Electronic Tax System
Electronic Tax System
trade liberalization; the financial and debt crisis in national revenue sources, strengthen legislative
the “West”; and the acute financial needs of oversight and the public audit functions, plug loose
developing countries. Governments in developing areas in income tax frameworks as well as
countries face great challenges in collecting tax instituting transparency in national revenue
revenues, which result in a gap between what they remittance processes. One of their
could collect and what they actually collect. One of recommendations included the introduction of an
this challenges according to Muita (2011), is the electronic system which the national revenue
embracing of emerging technologies and tax collector Zimbabwe Revenue Authority (Zimra)
payment methods that are more efficient so as they introducted in 2015.Other countries regionally have
can reduce wastage. One of the technologies he introduced such electronic systems more so those
argues is electronic tax system which so far has that are online for the same purposes in several
been embraced by the Kenya Revenue Authority. government departments and organizations. Kenya
According to Cobham (2010), the electronic tax Revenue Authority is one such organization that
system has been around, globally, for the last 30 relies heavily on electronic systems strategy in
years. Its history began in 1986 as a small test order to deliver on its core responsibility of
program in which only 5 tax payers from collecting revenue on behalf of the Government of
Cincinnati, Raleigh Durham, and Phoenix agreed to Kenya. Kenya Revenue Authority (KRA) is a
participate. Since then, electronic tax system has public sector organization that relies heavily on
grown to become common place, serving millions electronic systems strategy in order to deliver on
of taxpayers every year. its core responsibility of collecting revenue on
behalf of the Government of Kenya. According to
Wasao (2014), describes electronic tax system is an the Kenya Revenue Authority website (2015),
online platform whereby the taxpayer is able to KRA is a Semi Autonomous Government Agency
access through internet all the services offered by a (SAGA) whose purpose is assessment, collection,
financial authority such as the registration for a administration and enforcement of laws relating to
personal identification number, filing of returns and revenue and tax administration. It was established
application for compliance certificate, a perfect in 1st July 1995 by an Act of Parliament, Cap 469
example of such system is the Electronic taxation (www.kra.co.ke, 2015).
system that was rolled out in 2013 by the Kenya
Revenue Authority. Kenya Revenue Authority for According to Atika (2012), electronic tax system
instance as one of the financial authorities in the forms part of the revenue collection reforms by
world conducts this Electronic tax system through Kenya Revenue Authority whose main motive is
the Business Process Improvement (BPI) and enhancing tax collections and tax efficiency and
increases scope of electronic interaction with thus, tax revenues have been increasing rapidly due
taxpayers to boost staff productivity and taxpayer to the country's rapid economic development
service. accelerated by the new systems In this regard, the
planning and formulation phase of an elaborate
For Stanislav (2012), governments world-wide, electronic system strategy was done in the KRA
have invested heavily in electronic systems for the Corporate plan of 2003 and was implemented in
past two decades. These range from registration the fourth corporate plan of 2009. KRA has a
services (birth, car, company) to licence/document centralized Information Communication
applications (driver, dog, and passport) and tax and Technology (ICT) department that provides support
social welfare services. As already noted, when services in terms of electronic systems to the entire
looking at progress to date, it is not surprising to organization all these to try and achieve its goals
find that the aspect of e-government which tends to for achieving increased revenue collection and
be most developed and most widely used is facilitating voluntary compliance by taxpayers
electronic tax system. (Atika, 2012).
Gideon and Alouis (2013) wrote that an efficient Despite all these efforts, challenges still exist
national revenue collection system is the hub of though not much than the increased revenue
every public administration system and the collection indicators that the country is enjoying.
cornerstone of sound fiscal management. It enables Other economic and finance experts argue that the
governments to finance budget deficits from increase may not be necessarily because of the
domestic sources, thus dissuading recourse to off- introduction of the electronic system but other
shore sourcing. Basing their study on public factors (Wasao, 2014). This argument corresponds
revenue collection in Zimbabwe, the two argued by an earlier statement by Andarias (2006), who
that there is need to review the structural and argued that while looking at the importance of
operational frameworks governing the national technology established that, the electronic system is
revenue authority, tighten treasury control over all considered as an efficient tool when properly used;
otherwise it can also become a problem which cumbersome processes of tax payment filing and
needs to be solved, rather than the solution. The compliance through the electronic system. Some
electronic tax system comprises modern argue that the increase of revenue collection is not
Technology that has in the form of computers, related to electronic tax system but other factors
internet and software applications. Such technology like stable economy, population growth and
is considered to be only efficient when handled by increase in donor borrowing.
