Relationship Between Tax Awareness and Value Added Tax Compliance Among Registered Manufacturing Firms in Nakuru East, Kenya: Moderating Role of Perceived Taxpayer Trust

Abstract

This study was conducted to investigate the effect of tax awareness on Value Added Tax (VAT) compliance among registered manufacturing firms in Nakuru East, Kenya, with a focus on the moderating role of perceived taxpayer trust. The study employed an explanatory research design, utilizing both descriptive and inferential analyses. Data was collected from 204 respondents using a structured questionnaire with a 5-point Likert scale. The sample was drawn from a target population of 415 manufacturing firms in Nakuru East, employing simple random sampling, and Data analysis included descriptive and inferential statistics. Descriptive statistics revealed high levels of tax awareness and perceived taxpayer trust among respondents. Regression analysis revealed that tax awareness (β = 0.35, p < 0.05) and perceived taxpayer trust (β = 0.40, p < 0.05) significantly influenced VAT compliance. Perceived taxpayer trust was found to moderate the relationship between tax awareness and VAT compliance, indicating its crucial role in shaping taxpayer behavior. To enhance compliance, tax authorities should prioritize taxpayer education programs that focus on VAT regulations, deadlines, and penalties. Clear communication channels, such as workshops, seminars, and digital platforms, can bridge knowledge gaps and empower taxpayers to meet their obligations. Additionally, tailored educational materials for small and medium-sized enterprises (SMEs) are essential, as these firms often face resource constraints.