Effect of Strategic Planninig on Tax Compliance of Micro, Small and Medium Enterprises in Mombasa County, Kenya

Abstract

Tax compliance is a very important facet of modern day strategic planning. Organizations adopt strategic planning practices to continuouslyenhance tax compliance. Strategic planning enables SMEs to be proactive about their tax liabilities. Firms use planning to better understand their income and important transactions so that they can predict their tax liabilities at year's end, take efforts to mitigate tax effects, and avoid tax shocks. This enhances tax compliance for SMEs. “The main aim of this research was to analyze the influence of strategic planningon tax compliance among SMEs in Mombasa County. The following objectives were used to provide guidance; to determine the influence of Environmental scanningon tax compliance, to study the effect of strategy formulation on tax compliance, to study the effect of strategy implementationon tax compliances and to establish the effect of strategy evaluationon tax compliance. This research adopted the contingency theory, strategic fit theoryand resource based theory. A descriptive research design was used. The 5655 registered SMEs in Mombasa County served as the research population. Sample size was 110 respondents selected from Private education, Health and Entertainment. This research relied on primary data collected through questionnaires. Google forms were made use of in the questionnaire administration. The collected data was converted into quantitative format to make analysis using statistical package for social sciences. The statistics generated were descriptive statistics including mean and std. deviation and inferential statistics which included both correlation analysis and multiple linear regression. The study revealed a significant positive relationship betweenenvironmental scanning, strategy formulation, implementation, evaluationand tax compliance amongSMEs in Mombasa County. Regression analysis revealed that 64.2% of changes in tax complianceamong SMEswere ascribed to the four variables selected in this study. In conclusion, environmental scanning, strategy formulation, implementation andevaluationare essential in enhancing tax compliance. Based on the findings, strategy implementation had the greatest influence on tax compliance followed by strategy formulation while strategy evaluationand environmental scanning had the least influence. As a result, it is recommended that SMEs' managers and owners concentrate on strategic planning, as this improves tax compliance.”