well-trained personnel and embedded in the
There has been limited research done to evaluate
workflow of the organization
the effects electronic tax system on the efficiency
of revenue collection. Duncan (2000) looked at the
This researcher is therefore motivated by the above factors that facilitate the successful adoption of
background to conduct a study on the effects of the technology as a tax compliance enhancement tool.
electronic systems in KRA services provision more In his study, he concluded that three factors must
specifically on the area of efficient revenue be in place to realize this objective, namely:
collection. The researcher has chosen Uasin Gishu flexible Information Technology structure,
County as a case study for and will try find out how competent IT skill base and strong customer
online tax payment and filling has impacted on orientation. Kamau (2014), sought to determine the
revenue collections in that area. impact of adoption of technology as a strategic tool
in enhancing tax compliance in Kenya. The study
1.2 STATEMENT OF THE PROBLEM focused on the large taxpayers of Kenya Revenue
authority. The study concludes that indeed the
Electronic tax system was introduced by Kenya adoption of technology does impact on the tax
Revenue Authority to increase financial collection, compliance levels of the large taxpayers.
administration, avail services to the tax payers all Additionally it was concluded that the Kenya
the time from anywhere, reduce costs of Revenue Authority has effectively implemented its
compliance and improve tax compliance. However, Internet and Communication Technology strategy.
tax compliance levels remain low and tax
collections are below the targets set by Kenya 1.3 OBJECTIVES OF THE STUDY
Revenue Authority .Despite the increasing need to
increase revenue collection and enforcement so as The general objective of this study was to assess
to provide public services, and the introduction of the effects of electronic- tax system on the revenue
electronic tax systems in most countries across the collection efficiency of Kenya Revenue Authority,
global divide, developing countries like Kenya, still case of Uasin Gishu County.This study was guided
face the challenges of low tax compliance and tax by the following objectives;
administration.
i) To establish the effects of electronic
Muita (2011) argued that online tax systems are tax payment on revenue collection
rapidly replacing paper-based tax reporting efficiency by Kenya Revenue
systems. Promising many advantages over the Authority in Uasin Gishu County.
traditional method of hard copy tax filing, these
systems promise faster process, lower costs and
ii) To find out the effect of electronic tax
increased efficiency.
filing system on revenue collection
efficiency by Kenya Revenue
An electronic system for filing and paying taxes, Authority in Uasin Gishu County.
like the one introduced by KRA, if implemented
well and used by most taxpayers, benefits both tax
iii) To establish the challenges of using
authorities and taxpayers. For tax authorities,
electronic- tax system on revenue
electronic filing lightens the workload and reduces
collection efficiency by Kenya
operational costs – such as the costs of processing,
Revenue Authority in Uasin Gishu
storing and handling tax returns.In the previous
County and their possible solutions.
years, the Kenya Revenue Authority has revised all
its targets downwards in the last four years. Despite
this, it failed to meet the 2011/12 target. To meet 2. LITERATURE REVIEW
the 2014/15 target of a record Sh1.18 trillion, the
taxman had to raise collections by over 20 per cent 2.1 Electronic Tax System
through new efficient measures that heavily relied
on the introduction of electronic tax system. Electronic tax system is the system that has been
However, taxpayers, KRA staff and even other developed to replace the current KRA Online
government bodies have complained on the system. It is a web-enabled and secure application
system that provides a fully-integrated and for tax preparers also offer a service in which
automated solution for administration of domestic clients due a tax refund can apply for an immediate
taxes. It Enables Taxpayer internet based PIN bank loan equal to the expected IRS check. As a
registration, returns filing, payment registration to result, a client could receive the refund (less bank
allow for tax payments and status inquiries with and preparer fees) within three days of the filing
real-time monitoring of accounts (Waweru 2013). (Harold, 2011).
