Tax Service Quality, Trust in Government and Tax Compliance among Small and Medium Enterprises in North Rift Economic Bloc
Authors
Article Sidebar
Main Article Content
Abstract
Purpose- The study sought to establish the indirect effect of trust in government on the relationship between the tax service quality and tax compliance among SMEs in North Rift Economic Bloc, Kenya.
Design/Methodology- Based on the social contract theory, this study has a positivist philosophy that is informed by an explanatory research design. The target population was 21,232 SMEs; the sample size used in this study consisted of 393 SME owners/managers selected through a stratified sampling technique. Data were collected using a self-administered questionnaire, and Cronbach's alpha with factor analysis was used to establish the instrument's reliability and validity. Descriptive and inferential statistics were employed to test the hypothesis, and hierarchical regression using the Hayes Process macro was performed.
Findings-The study revealed that tax service quality (β =.541, p=.000<0.05) and trust in government (β =.375, p=.000<0.05) are significantly positively related to tax compliance. In addition, the tax service quality was found to have a significant effect on trust in government (β =.395, p =.000<0.05). In addition, the results showed that trust in government mediates the relationship between tax service quality and tax compliance (β =.1482, CI=.0981, .2015).
Practical Implications- These findings underscore the need for governments to improve the quality tax services, as this may be able to help in gaining public trust which will ultimately increase SMEs compliance with taxes. There is scope for future research to incorporate mixed-method approaches in order to discover yet more factors affecting tax compliance.
Article Details
Copyright (c) 2024 Amos Kiptum, Dr. Collins Kapkiyai, Dr. Daniel Kirui
This work is licensed under a Creative Commons Attribution 4.0 International License.
Dr. Collins Kapkiyai, Department of Accounting and Finance, Moi University, Kenya
Lecturer, Department of Accounting and Finance, School of Business and Economics, Moi University.
Dr. Daniel Kirui, Department of Accounting and Finance, Moi University, Kenya
Lecturer, Department of Accounting and Finance, School of Business and Economics, Moi University.
The data that supports the findings of this study are available from [AK] the corresponding author upon reasonable request.
Abdu, E., & Adem, M. (2023). Tax compliance behavior of taxpayers in Ethiopia: A review paper. Cogent Economics & Finance, 11(1), 2189559. DOI: https://doi.org/10.1080/23322039.2023.2189559
Adekoya, A. A., Agbetunde, L. A., & Lawal, A. B. (2022). Trust relationship and tax compliance in developing countries-Informal sector perspectives. International Journal of Economics, Commerce and Management, 10(6), 309-332.
Alkraiji, A., & Ameen, N. (2022). The impact of service quality, trust and satisfaction on young citizen loyalty towards government e-services. Information Technology & People, 35(4), 1239-1270. DOI: https://doi.org/10.1108/ITP-04-2020-0229
Alm, J. (2019). Tax compliance and administration. In Handbook on taxation (pp. 741-768). Routledge. DOI: https://doi.org/10.4324/9781315093161-30
Alm, J. (2023). Tax Compliance Technology, Trust, and Inequality in a Post-Pandemic World. eJTR, 21, 152.
Alshira’h, A. F., Alsqour, M. d., Lutfi, A., Alsyouf, A., & Alshirah, M. (2020). A socio-economic model of sales tax compliance. Economies, 8(4), 88. DOI: https://doi.org/10.3390/economies8040088
Ardhianto, R. A., Bawono, I. R., & Sudibyo, Y. A. (2022). The Role Of Trust In The Voluntary Compliance Of MSME Taxpayers. Jurnal Reviu Akuntansi dan Keuangan, 12(1), 75-87. DOI: https://doi.org/10.22219/jrak.v12i1.18501
Bani-Khalid, T., Alshira’h, A. F., & Alshirah, M. H. (2022). Determinants of tax compliance intention among Jordanian SMEs: A focus on the theory of planned behavior. Economies, 10(2), 30. DOI: https://doi.org/10.3390/economies10020030
Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of personality and social psychology, 51(6), 1173. DOI: https://doi.org/10.1037//0022-3514.51.6.1173
Bell, E., Bryman, A., & Harley, B. (2022). Business research methods. Oxford university press. DOI: https://doi.org/10.1093/hebz/9780198869443.001.0001
Bernarto, I., Wilson, N., & Suryawan, I. N. (2019). Pengaruh website design quality, service quality, trust dan satisfaction terhadap repurchase intention (studi kasus: tokopedia. com). Jurnal Manajemen Indonesia, 19(1), 80-90. DOI: https://doi.org/10.25124/jmi.v19i1.1987
Bihabwa, E. (2017). The influence of tax compliance on service delivery in Uganda: a case study of Makindye Division Kampala.
