Taxation System, Legal Framework and Compliance Efficiency of Digital Taxation in Kenya: A Case of Starehe Constituency
DOI:
https://doi.org/10.70619/vol6iss5pp1-13-851Keywords:
Digital taxation, Online tax registration, Legal framework, Tax compliance efficiencyAbstract
The purpose of this study was to examine the effect of the taxation system on the efficiency of digital tax compliance in Kenya, with a specific focus on the online tax registration system and the moderating role of the legal framework. The study was motivated by persistent underperformance in digital tax revenue collection despite the expansion of Kenya’s digital tax regime. An explanatory research design was adopted, targeting 2,500 internet merchants in Starehe Constituency, Nairobi County, from which a random sample of 345 respondents was selected. Primary data were collected using structured questionnaires and analyzed using the Statistical Package for the Social Sciences (SPSS). Descriptive statistics and regression analysis were employed to establish relationships among the study variables. The findings revealed that the online tax registration system had a positive, statistically significant effect on the efficiency of digital taxation (β = 0.550, p < 0.001). The study further established that the legal framework significantly moderated the relationship between the online tax registration system and compliance efficiency, indicating that clear, consistent, and simplified tax laws enhance the effectiveness of digital tax administration. Automated online systems were found to reduce processing time, minimize human error, enhance transparency, and limit opportunities for corruption compared to manual systems. The study concludes that efficient online tax registration systems, supported by a robust, simplified legal framework, are critical to improving digital tax compliance in Kenya. It recommends that the Kenya Revenue Authority enhance the reliability, usability, and security of online tax platforms and invest in taxpayer education. Policymakers should simplify digital tax laws, reduce the number of tax layers, and strengthen regulatory clarity to support compliance and the sustainable growth of the digital economy.
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