Effects of Tax Practices on Performance of Micro Small and Medium-Size Enterprises in Kisumu City, Kenya
Keywords:
Tax Rates; Tax Knowledge; Tax Types; Business growthAbstract
Micro, Small and Medium-sized Enterprises (MSMEs) play a significant role in Kenya’s economic development through employment creation, income generation, and contribution to national and county revenues. Despite this vital role, their performance is constantly constrained by various challenges, including taxation. This study examined the effects of tax practices on the performance of MSMEs in Kisumu City, Kenya, with emphasis on tax rates, tax management knowledge, and tax types. The study used data collected form 309 respondents by the use of questionnaires, this represented 81% response rate. Data analysis was done using descriptive, correlation analysis and regression analysis. The main measures for business performance were increase in profitability, business expansion, increase in the number of employees. The regression analysis results showed that tax knowledge had the greatest influence on performance of MSMEs with a Beta of .325 and p-value of .000 followed by tax types with a Beta of .314 and p-value of .000. Tax rate had a negative and the least significant impact on performance with a Beta of -.085 and a p-value of .245. The study recommended implementation of training campaigns, adoption of moderate and stable tax rates and simplification of tax administration procedures.
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