Effect of Systems Automation on Turnover Tax Compliance Among Small and Medium Enterprises in Eldoret City, Kenya

Abstract

Systems automation has emerged as a key driver of efficiency and transparency in tax administration processes. In Kenya, these technological advancements are particularly relevant for SMEs, who often face challenges in meeting tax obligations. This study, therefore, evaluates the effect of systems automation on turnover tax compliance among Small and Medium Enterprises (SMEs) in Eldoret City, Kenya. The Economic Deterrence Theory guided the study. The study adopted a cross-sectional explanatory survey. The target population comprised all 24,416 owners of registered SMEs in Eldoret City, with a sample size of 394 calculated using Yamane’s formula. The study employed a stratified random sampling technique to select respondents from SMEs in Eldoret City. The study used questionnaires as a data collection tool. Pre-testing of research instruments was achieved through a pilot study in Nakuru County. questionnaire. To assess the questionnaire's validity, the researcher evaluated content validity through expert reviews. To ensure reliability, the study used a Cronbach’s alpha above 0.7 to assess internal consistency. The study used SPSS version 25 for data analysis. The collected data were analyzed using both descriptive and inferential statistics. The findings indicated that systems automation and turnover tax compliance among SMEs in Eldoret City, Kenya, were positively and moderately correlated (r = 0.736**, p < 0.01). The β coefficient for linear regression indicates that system automation (β1 = 0.450, p < 0.05), implying that a unit increase in system automation is associated with a 0.450-unit increase in turnover tax compliance among SMEs in Eldoret City. The study concludes that automated systems can be really effective in enhancing turnover tax compliance among SMEs in Eldoret City. The study recommended that Tax authorities should continue to invest in and improve automated tax systems further to increase the accuracy and efficiency of turnover tax filing and reduce errors.