According to Kun, et al (2008), for a long time, Different literatures points out ICT use to be
government services have been regarded as extremely beneficial; Mugisha, (2001) attests that,
synonymous with bureaucracy in both developing the use of ICT enhances timely access to accurate
and industrialized countries. The tenets of and relevant information, which is a prerequisite
Weberian bureaucracy include such factors as for good planning, programming, implementation
organized hierarchy, development of standardized as well as monitoring and evaluation which forms
and impersonal procedures, formal division of the key component in development; Suluo, (20013)
labor and responsibility, and emphasize efficiency shows that, ICT use has lead to high level
in all procedures. organizational growth; and yet Crede,(2008)
reveals two facts, first; ICT has the capacity to
All countries have bureaucratic state mechanisms; increase productivity and create more cost effective
and while many commercial organizations are output with the same or less inputs and second;
strongly inspired by the tenets of bureaucracy, their Development of ICT applications for business use
efficiency varies widely. Whatever the level of alter the approach organizations function and
efficiency of the bureaucracy, the availability of eventually, improve their services as well as
computers to people from all walks of life has products. What these scholars are trying to
brought them better and more convenient access to emphasize is that; the spread of ICT use in various
public services. Additionally, through the Internet sectors brings new opportunities for economic
and computer technology, governments can growth and development. New organization design,
provide services in the original positive sense of new markets, new products and improved services
Weberian bureaucracy. In other words, e- are been created which brings with them new
government can facilitate public service offerings sources of revenue.
in a truly standard, impersonal, efficient, and
convenient manner for both service provider (the In Tanzania for example, according to the TRA
government) and service recipient (the citizens). In (2010), after the introduction of electronic tax
some cases a government agency can also be a systems with the most central being the Integrated
service recipient of an e-government service. In Tax Administration System (ITAX), Taxpayer
economic terms, the ability of citizens to access Identification System (TIN), Computerized Motor
government services anytime, anywhere helps to Vehicle Registration System (CMVRS), Customs
mitigate the transaction costs inherent in all types Administration System (ASYCUDA++) and
of government services (Kun, et al, 2008). Computerized Drivers’ License System (CDLS) by
the Tanzania Revenue Authority, There are no
According to Harold (2011), computer-generated more rooms full of clerks posting entries by hand in
returns, transmitted electronically, generally are large ledger books as it used to be; instead there is
easier to process than paper returns; since the a widespread use of computers to administer tax.
information on the forms doesn't have to be keyed
in, number by number, by IRS staff into the 2.2 Tax Collection and Electronic Tax
Service's computers hence there is less chance of System
errors. Electronic transmittal is instantaneous,
bypassing the frustrating vagaries of the postal Tax collection and administration can be improved
system and the client receives confirmation within through measures such as; shifting towards an
a day or two that the return not only was received electronic tax payer registration system where a
by the IRS, but was received accurately. uniform Tax Identification Number (TIN) would
apply regardless of whether a tax payer is
However, from an American experience, electronic registering for Personal Tax, Corporate Tax or
tax systems’ biggest advantage, from the taxpayer's VAT. Simplify the tax code: Since income tax and
point of view, is that it shortens the time for value added tax (VAT) rates are punitive and lack
refunds from an average of 12weeks to about 3 in-built mechanisms that would enhance self-
weeks. Refunds can even be deposited directly into assessment, there is need to simplify tax laws,
taxpayers' bank accounts. As an added incentive, forms and procedures developing systems that can
some vendors that provide electronic filing services enhance access to third-party sources of
information. KRA still lacks adequate and 2.3.1 Neoclassical Economic Theory
frequently updated information systems on
registered taxpayers. According to the neoclassical economic theory
which makes use of the Smithian concept of homo
Computerization of taxpayer records is still economic us, taxpayers are selfish rational utility
incomplete. There is need to develop systems that maximizes who, following the optimal strategy, try
can access third party sources of information, such to evade taxes as a means of obtaining the best
as withholdings, bank transactions, foreign outcome.
exchange transactions, transactions in securities
and large transactions (involving real estate, cars, Slemrod et al. (2010) found a higher level of
tax-deductible transactions, customs payments). compliance among low and middle-income
Use of tax amnesties can prove useful. Enhancing taxpayers and a higher propensity to avoid taxes in
administration through measures such as entrusting the high-income group. Vary audit rates from 5%
sensitive negotiations to special teams; minimizing to 30% and 60% and report a significant increase in
contacts between tax payers and tax collectors and tax compliance. In the same vein, Trivedi et al.
