The effect of tax related education on PAYE tax compliance for KRA audited firms in Nairobi central business district
Tax is an important stream of revenue for government’s development projects. However, PAYE tax compliance in Kenya is generally poor because of inadequate knowledge among the taxpayers. The main aim of this study was to determine the effect of tax related education on PAYE tax compliance for the Kenya Revenue Authority audited firms in Nairobi. This study examined taxpayers’ education as a key strategy in achieving voluntary PAYE tax compliance among the tax payers. The study adopted a survey research design. The sample in this study consisted of business enterprises that operate within the NCBD that were audited/not audited by KRA in 2012-2013 irrespective of their trade. They represented the Hospitality, Real Estate Agency, Trade, Financial Services, and Education sectors. Since the study requires a short time period to complete only 50 firms were sampled. The survey data was collected using a self-administered questionnaire and was filled in by the Owners or Finance Managers of the firms within the NCBD. Regression analysis was used to determine the relationship that existed between the dependant variable and the independent variable. The findings revealed that there was adequate knowledge on tax issues among the Owners and Finance Managers of the enterprises. This is because a greater proportion of the respondents (86%) indicated that they knew all PAYE rules an indication that they were well informed about income taxes and the PAYE system, 90% reported that PAYE audit made them understand the PAYE rules. It also revealed that PAYE tax education has an effect on voluntary PAYE tax compliance. Further studies on the subject in question can bring new insight and enrich common understanding. There is need to research more on PAYE tax compliance as most of the empirical findings in this area are from developed countries. On this basis, the study proffered that there is need for tax education to be offered to students pursuing non-accounting courses and not restricted to accounting students at all levels. Also, government and other stakeholders should work together to reduce PAYE tax complexity and compliance cost in order to encourage voluntary compliance.