Assessing The Impact Of Itax System On Tax Compliance In Kenya Revenue Authority (Research Paper Sample)

ASSESSING THE IMPACT OF iTAX SYSTEM ON TAX
COMPLIANCE IN KENYA REVENUE AUTHORITY.
JANETH CHEPKEMOI SABUL
A RESEARCH PROJECT PRESENTED IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD
OF POST GRADUATE DIPLOMA IN DOMESTIC TAXES
JUNE 2017
DECLARATION
This research is my original work and has not been presented for examination in any other university.
Signed………………………………………………… Date…………………………………
JANETH CHEPKEMOI SABUL
HBD336-C016-1852/2016
This research project has been submitted for examination with my approval as University Supervisor.
Signed……………………………………………………Date………………………………...
VINCENT OMONDI
Supervisor
DEDICATION
This work is dedicated to my husband Geoffrey B Kachi and Children Shannie and Ephy who have been a constant source of inspiration. They have given me the drive and discipline to tackle any task with enthusiasm and determination. Without their support this proposal would not have been made possible.
ACKNOWLEDGEMENT
I would like to acknowledge the support given to me by my lovely spouse Geoffrey Kachi and my children, Shantel Ivy and Carmi Ephy. They had to do without my presence for a long time but stood by me to the very end of the proposal. A special thank you, to my dear parentsthe Sabul’s whose encouragement, guidance and support kept me going, and to my co-workers who supported me in all respect during the completion of the proposal. Lastly I would like to acknowledge the inspirational instructions and guidance of my supervisor Vincent Omondi without which the proposal would never have been possible.
LIST OF ABBREVIATIONS AND ACROYNMS
KRAKenya Revenue Authority
ItaxComputer Based System
LTOLarge Tax Payer
ITMSIntegrated Tax Management System
TAM Theory of Technical Acceptance Model
ETRElectronic Tax Register’
PINPersonal Identification Number
ICTInformation Communication Technology
TATheory on Technology Acceptance
UTAUTUnified Theory of Acceptance and Use of Technology
VATValue Added Tax
TRA Theory of Reason Action
MIT Massachusetts Institute of Technology
SPSS Statistical Packages for Social scientists
TABLE OF CONTENTS
TOC \o "1-3" \h \z \u DECLARATION PAGEREF _Toc485880643 \h iiDEDICATION PAGEREF _Toc485880644 \h iiiACKNOWLEDGEMENT PAGEREF _Toc485880645 \h ivLIST OF ABBREVIATIONS AND ACROYNMS PAGEREF _Toc485880646 \h vTABLE OF CONTENTS PAGEREF _Toc485880647 \h viABSTRACT PAGEREF _Toc485880648 \h ixCHAPTER ONE: INTRODUCTION PAGEREF _Toc485880649 \h 11.1Background of Study PAGEREF _Toc485880650 \h 11.2 Challenges PAGEREF _Toc485880651 \h 21.3 Statement of the Problem. PAGEREF _Toc485880652 \h 21.4 Research Questions PAGEREF _Toc485880653 \h 31.5 Research Objectives PAGEREF _Toc485880654 \h 41.5.1 General Objective PAGEREF _Toc485880655 \h 41.5.2 Specific Objectives PAGEREF _Toc485880656 \h 41.6 Significance of the Study PAGEREF _Toc485880657 \h 41.7 Scope and Limitations of the Study PAGEREF _Toc485880658 \h 5CHAPTER TWO: LITERATURE REVIEW PAGEREF _Toc485880659 \h 62.1 Introduction PAGEREF _Toc485880660 \h 62.2 Theoretical Review PAGEREF _Toc485880661 \h 62.2.1 Theory on Technology Acceptance (TA) PAGEREF _Toc485880662 \h 62.2.2 Theory of Planned Behaviour PAGEREF _Toc485880663 \h 72.3Empirical Review PAGEREF _Toc485880664 \h 82.4 Conceptual Framework PAGEREF _Toc485880665 \h 112.5 Statistical Model PAGEREF _Toc485880666 \h 122.6 Assumptions of Study PAGEREF _Toc485880667 \h 12CHAPTER THREE: RESEARCH METHODOLOGY PAGEREF _Toc485880668 \h 133.1Introduction PAGEREF _Toc485880669 \h 133.2 Research Design PAGEREF _Toc485880670 \h 133.4 Sample Design PAGEREF _Toc485880671 \h 143.5 Research Instruments PAGEREF _Toc485880672 \h 143.6 Validity of the Instrument PAGEREF _Toc485880673 \h 153.7 Reliability of Instruments PAGEREF _Toc485880674 \h 153.8 Data Collection PAGEREF _Toc485880675 \h 153.9 Data Processing, Analysis and Presentation PAGEREF _Toc485880676 \h 15CHAPTER FOUR: RESEARCH FINDINGS AND DISCUSSIONS PAGEREF _Toc485880677 \h 174.1 Introduction PAGEREF _Toc485880678 \h 174.2 Response Rate PAGEREF _Toc485880679 \h 174.3 Reliability Analysis PAGEREF _Toc485880680 \h 184.4 Demographic Characteristics Results PAGEREF _Toc485880681 \h 184.4.1 Gender PAGEREF _Toc485880682 \h 184.4.2 Working Experience PAGEREF _Toc485880683 \h 194.4.3 Age of the Respondents PAGEREF _Toc485880684 \h 204.4.4 Level of Education PAGEREF _Toc485880685 \h 204.4.5 Occupation Level in the Organization PAGEREF _Toc485880687 \h 214.5 Discussion of Findings PAGEREF _Toc485880688 \h 224.5.1 Itax System PAGEREF _Toc485880689 \h 224.5.2 Itax Filing System PAGEREF _Toc485880690 \h 234.5.3 Cost Implication PAGEREF _Toc485880691 \h 244.5.4 Tax Compliance PAGEREF _Toc485880692 \h 254.6 Correlation Analysis Matrix PAGEREF _Toc485880693 \h 264.6.1 Coefficient of Determination PAGEREF _Toc485880694 \h 274.7 Regression Analysis PAGEREF _Toc485880695 \h 284.7.1 Analysis of Variance (ANOVA) PAGEREF _Toc485880696 \h 284.7.2 Regression Coefficient PAGEREF _Toc485880697 \h 28CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATION PAGEREF _Toc485880698 \h 305.1 Introduction PAGEREF _Toc485880699 \h 305.2 Summary of Findings PAGEREF _Toc485880700 \h 315.3 Conclusions PAGEREF _Toc485880701 \h 315.4 Recommendations PAGEREF _Toc485880702 \h 325.5 Research for Future Studies PAGEREF _Toc485880703 \h 32REFERENCES PAGEREF _Toc485880704 \h 32APPENDICES PAGEREF _Toc485880705 \h 35APPENDIX I: QUESTIONNAIRE PAGEREF _Toc485880706 \h 35APPENDIX II: WORK PLAN PAGEREF _Toc485880707 \h 41APPENDIX III: BUDGET PLAN PAGEREF _Toc485880708 \h 42
ABSTRACT
Despite transforming its operation to online system through the iTax platform KRA still faces compliance challenges leading to actual revenue and expected differing by large gaps margin. The study has investigated the impact of iTax on tax compliance in Kenya with specific reference to LTO Nairobi. The general objective of the study was to analyze the impact of itax system on tax compliance in KRA. Other objectives include the impact of itax infrastructure accessibility, awareness, and the risk of using the itax system. Overcoming these issues requires a well-defined road map with a solid understanding of where KRA is today, where it is going and the tradeoffs that will bound the road map. The study’s data collection method was done by use of questionnaires. The findings of this study will provide the management of KRA with ideas of implementing iTax and a better understanding of the likely challenges they may face and the appropriate measures to help in mitigating the risk of tax compliance. The quantitativedatacollectedwasanalyzedusingdescriptivestatisticssuch as frequencies, percentages, measures of central tendencies (mean, medium, mode)and measure of dispersion(standard deviation, range or variance). The data was analyze during SPSS. The findings were presentedusing figures, pie charts ,and tables. The findings of the study shows that itax system, itax filing system and cost implication have a significant effect on tax compliance at KRA Nairobi.
The findings of the study were that itax has simplified tax processes and made it easy for the taxpayers to be compliant, they agreed that the system is user friendly. Secondly it has shortened the time taken to extract data, revenue information and time taken to file return due to reduction of movements. Thirdly taxpayer education and sensitization had an, impact on tax compliance. They strongly agree that prosecuting tax evaders and publicizing cases would have impact on compliance, volunteer compliance and enforcing compliance in a just and fair manner would also encourage compliance .The study concluded that itax system, itax filing system and cost implication have a significant correlation on the tax compliance. The study concludes that Kenya Revenue Authority should emphasize on utilizing all the avenues to capitalize on tax compliance issues.
CHAPTER ONE:
INTRODUCTION
1.1Background of Study
Kenya’s tax collecting agent is Kenya Revenue Authority, since its inception it has grown gradually from manual processes to online system for the administration of taxes to expand tax collection. The current tax collection system in domestic taxes department is called itax. iTax is an improvement of a previous online system called the Integrated Tax Management System (ITMS) which rolled out in 2007. Nah et al (2000) describe an ITMS system as a packaged business software system that enables tax authorities to enforce taxation efficiently and effectively as well as manage use of its resources (materials, human resources, finance) and administration of taxes by providing a total, integrated solution for the organization's information processing needs.
Integrated Tax Management Systems is said to have transformed the way organizations go about the process of providing information systems. Instead of crafting each new information system locally, KRA was able to install well-integrated, internationally sourced packages seek to incorporate best practice from information technology systems world-wide. These packages also provide very rich choice in features and functions so that the adopting organization can tailor the package implementation to meet their very specific needs. They promise to provide an effective and efficient system to meet the needs of organizations. Despite the promise, there are many challenges which occur during the impleme...