DESK AUDIT AND TAX COMPLIANCE IN KENYA

Abstract

Tax compliance in Kenya has been poor and consequently Kenya Revenue Authority has not been meeting targets for past five years. Additionally, tax revenue decreased from 15.1% in 2019 to 14.3% in 2020. This study examined how desk audits affect tax compliance within Kenya. This study was anchored on Allingham and Sandmo (AS) theory. In addition, explanatory research technique was used. Moreover, the study population was all 232 staffs in seven departments in Kenya Revenue Authority. Yamane's Formula was utilized to establish study sample size. Using this formula, 146 respondents were selected from target population. The study utilized both primary and secondary data. Moreover, secondary data was acquired from Kenya Revenue Authority annual reports. Primary data was collected using semi-structured questionnaires. Moreover, the questionnaires produced qualitative and also quantitative data. Moreover, thematic analysis was utilized in qualitative data analysis and the findings were presented in a narrative format. Further, descriptive and inferential statistics were used in analyzing quantitative data with assistance of SPSS version 24. Descriptive statistics included frequencies, percentages, mean and standard deviation while inferential statistics comprised of regression analysis and correlation analysis. Diagnostic tests in the study included the normality test, linearity test, autocorrelation test, multicollinearity test and also heteroscedasticity test. The study results were then displayed in figures and tables. The research found that desk audit has positive and significant effect on tax compliance in Kenya. Therefore, the study recommends that KRA should enhance desk audits by requesting the tax payers to provide more documents including books and financial records to support the submitted returns.

Keywords: Desk Audits, Tax Audits, Tax Compliance, Revenue Collection