reducing the discretionary powers of tax officers; (2009) shift from an audit probability of 0% to 25%
setting up supervisory systems with at least three and observe higher tax compliance in the latter
hierarchical levels to reduce opportunities for case. Other studies report that compliance
collusion; and devise incentive systems that match diminishes in the first rounds after an audit and
public and private interests. There is the possibility then increases again
of relying on banks in collecting taxes. (Moyi
2006) Guala and Mittone, (2005). The phenomenon was
coined “bomb-crater” effect and refers to the
The Authority aims to continue on the path towards following situation: “a taxpayer who has recently
financial administration excellence through been audited seems to believe that the likelihood of
surpassing set financial targets at least cost. Under a subsequent audit is very remote; therefore, the
this perspective, a key strategy to be pursued is the risk of evasion appears to be low. After several
strengthening of the Enforcement function. KRA periods, however, the assumed likelihood of audits
acknowledges that the majorities of taxpayers are increases again, and compliance increases” Some
honest and law abiding and deserve efficient, studies report a negative relationship between tax
professional and fair tax administration. Therefore rate and compliance behaviour.
enforcement programs must rest on sound
foundation of observing taxpayer rights. The Anderhub et al. (2001) for example, showed that an
Electronic tax system endeavors to provide the increased tax rate discouraged tax evasion. In a 25-
balance between quality service delivery and round experiment,He report that compliance level
enforcement to enhance voluntary compliance. lessens when the tax rate is boosted from 10%,
(Waweru 2013) 30% to 50%.
2.3 Theoretical Literature Review The objective of a control theory was to calculate
solutions for the proper corrective action from the
It is appropriate to lay out the theoretical controller that result in system stability, that is, the
underpinnings of this study. This is henceforth system will hold the set point and not oscillate
undertaken in the sections hereunder around it. Systems have inputs and outputs to bring
a product after processing and so inputs and
outputs of a control system are generally related by They concluded that Computerization of tax and
differential equations. revenue authorities can contribute to reaching the
goal of good (financial) governance. It improves
Setting objectives, budgets, plans and other accountability and transparency of the revenue
expectations establish criteria for control. Control authorities. Nevertheless, while reforming and
itself exists to keep performance or a state of affairs modernizing the tax system is an essential part of
within what is expected, allowed or accepted. improving domestic resource mobilization, such a
Control built within a process is internal in nature. reform will be sustainable only in conjunction with
It takes place with a combination of interrelated more profound changes in the administrative and
components-such as social environment effecting political structure of a state.
behavior of employees, information necessary in
control, and policies and procedures. Internal Sagas, Nelimalyani and Kimaiyo (2015), did an
control structure is a plan determining how internal assessment of the impact of electronic tax register
control consists of these elements. on revenue collection by Kenya Revenue Authority
western region, Kenya. Findings from their study
2.3.3 Technology Acceptance Model (TAM) indicated that indicated that 75% of the
respondents were of the opinion that ETR machines
Davis et al (2003), TAM theorizes that an have helped to curb cases of tax evasion 86% of the
individual’s intention towards using a system is respondents were of the opinion that ETRs have
jointly determined by perceived usefulness, the helped increase revenue collection due to their
user’s ‘‘subjective probability that using a specific efficient nature.
application system will increase his or her job
performance’’ and perceived ease of use (PEOU), Wang’ombe (2009) did a study on the revenue
‘‘the degree to which the . . . user expects the target productivity and some administrative factors of the
system to be free of effort.’’ The effects of external Kenyan tax system for the period 2001–2008. The
variables (e.g., system design characteristics) on result of this study came up with buoyancy
behavioral intention (BI) are mediated by these estimates of the total tax system as 1.26 while
beliefs. According the PEOU also has a direct elasticity was 1.27. The study thus concluded that
effect on PU.In predicting usage; TAM models the tax system in general was both elastic and
might be useful within and across organizations for buoyant implying that tax reforms had greatly
evaluating applications or technologies, or to make improved productivity. Discretionary tax measures
comparisons between user groups or applications. had a very small effect on tax productivity
However, TAM has limitations in being applied implying improved efficiency.
beyond the work place because its fundamental
constructs do not fully reflect the variety of user Wawire (2000) did a study on the tax buoyancy and
task environment and constraints. income-elasticity of Kenya’s tax system. Tax
revenues from various sources were regressed on
Paul and John (2003), suggested that TAM is a their tax bases. The study concluded that the tax
useful model but has to be integrated into a broader system had failed to raise necessary revenues.
one which would include variables related to both However, the shortcomings of the study were that it
human and social factors. The theory of planned never considered other important determinants of
behavior (TPB) takes these factors into account. tax revenue, for instance the unusual circumstances
that could have affected tax. It also never
2.4 Empirical Literature Review disregarded tax revenue data by source hence it
was difficult to say which tax bases contributed
2.4.1 Electronic Tax Payments more to the exchequer. Finally, it never considered
the time series properties of the data used.
