Effect of Adoption of Tax Systems on Tax Compliance among Small and Medium Enterprises in Meru County, Kenya

Amos Mwiti Muthuri (), Prof. Paul Maku () and Susan Kambura ()

International Journal of Finance, 2025, vol. 10, issue 6, 52 - 66

Abstract: Purpose: To evaluate the effect of adoption of tax systems on tax compliance among small and medium enterprises in Meru County, Kenya Methodology: The study used a descriptive survey design targeting 2,885 SMEs in Meru County, with a sample of 235 firms. Data were collected via structured questionnaires after a pilot test ensured validity. Both descriptive and inferential statistics were employed for analysis. Findings: The study revealed a strong, statistically significant positive relationship between adoption of tax systems and tax compliance among SMEs in Meru County (r = 0.765, R² = 0.585, B = 0.816, p < 0.05). Adoption of digital platforms like iTax accounted for 58.5% of the variance in compliance. The adjusted R² of 0.582 confirmed model reliability. Findings indicate that digital tax systems enhance voluntary compliance by simplifying filing, minimizing errors, improving accessibility, and fostering trust in tax processes, thereby promoting fiscal accountability among SMEs. Unique Contribution to Theory, Policy and Practice: This study makes a significant contribution to theory, policy, and practice by demonstrating how digital tax system adoption influences SME tax compliance in Meru County, Kenya. Theoretically, it supports the Technology Acceptance Model by showing that perceived usefulness and ease of use drive digital tax adoption and compliance. Policy-wise, the findings highlight the need for SME-focused reforms such as simplified, mobile-accessible platforms and digital literacy programs. Practically, the study emphasizes user-centered approaches, including technical support, localized access, and feedback mechanisms to improve usability and trust. Incorporating mobile reminders, simplified workflows, and co-designed features can overcome adoption barriers and promote sustained compliance. These insights provide a strategic framework for aligning digital tax systems with the operational needs of SMEs, enhancing voluntary compliance and accountability in low-resource settings.

Keywords: Tax Systems; Tax Compliance; Technology Acceptance Model; Small and Medium Enterprises; Meru County (search for similar items in EconPapers)
Date: 2025
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