Alternative Dispute Resolution Mechanisms and Tax Compliance: The Moderating Role of Taxpayer Education

Abstract

Aims: This research sought to determine the moderating role of taxpayer education on the relationship between Alternative Dispute Resolution mechanisms (mediation, arbitration, and Early Neutral Evaluation), and tax compliance. Study Design/ Methodology: The research used an explanatory research design, where questionnaires were used to collect data from 252 Small and Microenterprise businesses in Nairobi, Kenya. Hypotheses were tested using hierarchical regression analysis to assess the direct effects and the moderating role of taxpayer education. Findings: The study found out that Mediation, arbitration, and Early Neutral Evaluation significantly enhance tax compliance, fostering trust and efficiency among SMEs. Taxpayer education amplifies these effects, enhance compliance through increased awareness. The findings therefore support the assertions of Conflict Resolution Theory, Legal Realism Theory and Justice Theory. Low awareness can hinder Alternative Dispute Resolutions’ impact on tax compliance thus emphasizing education’s critical role. Practical Implications: Revenue authorities should integrate mediation, arbitration, and Early Neutral Evaluation into tax frameworks, supported by a robust taxpayer education to enhance compliance among SMEs and informal operators.