An assessment of the effectiveness of electronic tax registers in processing of value added tax returns: a case study of registered vat taxpayers in Kisii town, Kenya

Abstract

The main purpose of this study was to assess the effectiveness of Electronic Tax Registers (ETRs) in the processing of Value Added Tax returns. The population under study comprised of 98 VAT registered taxpayers in Kisii town, which was stratified into; service providers, wholesalers & large scale retailers and supermarkets. The main instrument of collecting primary data was the questionnaires while secondary data was obtained from the KRA regional office. Analysis of data was mainly done using descriptive statistics.Data was collected from 78 registered VAT taxpayers in Kisii town. The respondents were senior, middle level and lower level managers. Out of the 78 registered VAT taxpayers to whom the questionnaires were administered, only 68 responded. This gives a response rate of 87% percent. Data analysis tools used in the research were Excel and SPSS and data was presented in form of tables and graphs. Based on the results from data analysis and findings of the research, one can safely conclude the following; First, Kenya has witnessed significant changes in many aspects of its economy over the last four decades, but like most developing countries, it has had to contend with the common problems that plague tax systems of developing countries. From the research data, most businesses (91%) have acquired ETR machines; an indication that most businesses in Kisii town have complied with the VAT requirements in Kenya. Secondly, the timely filing of the monthly VAT returns is attributed to many factors. ETR is one of the factors. Most businesses indicated that timely filing of VAT returns was attributed to the adoption of the ETR machine. The use of ETR machines has also led to improved sales audit for the business. Thirdly, it was found out that ETRs have enhanced revenue collection resulting from sound sales and stock audits. Lastly, to evaluate the effectiveness of ETRs in filing VAT Returns at regular intervals, it was found that the use of ETRs was not a waste of funds and has assisted the business in many ways. The findings of this research project will assist the Kenya Revenue Authority look for ways of improving the processing of VAT returns as well as come up with other cost effective methods which taxpayers can use in processing their VAT returns