Effect of Taxpayer Egoism on Capital Gains Tax Compliance Among Property Owners in Kasarani Sub-County, Nairobi County, Kenya

Abstract

Research shows that money received in taxes derived from domestic taxes has not been adequate to finance the government's annual budgets. The country has been forced to finance the deficit through debt. According to the Kenya Revenue Authority, there is a need for concerted efforts to collect more Tax through expanding the tax base. The main objective of this study was to establish the effect of taxpayer egoism on capital gains tax compliance among property owners in Kasarani subcounty, Nairobi, Kenya. The study was anchored on the Theory of Psychological Egoism Theory. The study adopted an explanatory research design. The target population was 5,278 property owners, and the sample was 371 respondents. The study further found that 278 respondents accurately filled and submitted their questionnaire responses out of 371 sample size, the remaining 93 did not submit their responses, indicating a response rate of 74.9%, and a non-response rate of 25.1%. Random sampling was used. The study also utilized primary data collected through structured questionnaires. The study found that taxpayer egoism had a negative and significant effect on capital gains tax compliance (β = -0.413, p = 0.000). Based on the findings, the KRA could enhance Psychological Egoism Theory by revealing systems automation's transformational effect, which shows that while egoism reduced capital gains tax compliance, its interaction with system automation produced a positive effect. This suggests digital systems convert taxpayer egoistic motivations into compliant behavior when evasion becomes technologically difficult. Future research could explore incorporating macroeconomic variables like property market volatility indices to explain why certain high-burden taxpayers remain compliant during market downturns, addressing the conceptual narrowness of current capital gains tax compliance models.