Determinants of voluntary rental income tax compliance by landlords in Kiambu Town, Kiambu County, Kenya

Abstract

Tax non-compliance stands a bigger problem and is prevalent in many economic sectors including housing and property developers. Despite the tremendous growth from real estate sector in Kenya, the corresponding tax collection from the sector has remained very low. In 2017 rental income tax compliance ratewas low at 40% in Kiambu Town. The purpose of this study was to establish the determinants of voluntary rental income tax compliance by landlords in Kiambu Town, Kenya by employing descriptive survey design.The target population was 789 rental property owners in Kiambu Town. A structured questionnaire was employed to collect primary data and analyzedusing SPSSVersion 25.0. Regression of coefficients indicated that tax knowledge, attitude,and perceptionhave positive and significant effect on voluntary rental income tax compliancewhile the cost of complianceand tax rate levied on rental propertyhave negative and significant effect on voluntary rental income tax compliance. The study concludes that attitude and perception has the highest positive impacton voluntary rental income tax compliance followed bytax knowledge. The cost of compliance has the greatest negative impacton voluntary rental income tax compliance followed bytax rate levied on rental property.Thereisneed for periodic workshop training, tax educational programmes organized by the Kiambu county governments and Kenya Revenue Authority to sensitize and about the importance of taxcompliance. There is also need for Kiambu county government and KRA to review the costs incurred by taxpayersduring their attempt to comply with taxation requirements with aim of simplifying the process. Further, there is need for Kenya Revenue Authority to review the tax rates levied on rental property to ensure that the rates are favorableand do not burden the property owners