Budaharini, I. A. P., Kusuma, I. G. A. T., Widyani, A. A. D., Sujana, I. W., & Villaceran, I. (2022). The effect of service quality and customer satisfaction on customer loyalty with customer trust as intervening variables in cv power hearing Bali. International journal of sustainability, education, and Global creative economic (ijsegce), 5(2), 107-124.
Byaro, M., & Kinyondo, A. (2020). Citizens' Trust in Government and Their Greater Willingness to Pay Taxes in Tanzania: A Case Study of Mtwara, Lindi, and Dar es Salaam Regions. Poverty & Public Policy, 12(1), 73-83. DOI: https://doi.org/10.1002/pop4.271
Castaneda, N., & Doyle, D. (2019). Progressive tax policy and informal labor in developing economies. Governance, 32(4), 595-618. DOI: https://doi.org/10.1111/gove.12390
Commission, A. U., & Forum, A. T. A. (2023). Revenue Statistics in Africa 2023. OECD Publishing.
Damayanti, T. W., & Supramono, S. (2019). Trust reciprocity and power: An integration to create tax compliance. Montenegrin Journal of Economics, 15(1), 131-139.
Dang, V. C., & Nguyen, Q. K. (2022). Audit committee characteristics and tax avoidance: Evidence from an emerging economy. Cogent Economics & Finance, 10(1), 2023263. DOI: https://doi.org/10.1080/23322039.2021.2023263
Dharmayanti, N. (2023). The Effect Of Tax Office Service Quality And Taxpayer Income On Land And Building Tax Compliance. JAK (Jurnal Akuntansi) Kajian Ilmiah Akuntansi, 10(1), 48-64. DOI: https://doi.org/10.30656/jak.v10i1.4927
Di Nola, A., Kocharkov, G., Scholl, A., & Tkhir, A.-M. (2021). The aggregate consequences of tax evasion. Review of Economic Dynamics, 40, 198-227. DOI: https://doi.org/10.1016/j.red.2020.09.009
Dom, R., Prichard, W., Custers, A., & Davenport, S. (2022). Taxing SMEs. Innovations in Tax Compliance: Building Trust, Navigating Politics, and Tailoring Reform. DOI: https://doi.org/10.1596/978-1-4648-1755-7
Fandy Tjiptono, G. C. (2019). Service, quality dan customer satisfaction.
Feld, L., & Frey, B. (2019). Tax compliance as the result of a psychological tax contract: The role of incentives and responsive regulation. Centre for Tax System Integrity (CTSI), Research School of Social Sciences ….
Gaspar, V., Amaglobeli, M. D., Garcia-Escribano, M. M., Prady, D., & Soto, M. (2019). Fiscal policy and development: Human, social, and physical investments for the SDGs. International Monetary Fund. DOI: https://doi.org/10.5089/9781484388914.006
Goren, T., Vashdi, D. R., & Beeri, I. (2022). Count on trust: the indirect effect of trust in government on policy compliance with health behavior instructions. Policy Sciences, 55(4), 593-630. DOI: https://doi.org/10.1007/s11077-022-09481-3
Gort, J., & Brooks, A. (2023). Africa's Next Debt Crisis: A Relational Comparison of Chinese and Western Lending to Zambia. Antipode, 55(3), 830-852. DOI: https://doi.org/10.1111/anti.12921
Güzel, S. A., Özer, G., & Özcan, M. (2019). The effect of the variables of tax justice perception and trust in government on tax compliance: The case of Turkey. Journal of behavioral and experimental economics, 78, 80-86. DOI: https://doi.org/10.1016/j.socec.2018.12.006
Habibov, N., Cheung, A., & Auchynnikava, A. (2018). Does institutional trust increase willingness to pay more taxes to support the welfare state? Sociological Spectrum, 38(1), 51-68. DOI: https://doi.org/10.1080/02732173.2017.1409146
Hamilton, B. (2021). Tax Administration 2021: COMPARATIVE INFORMATION ON OECD AND OTHER ADVANCED AND EMERGING ECONOMIES. Tax Administration: Comparative Information on OECD and Other Advanced and Emerging Economies, 1-228.
Haning, M. T., Hamzah, H., & Tahili, M. H. (2020). The public trust of taxpayers at local government: Explaining the role of good governance practices of tax service in Indonesia. International Journal of Advanced Science and Technology, 29(2), 1286-1299.
