Effect of Customer Service on Value Added Tax Compliance Among Small and Medium Enterprises in Starehe Sub-County in Nairobi, Kenya

Abstract

The compliance with Value Added Tax (VAT) among small and medium enterprises (SMEs) is an area of significant interest across different nations. The primary objective of this study was to determine the effect of customer service on value-added tax compliance among small and medium enterprises in Starehe Sub-County in Nairobi, Kenya. The theory that guided this study was the Ability to Pay Theory and the Social Exchange Theory. This study utilized an explanatory research design, targeting a population of 5,395 Small and Medium Enterprises in Starehe Sub-County in Nairobi, Kenya, with a sample size of 372 respondents. 290 respondents correctly filled and submitted their questionnaires, indicating a 78 % response rate. This study utilized a questionnaire to gather primary data, which was subsequently analyzed using descriptive and inferential statistics to assess the relationships between variables. The beta coefficient results revealed customer service had a positive and significant effect on VAT compliance (β = 0.372, p = 0.035). The Kenya Revenue Authority (KRA) tax authorities should enhance customer service through dedicated SME support desks and regular staff training programs. Future research could investigate the effects of tax reforms on VAT compliance particularly Kenya's Finance Act 2023 provisions.