Influence Of Creative Accounting Practices On Tax Evasion Amongst Small And Medium Enterprises In Nakuru, Kenya
##plugins.themes.academic_pro.article.main##
Abstract
Tax evasion has become a challenge to the Kenya Revenue Authority (KRA). In April of 2018 for instance, KRA charged a business person with a KSh. 7 billion tax evasion that was undertaken through use of fraudulent accounting practices. This study thus sought to examine the influence of creative accounting practices on tax evasion amongst small and medium enterprises (SMEs) in Nakuru in Kenya. It was guided by the deterrence theory and economics of crime theory and employed descriptive research design. The study specifically targeted the owners/managers of all the 20,355 SMEs operating within Nakuru County. Nassiuma (2000) formula was employed to arrive at a sample size of 100 SMEs’owners/managers. Proportional stratified random sampling technique was used to select the 100 owners/managers of SMEs from the target population. A structured questionnaire was used to gather primary data while secondary data was collected through document analysis. Content validity of questionnaires was based on responses given by five content experts. Cronbach Alpha coefficient of 0.71 was realized as a test for reliability of the instrument. Descriptive statistics that included frequencies and percentages as well as inferential statistics such as correlation and regression analysis were employed in data analysis. The study found that creative accounting practices positively influence tax evasion amongst SMEs in Nakuru. It recommended that the KRA should enforce the use of Electronic Tax Registers to eliminate loopholes that allow for manipulation of source documents, understatement of sales figures, and overstatement of purchase figures by SMEs
##plugins.themes.academic_pro.article.details##
References
2) Ayu, P., & Putri, A. N. (2017). Tax Avoidance, Earnings Management, and Corporate Governance Mechanism (Evidence from Indonesia). International Journal of Economic Research, 1(2), 34–42.
3) Buchan, L. (2017). Tax Avoidance Cost UK Economy £13bn in Five Years, Say Labour. Retrieved from https://www.independent.co.uk/news/uk/politics/tax-avoidance-cost-uk-economy-13-billion-labour-peter-dowd-a7929666.html
4) Chen, S., & Wang, J. S. (2010). Tax Evasion and Fraud Detection: A Theoretical Evaluation of Taiwan’s Business Tax Policy for Internet Auctions. Asian Social Science, 6(12), 23–29.
5) Guandaru, C., Mutiso, N., & Ngui, D. M. (2012). Tax Avoidance and Evasion as a Factor Influencing “Creative Accounting Practice” Among Companies in Kenya. Journal of Business Studies Quarterly, 4(2), 77–84.
6) Kamau, G., Namusonge, S., & Okibo, B. (2016). Creative Accounting Related Practices Among Corporations Listed in Nairobi Securities Exchange in Kenya. IOSR Journal of Business and Management, 2(3), 67–74.
7) Karanja, F. N., Ndirangu, M., & Kiema, J. B. K. (2004). The Spatial Approach in the Identification of Tax Evasion on Rental Income: Case Study of Umoja and Kileleshwa Estates in Nairobi, Kenya. Journal of Property Tax Assesssment & Administration, 4(1), 47–60.
8) Kiema, J. (2016). The Spatial Approach in the Identification of Tax Evasion on Rental Income: Case study of Umoja and Kileleshwa Estates in Nairobi.Journal of Property Valuation and Investment, 2(3), 45–56.
9) Malonza, B. M. (2016). Effect of Use of itax on Corporation Tax Compliance by Medium Corporate Taxpayers in Kenya. Unpublished Master of Business Administration Thesis: University of Nairobi.
10) Musau, M. (2015). Determinants of Tax Compliance among Small and Medium. Government Information Quarterly, 27(11), 87–93.
11) Nakiwala, A. (2010). Tax Competencies, Compliance Costs and Income Tax Compliance among SMEs in Uganda. International Journal of Business and Public Management, 1(2), 25–27.
12) Nassiuma, D. K. (2000). Survey Sampling: Theory and Methods. Nairobi, Kenya: University of Nairobi.
13) Ogunsanwo, O. M. (2013). A Comparative Study and Analysis of the Taxability of Illegal Income in South Africa and United States of America. Retrieved from https://repository.up.ac.za/bitstream/handle/2263/43210/Ogunsanwo_Comparative_2014.pdf;sequence=1
14) Uge, B. O., & Akpotohwo. (2011a). Creative Accounting Practices and Its Asphyxiating Impact on Income Tax Compliance by Firms in Delta State. Multidisciplinary Journal of Research Development, 17(3), 1–7.
15) Uge, B. O., & Akpotohwo. (2011b). Creative Accounting Practices and Its Asphyxiating Impact on Income Tax Compliance by Firms in Delta State. Multidisciplinary Journal of Research Development Volume, 17(3), 1–7.
16) Viljoen, J. (2016). Lessons Learnt From History: Tax Evasion. Unpublished Master of Commerce Thesis: University of Pretoria.