Hardiyansyah, L. N. I., & Efrina, R. (2018). JURNAL NATAPRAJA.
Hayes, A. F. (2013). Mediation, moderation, and conditional process analysis. Introduction to mediation, moderation, and conditional process analysis: A regression-based approach, 1(6), 12-20.
Ho, T. T., Tran, X. H., & Nguyen, Q. K. (2023). Tax revenue-economic growth relationship and the role of trade openness in developing countries. Cogent Business & Management, 10(2), 2213959. DOI: https://doi.org/10.1080/23311975.2023.2213959
Holis, N., & Asmarani, R. (2021). Skeeter’s Struggle for Life Equality of Black Women in The Help Film. Jurnal Kata, 5(1), 37-45. DOI: https://doi.org/10.22216/kata.v5i1.68
Jonis, S., & Handryno, S. (2021). The effect of tax service quality on taxpayers’ compliance in paying land and building tax. International Journal of Scientific Research, 11(7), 637-641. DOI: https://doi.org/10.29322/IJSRP.11.07.2021.p11583
Kassa, E. T. (2021). Factors influencing taxpayers to engage in tax evasion: evidence from Woldia City administration micro, small, and large enterprise taxpayers. Journal of innovation and entrepreneurship, 10(1), 8. DOI: https://doi.org/10.1186/s13731-020-00142-4
Larasati, A. P., & Kurnia, K. (2020). Pengaruh E-Registration, E-Billing dan Pelayanan Fiskus terhadap Kemauan Membayar Pajak. Jurnal Ilmu dan Riset Akuntansi (JIRA), 9(6).
Larzen, S. J., Magero, P., Makanga, A., & Aondo, R. (2020). Increasing Tax Base in Kenya.
Makovicky, N., & Smith, R. (2020). Introduction: Tax beyond the social contract. Social Analysis, 64(2), 1-17. DOI: https://doi.org/10.3167/sa.2020.640201
Maritim, J. C. (2020). Tax Evasion in the Informal Sector in Kenya: Assessing the Adequacy of the Legal and Regulatory Framework University of Nairobi].
Mas' ud, A., Abd Manaf, N. A., & Saad, N. (2019). Trust and power as predictors of tax compliance: global evidence. Economics & Sociology, 12(2), 192-204. DOI: https://doi.org/10.14254/2071-789X.2019/12-2/11
Masud, A., Alkali, Y. M., & Aliyu, A. A. (2021). Mediating role of trust in the relationship between public governance quality and tax compliance: An African cross-sectional analysis. Bussecon Review of Social Sciences (2687-2285), 3(4), 11-22. DOI: https://doi.org/10.36096/brss.v3i4.276
Modica, E., Laudage, S., & Harding, M. (2018). Domestic revenue mobilisation: A new database on tax levels and structures in 80 countries.
Mohammed, H., & Tangl, A. (2023). Taxation Perspectives: Analyzing the Factors behind Viewing Taxes as Punishment—A Comprehensive Study of Taxes as Service or Strain. Journal of Risk and Financial Management, 17(1), 5. DOI: https://doi.org/10.3390/jrfm17010005
Muhammad, S., & Saad, R. A. J. (2016). Determinants of trust on zakat institutions and its dimensions on intention to pay zakat: A pilot study. Journal of Advanced Research in Business and Management Studies, 3(1), 40-46.
Murunga, J., Muriithi, M., & Wawire, M. (2021). The size of the informal sector and tax revenue in Kenya. Journal of Economics and Public Finance, 7(5), 15-35. DOI: https://doi.org/10.22158/jepf.v7n5p15
Mustapha, B., & Obid, S. N. B. S. (2015). Tax service quality: The mediating effect of perceived ease of use of the online tax system. Procedia-Social and Behavioral Sciences, 172, 2-9. DOI: https://doi.org/10.1016/j.sbspro.2015.01.328
Ndikumana, L., Mannah-Blankson, T., & Njuguna, A. E. (2020). Looming debt crisis in sub-Saharan Africa: Drivers, implications and policy options.
