the effects of tax enforcement mechanisms on SMEs' tax compliance levels in Dagoreti North Sub-County. The research was founded on economic deterrence theory. An explanatory research design was employed. The population was 6174 owners of licensed SMES in Dagoreti North Sub-County. A sample of 141 SME owners in Dagoreti North Sub-County was selected using stratified sampling. Primary data was collected using questionnaires. Qualitative data were analyzed through thematic analysis. Quantitative data were analyzed through descriptive and inferential statistics. The study established that tax enforcement mechanisms (β = 0.667; p = 0.000) significantly affected tax compliance levels. The study concluded that tax enforcement mechanisms are a significant determinant of tax compliance level among SMEs in Dagoreti North Sub-County. This can be done by leveraging the emerging AI tools to reduce the need for extensive manpower. This will enhance compliance and revenue collection, and encourage SMEs to maintain accurate financial records and consistently uphold tax obligations.
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