Determinants of Compliance Levels With Residential Income Tax by Property Owners in Nairobi County

Abstract

Tax authorities major challenge has always been persuading all the property owners to comply with taxation regulations. The study was aimed at establishing the impact of the various determinants on residential income tax compliance. It was specifically aimed to establish how, tax rates, tax knowledge, income levels, fines and penalties affect residential rental income tax compliance by property owners in Nairobi County. The study used descriptive research design since it was focused on the effects of tax compliance determinants on operational performance of property owners in Nairobi County. The study was guided by Theory of Fiscal policy and Social influence theories. The study used a descriptive statistic in its methodology on property owners in Nairobi County. This study used primary data. Data collection was effected by use of structured questionnaires. Property owners in Nairobi County were the targeted population who were sampled out to be 100 out of the total number of 1000 property owners in Nairobi County. These questionnaires were issued through drop and pick method, coded, keyed and analyzed using both descriptive and regression analysis. The regression model used had four variables. Tax rates, fines and penalties, tax knowledge and income levels were the dependent variables while residential tax compliance was the independent variable. The study findings indicated that tax rates, tax knowledge, income levels, fines and penalties have a positive impact on residential rental income tax compliance. The study provides some preliminary evidence that imposing fines/penalties and education provision among property owners in Nairobi county will improve tax compliance. There should be stiff enforcement of fines and penalties to deter tax evasion. Additionally, tax authorities should simplify processes involved in filing of returns and payment of taxes. Other future academicians should research on residential income tax compliance levels by property owners in a different town rather than Nairobi county or carry out a cross sectional study in Kenya.