Influence of Enforcement Strategies on Tax Compliance in the Informal Sector in Kenya: Survey of Nyeri Town

DOI: 10.21276/sb.2017.3.10.15 Abstract: Tax non-compliance reduces tax collection and the tax performance within a country. The Kenyan government has implemented various strategies to bring businesses in the informal sector into the tax bracket though available data shows declines in the collected taxes. The purpose of this study was to identify predictors of tax compliance in the informal sector in Nyeri Town. Specifically the study aimed to assess how tax rates, attitudes towards government spending, complexity of tax returns and tax enforcement strategies influence tax compliance. The study adopted a crosssectional survey design and targeted 715 informal businesses in Nyeri Town. Stratified random sampling technique was used to select 143 informal businesses to participate. Researcher-administered questionnaires were used to collect data from the respondents. Descriptive statistics entailing frequency distribution, percentages, mean, were used to summarize and organize data. Inferential statistics entailing Chi-square tests and correlation analysis were employed to establish relationships between study variables. Findings were presented using tables of frequencies and percentages. A significant number (83%) indicated that they’d be more willing to pay taxes if the tax enforcement strategies were improved. The study found that tax enforcement strategies had no significant relationship (p=0.068) with tax compliance at 95% confidence level The study also found that tax enforcement strategies had a weak positive correlation (r=0.364) with tax compliance. The study concluded although to a small extent, tax enforcement strategies predicted tax compliance in the informal sector. It was recommended that the tax enforcement strategies could be improved by bringing the services closer to their businesses, to enhance tax compliance.