Neuman, W. L. (2012). Designing the face-to-face survey. Handbook of survey methodology for the social sciences, 227-248. DOI: https://doi.org/10.1007/978-1-4614-3876-2_14
Nguyen, T. H. (2022). The impact of non-economic factors on voluntary tax compliance behavior: A case study of small and medium enterprises in Vietnam. Economies, 10(8), 179. DOI: https://doi.org/10.3390/economies10080179
Nurkholis, N., Dularif, M., & Rustiarini, N. W. (2020). Tax evasion and service-trust paradigm: A meta-analysis. Cogent Business & Management, 7(1), 1827699. DOI: https://doi.org/10.1080/23311975.2020.1827699
Odongo, Z. M., & Munene, R. (2023). Impact of Compliance Costs and Tax Education on Tax Compliance among Small and Medium-Sized Enterprises (SMEs) in Kisumu County, Kenya. Journal of Business, Economics and Management Research Studies, 1(2), 31-45.
Oyollo, B. O. (2022). Effects of Tax Reforms on Revenue, a Study of Kenya Revenue Authority University of Nairobi].
Prastiwi, D., Narsa, I. M., & Diamastuti, E. (2021). Tax compliance: Respectful treatment and institutional image. The Indonesian Acounting Review, 11(2), 221-234. DOI: https://doi.org/10.14414/tiar.v11i2.2471
Prichard, W., & Dom, R. (2022). Taxing at the Local Level. Innovations in Tax Compliance: Building Trust, Navigating Politics, and Tailoring Reform.
Psomas, E. (2020). The originality of the lean manufacturing studies: a systematic literature review. International Journal of Lean Six Sigma, 11(2), 254-284. DOI: https://doi.org/10.1108/IJLSS-01-2018-0002
Randlane, K. (2016). Tax compliance as a system: Mapping the field. International Journal of Public Administration, 39(7), 515-525. DOI: https://doi.org/10.1080/01900692.2015.1028636
Santoro, F., & Waiswa, R. (2024). How to improve tax compliance by wealthy individuals? Evidence from Uganda. Development Policy Review, 42(2), e12754. DOI: https://doi.org/10.1111/dpr.12754
Sebele-Mpofu, F. Y. (2020). Governance quality and tax morale and compliance in Zimbabwe’s informal sector. Cogent Business & Management, 7(1), 1794662. DOI: https://doi.org/10.1080/23311975.2020.1794662
Smith, N. C., Kimmel, A. J., & Klein, J. G. (2009). Social contract theory and the ethics of deception in consumer research. Journal of Consumer Psychology, 19(3), 486-496. DOI: https://doi.org/10.1016/j.jcps.2009.04.007
Sugiyarti, S., Larasati, E., Suwitri, S., & Ngatno, N. (2021). Tax Service Quality In Increasing Taxpayer Compliance In The Cirebon Satu Pratama Office. Proceedings of the 1st Tidar International Conference on Advancing Local Wisdom Towards Global Megatrends, TIC 2020, 21-22 October 2020, Magelang, Jawa Tengah, Indonesia, DOI: https://doi.org/10.4108/eai.21-10-2020.2311924
Sukesi, S., & Yunaidah, I. (2020). The effect of tax socialization, superior service, and service quality on taxpayers’ satisfaction and compliance. Journal of Economics, Business, and Accountancy Ventura, 22(3). DOI: https://doi.org/10.14414/jebav.v22i3.1698
Susuawu, D., Ofori-Boateng, K., & Amoh, J. K. (2020). Does service quality influence tax compliance behaviour of SMEs? A new perspective from Ghana. International Journal of Economics and Financial Issues, 10(6), 50-56. DOI: https://doi.org/10.32479/ijefi.10554
Thornton, E. M., Aknin, L. B., Branscombe, N. R., & Helliwell, J. F. (2019). Prosocial perceptions of taxation predict support for taxes. PloS one, 14(11), e0225730. DOI: https://doi.org/10.1371/journal.pone.0225730
Wanjohi, M. S., Magutu, P. O., Mokoro, J. M., & Lumumba, O. M. (2010). Taxpayers’ attitudes and tax compliance behaviour in Kenya.
Yong, D. S., & Freudenberg, B. (2020). Perceptions of Tax Compliance by SMEs and Tax Practitioners in New Zealand: A Divergent View? New Zealand Journal of Taxation Law and Policy, 26(1), 57-85. DOI: https://doi.org/10.2139/ssrn.3649856
Zeithaml, V. A., Berry, L. L., & Parasuraman, A. (1988). Communication and control processes in the delivery of service quality. Journal of marketing, 52(2), 35-48. DOI: https://doi.org/10.1177/002224298805200203
Zikmund, W., Babin, B., Carr, J., & Griffin, M. (2013). Business Research Methods, 9th International Edition. South-Western Cengage Learning, Canada.