Effect of Tax Aggressiveness on Value Added Tax Compliance Among Medium Taxpayers in the West of Nairobi Tax District, Kenya

Abstract

Tax is a vital source of government revenue in almost all countries in the world, as it ensures that the government can offer goods and services to the general public. Therefore, tax compliance is critical in all economies, which recognize the role played by revenue collected from taxes in national development. The broad objective of the study was to establish the effect of tax aggressiveness on value-added tax compliance among medium taxpayers in the West of Nairobi Tax District, Kenya. The study was guided by the following theories Ability to Pay Theory and the Agency Theory. The study adopted an explanatory research design, and the target population was 3872 Medium Taxpayers in the West of Nairobi Tax District, and a sample size of 362 respondents. 261 respondents 72.1% were interested in the questionnaire topic, and in turn accurately completed their questionnaires and submitted them in time, while 101 did not have interest in filling the questionnaires, thus a 27.9% non-response rate. Primary data collection was employed using closed structured questionnaires from the study's objectives. The data was analyzed using descriptive, inferential statistics, and multiple linear regression analysis will be adopted. The regression model found that tax aggressiveness has a negative and significant effect on VAT compliance (β = -0.268, p = 0.000). The study recommends regarding the negative effect of tax aggressiveness on VAT compliance; the government of Kenya should strengthen enforcement mechanisms through increased penalties for avoidance schemes and enhanced audit capabilities.