Effect of Technological Tax Reforms on Financial Performance of Small and Medium Enterprises in Kenya

Abstract

Technological tax reforms is the chief undertaking useful in elimination of manual operation and replacing it with computerized or digitalized platform to increase adherence to policies and smoothen the operation. The technological tax reforms identified in the study include, e-registration, e-filling and mobile payments. The objective of the study was to explore the effect technological tax reforms on the financial performance of SMEs in Kenya. The study used primary data in its analysis. A descriptive research design was adopted by the study with a census of 100 respondents drawn from top 50 ranked SMEs in Kenya. Data analysis was done with the aid of SPSS software for analysis. The results of the study indicated that e-registration, e-filing and mobile payments all have positive and statistically significant relationship with financial performance of SMEs in Kenya. The study further concludes that e-registration, e-filing and mobile payments are important and helps boost the financial performance of SMEs by increasing efficiency and the reducing the transactional costs. The study recommends that the Kenya Revenue Authority should role out more technological reforms and further ease the KRA pin online registration process to a system that is friendly to the semi-skilled at least. KRA should also increase their sensitization campaigns on deadlines of tax payments, the payment platforms and the penalties for tax defaults. This information should be made available to the public to avoid tax defaults by businesses as a result of lack of information and the costs associated with default and hence improve financial performance. In addition, the government should also come up with a way of eliminating double taxations. There should be one payment point, either KRA or the county government licenses. This can be done through categorization of businesses to avoid conflict.