Influence of Taxpayers' Characteristics on Utilization of Electronic Tax Registers Among Private Firms in Kakamega County, Kenya

Abstract

Tax payers' characteristics are unique attributes associated with individual taxpayers and include: the size of the business, income level of the taxpayer, financial constraints facing the taxpayer and perception towards ETR. Taxation and tax compliance literature indicate that firm size, income levels, financial constraints and traders perceptions are important drivers of compliance. Previous studies focus on the comparative analysis of revenue loss and non-compliance in developing countries, they employ technology acceptance model (TAM). Given that the law makes it mandatory for businesses registered for VAT to issue tax invoices and/or cash sale receipts which must be ETR generated or supported by ETR receipts, the relationship between firm size and utilization of ETRs, the effect of income levels on utilization; influence of financial constraints and traders perceptions are not known. The purpose of this study therefore was to investigate the influence of traders' characteristics on utilization of ETRs by private firms in Kakamega County. The specific objectives of the study were to: establish the relationship between firm size and utilization of electronic tax registers, determine the effect of income levels of taxpayers on utilization of electronic tax registers, investigate the influence of financial constraints on utilization of electronic tax registers and analyze the influence of traders' perception on utilization of electronic tax registers among private firms in Kakamega County. The study was guided by the theory of reasoned action framework. The study employs correlational research design. The target population was 610 private firms in Kakamega County. A sample of 243 finance department employees from 243 private firms was selected using stratified random sampling technique. Primary data was collected using self administered questionnaires. A pilot test with 10 employees was used for reliability and validity testing. The test retest coefficient was obtained to establish reliability. A Cronbach's alpha of 0.7 was acceptable for reliability. Data was analyzed using descriptive statistics such as mean, standard deviation, percentages and frequencies and inferential statistics namely Pearson correlation analysis. The findings of the study were that the relationship between firm size and utilization ofETRs is positive and significant (r = 0.475, p = 0.008, n = 220) implying that firm size influences utilization of ETRs positively; effect of income levels on the utilization ofETRs is positive and significant (r = 0.597, p = 0.000, n = 220) meaning that income levels of tax payers influence utilization of ETRs positively; the influence of financial constraints on the utilization of ETRs is negative and significant (r = -0.728, p = 0.003, n = 220) implying that financial constraints facing tax payers influence utilization of ETRs negatively and the influence of traders' perception on the utilization of ETRs is negative and significant (r = -0.555, P = 0.003, n = 220) meaning that traders' perceptions influence utilization ofETRs negatively. Results will be presented in the form of tables, charts and graphs. The results may be useful to academicians, scholars and government for policy formulations.