Influence of Online Tax Filing on Tax Compliance among Small and Medium Enterprises in Nakuru Town, Kenya

The Kenya Revenue Authority has introduced online filing through the iTax system that replaced the Integrated Tax Management Systems. The online filing of tax returns introduces benefits that were not possible through manual filing of the tax returns. These benefits include the element of convenience to the taxpayer, reduced costs on the revenue authority, and quality data on tax returns due to elimination of data entry errors associated with manual filing. This study aims to assess the level of awareness regarding online filing of tax returns in the context of the Small and Medium Enterprises in Nakuru. The Small and Medium Enterprises in Nakuru Central Business District have been chosen owing to the fact that Nakuru town is the fastest growing town in East and Central Africa due to the high number of Small and Medium Enterprises in the town. The specific objectives of the study included examination of the effect of computer literacy on tax compliance among Small and Medium Enterprises in Nakuru, examination of the impact of online tax filing on tax compliance among Small and Medium Enterprises and an examination of perceived security on tax compliance. The study is based on four theories as part of the theoretical framework, that is, the Theory of Technological Acceptance Model, Unified Theory of Acceptance and Use of Technology, Theory of Reasoned Action and Diffusion of Innovation Theory. These theories deal with the factors influencing the adoption of new information systems such online filing. The study utilized the survey descriptive research design in which quantitative data was collected through use of primary data collection techniques. Primary data was collected using questionnaires. A sample size of 100 respondents from the Small and Medium Enterprises in Nakuru was utilized. The study found amongst the independent variables only the computer literacy had significant effect on the influence tax compliance levels amongst Small and Medium Enterprises in Nakuru.The multiple correlation effect of 0.954 indicates a relatively strong positive relationship effect between the three independent variables and the dependent variable. The coefficient of determination (R Square) indicates the variance on the dependent variable attributed to the three independent variables. In this context, the coefficient of determination (R Square) of 0.911 indicates that the three independent variables contributed to 91.1% of the variance in the dependent variable.