There has been several studies concerning the
electronic tax payments across the globe, Muriithi and Moyi (2003) did a study on the
Seelmann, Lerche, Kiefer and Lucante (2011) did a productivity of Kenya’s tax structure in the context
study Benefits of a computerized integrated system of the tax reforms focusing on pre and post reform
for taxation in Tanzania, they argued that Taxation period. In the study, they assessed the buoyancy
is often the most important source of state revenue. and elasticity of individual taxes and the overall tax
However, many developing countries lack effective system. Their findings suggested that tax reforms
tax administration structures and processes. had a positive impact on the overall tax structure
Technological innovations have not filtered and on the individual tax handles, even though the
through to the daily working reality of tax officials. impact of the reforms was not always uniform. The
reforms had a bigger impact on direct taxes than on
indirect taxes, suggesting that revenue leakage is important in today’s world due to its effectiveness
still a major problem for indirect taxes. Even and applicability in various areas. Tax e-filing is
though the current study adopted model used by one of the e-government services that have been
Muriithi, it differs from their study in some adopted by many developed countries today where
dimension. First, this study used data of since the public has to discharge their responsibility to
1963–2010. Second, nominal figures were the government via online tax filing. And that
converted to real figures. Finally this study despite the rapid adoption of tax e-filing in many
considered stationary of a time series data and the countries, researchers have argued that it is yet to
data regressed for the whole period of the study. establish an integrated system that is reliable,
especially in developing countries due to high
Lastly, Ayodeji (2014) looked at the Impact of perceived risk by the public. They concluded that
electronic tax systems on Tax Administration in many of these risk facets will be significant.
Nigeria. He argued that the dwindling global Among the risks that could possibly be significant
fortune occasioned by the fall in the price of crude are performance risk, psychological risk, time risk
oil, the major source of wealth for Nigeria shifted and privacy risk. Past studies have shown that
the attention of the government and major taxpayers tend to e-file near the tax deadline and
stakeholders in the country to the revenue this may lead to system crashes if the e-filing
generated locally. But the daunting task of boosting system is not tailored to accommodate this trend.
the Internally Generated Revenue necessitates the Psychological and time risks could possibly be
adoption of electronic tax systems technologies to prevalent for taxpayers who are not IT literate, they
drive Tax administration and concluded that may find themselves frustrated or anxious if a lot of
electronic tax systems plays an important role in time is spent learning about the e-filing system and
the increase of internally generated revenue in then find that the system does not function as they
Nigeria by ensuring compliance thereby boosting had hoped it would. Privacy risk may possibly be a
productivity and economic activities in the country. significant risk for e-filing adoption; this is because
It is a change agent for accelerated growth and e-filing involves the transmission of taxpayers’
poverty reduction in Nigeria and the whole of confidential information through the Internet.
African continent at large. The major Recommendations included a fact that risk
recommendation from their study was that reducing strategies could be formulated to
necessary laws and regulations have to be passed encourage efiling adoption such as improved
by the appropriate authorities to reduce or abolish security features for the user interface. The risk-
import taxes on information technology hardware reducing strategies could be developed to cater to
such as computers, Servers, printers, biometric the facets of risk that are the most prevalent in e-
scanners and other devices. filing adoption.
