Determinants of Residential Rental Income Tax Compliance by Property Owners in Thika Town

Abstract

Tax compliance has been a crucial subject to researchers in many countries around the globe. In most third world countries house rental taxation has been classified as economic. In Kenya, statistics indicate that less than half of property owners and developers comply with rental income tax requirements. Thus, this study sought to examine the determinants residential rental income tax compliance by property owners in Thika town. The study employed a descriptive research design and collected data from a sample of 58 property owners using questionnaires. The data collected was analyzed using descriptive and inferential statistics with the help of Statistical Package for Social Sciences version 21 for evaluation of relation between dependent and independent variables. Multiple regression model was adopted. The findings of the study found a significant positive relationship between tax rate, tax knowledge and residential rental income tax compliance and an insignificant positive relationship between attitude and perception and residential rental income tax compliance. The study also found an insignificant negative effect between income levels, fines and penalties and residential rental income tax compliance by property owners. The study concluded that tax rate, tax knowledge, attitude and perception positively influence residential rental income tax compliance while income levels, fines and penalties negatively influence residential rental income tax compliance by property owners. It was recommended that KRA develops training programs to create awareness on residential rental income tax compliance by property owners and that the tax authority in Kenya (KRA) should develop effective working policies to develop a positive relationship and trust with taxpayers. It was recommended that further study be carried on the other factors that affect compliance with residential rental income tax and study to cover other areas besides Thika Town.