2.4.2 Electronic Tax Filing In his study titled Influencing Tax Compliance in
SMEs through the Use of ICTs Lubua (2014)
On filing, scholars and researchers have looked on argued that Revenue collection is an important
the relationship between electronic filing and other determinant of the economy of any country. The
factors in taxation including efficiency, revenue adequacy of government revenues allows the
collection, work load reduction and many more. government to support its operations ranging from
For instance, Kuznetsova (2010) investigated the administrative activities, infrastructure
factors that affect diffusion of tax return filing constructions and service provision. The study
online (e-return) in Finland. Basing their studies on aimed to show how e-transparent services address
the Diffusion of Innovations theory, Bass Diffusion the challenge of voluntary tax compliance by SMEs
Model and Service Process Analysis he discovered in the republic of Tanzania. The study observed the
that the diffusion of e-return is dependent on such following factors to influence voluntary
variables as perceived attributes of e-return system, compliance: Awareness of tax laws, business
interpersonal communication channels, experience, the integrity of employees, low
performance of related services, and extent of Tax frequency of visitation by tax officers and training
Administration’s promotion efforts. needs. Recommendations read that the revenue
authority must use relevant ICT tools to positively
Another study by Anna Yusniza (2009) looked at promote these factors; as the result, the position of
the relationship of perceived risk and its facets taxpayers to voluntarily file their tax returns will be
within the technology acceptance model (TAM) enhanced.
within the tax e-filing context in Malaysia. They
based their study on the argument that e- Amitabh et al. (2009) did a study on the
government is becoming increasingly more antecedents of paperless income tax filing by
young professionals in India. The objective of this
study was to study how young Indian professionals business plan – documenting the ideas and actions,
will adopt or behave towards paperless or online desired outcomes and the time frame for each
filing of tax returns with the aim of enhancing component, taking into account the strengths and
compliance. The regression analysis carried out weaknesses of the tax administration and
found that the antecedents of young Indian environmental opportunities and threats. The plan
professionals depended on the perceived ease of the should also document the implementation strategy
tax system, personal innovativeness in information including the implementation approach. Many
technology, relative advantage, performance of countries have taken a gradual approach by
filing service, and compatibility. The implication of allowing voluntary e-filing and e-payment for
the findings to the current study is that for any select segments of the taxpayer base, e.g.
online system to succeed whether for small, individuals or companies only, in the initial stages
medium or large taxpayers’ category there must be to allow for live testing of the system. After testing
the ease of use, innovativeness and accessibility. is complete filing becomes mandatory for some
taxpayers, e.g. companies (Dowe, 2008).
Wamathu (2013) studied the effects of electronic
taxation on financial performance of audit firms in In Uganda, Akello (2014) reported that there are
Kenya. From the finding the study found that there challenges such as intermittent power supply and
has been timely filing of returns since inception of Internet outages but says the tax body has made
I-tax, there has been a reduction in audit period due contingency plans to ensure that the system is
to introduction of I-Tax, respondents were quite operational 24/7. First, the e-Tax is hosted on a
knowledgeable. ,system failure when login were central server at their Kampala headquarters, which
less, I-Tax was user manual friendly , I-tax system means that it’s not affected by power or network
was reliable and that I-tax was not user friendly, I- outages even when power or the Internet is off in
tax system cost effective, I-tax system was cost some parts of the country. The electronic filing
effective and respondent were aware of that I-Tax process still confuses a lot of people because the
system was electronic cash register and electronic web portal has many features and yet most people
signature device. She recommended that there is cannot understand some tax terms.
need for the Kenya Revenue Authority to invest on
technology in order to reduce the system failure as Sheikh (2015) explains that as with any new
the study revealed that system failure affects system, there have been numerous teething
system logins. System failure discourages use of problems with the electronic system. First, there are
technology. two concurrent tax systems — manual and iTax
systems — without either system recognizing the
Muita (2010) in her MBA thesis has also done a other. Taxpayers are also receiving demand emails
related study on the factors that influence adoption from the Integrated Tax Management System. This
and use of e-filing system among Large Taxpayers is bound to create discrepancies in taxpayers’
in Kenya. The study examined the skills required records, especially with regards to payment of tax
by the users of e-filing, the technology required and obligations as well as submitting returns.
the tax authority’s preparedness in enhancing the
adoption of tax compliance based technology. The For instance, in the current setup, if a taxpayer pays
study found that for e-filing to effectively take off taxes manually, the iTax system will not recognize
in Kenya skills, infrastructure and a conducive the payment. Instead, the system automatically
business environment are needed. calculates penalties and interest on the perceived
“missed” tax payments thereby leading to potential
2.4.3 Challenges of Using the Electronic Tax disputes between the KRA and the taxpayer.
System Second, the iTax system lacks historical records of
taxpayers. Its record keeping is a “going forward”
Dowe (2008) argued that the basic prerequisites for type in that it only stores tax records of taxpayers
implementing successful e-filing and e-payment from the time of registering for iTax onwards
systems are: (1) a reliable and accessible internet (Sheikh, 2015)
service; (2) cooperative financial institutions; (3)
an IT oriented public; and (4) adequate financing to According to Lubua (2014), employees play a vital
set up the appropriate infrastructure in tax offices. role in ensuring that the revenue authority collects
Ideally, the setting of an e-filing and e-payment its tax from clients at the right time. They also
system should form part of a comprehensive IT ensure that clients have the right knowledge of
design, development and implementation strategy. business taxation. Low integrity to employees is
reported to significantly affect efforts by the
The implementation process for electronic tax revenue authority toward improving revenue
systems begins with the development of a strategic
collection. To a large extent, the use of ICTs in the revenue authority, employees organize seminars to
Tanzanian revenue authority has addressed the educate stakeholders about the benefits of
challenge of corruptive behaviour by employees. In voluntary tax compliance. However, many
areas such as custom department, clients are able to respondents admitted that they never received
conduct own assessments. However in domestic training from tax officers. This is partly due to
revenue there is a low usage of ICTs. Clients inadequate members of staff. The mobile
depend on employees for assessment and this technologies can be useful in providing trainings
assessment depends on employees’ rational ability (Lubua, 2014)
and integrity.
literature review, a good system will need: (1) a Revenue Authority in Uasin Gishu County
reliable and accessible internet service; (2) secondly To find out the effect of electronic tax
cooperative financial institutions; (3) an IT oriented filing system on revenue collection efficiency by
public; and (4) adequate financing to set up the Kenya Revenue Authority in Uasin Gishu County
appropriate infrastructure in tax offices. Ideally, the and Thirdly establish the challenges of using
setting of an e-filing and e-payment system should electronic- tax system on revenue collection
form part of a comprehensive IT design, efficiency by Kenya Revenue Authority in Uasin
development and implementation strategy. Training Gishu County and their possible solutions.
is essential because it provides clients with the
skills necessary in raising their attitude of Regarding electronic tax payment 45% of the
voluntarily complying with taxation systems, the respondents agreed that KRA has good electronic
designers must ensure that its user friendly and tax payment System in place five of them strongly
reduces its difficulty in accessing disagrees while none of the respondents was
undecided on this matter. It can be therefore
3. RESEARCH METHODOLOGY concluded that most respondents accept KRA as
the best electronic payment system maybe
The research adopted a case study research design. compared with other similar initiatives in
In case studies, the researcher explores a single government functions like university portals and
entity or phenomenon that is bounded by time and banking activities that have embrace electronic
activity (a program, event, process, institution, or systems.When asked whether KRA Board of
social group) and collects detailed information by Directors are committed to the electronic payment
using a variety of data collection procedures during System implementation, 34% of the respondents
a sustained period of time. The case chosen for the strongly disagreed while 22% and 17 % strongly
study was Kenya Revenue Authority offices in agreed and disagreed respectively. It also should be
Uasin Gishu County. The study targeted a noted that 20% of the total respondents were
population of 102 staff drawn from management undecided on this matter. Finally, majority (33%)
and the employees of KRA (33) and Tax payers acknowledged while almost a similar number but
(69). with a wider margin (20%) disagreed. Eleven of
The study basically used census of the 102 them were undecided maybe because could not
respondents. It was used simply because the study understand or simply disagreed.70% of the
was targeting custodians of the electronic tax respondents claimed that there were less frequent
systems. Simple random sampling technique was failure when login in the online system while only
used in selecting the employees and taxpayers from 10% said they were very frequent. A similar
whom data was collected. Sample of responding percentage was acquired from the respondents who
staff was drawn from top, middle and low staff work at Uasin Gishu county KRA offices when
working in various departments of Kenya revenue asked whether the system was user
authority in Uasin Gishu County.Data was friendly.However, most of the tax payers 85 (%)
collected using both primary and secondary data said the system was not user friendly to them and it
collection techniques. Primary data was gathered had several failures when logging in and while
basically through structured questionnaires. using.
Secondary data on the other hand was gathered
through review of available relevant materials. Regarding electronic tax filingForty out of one
Data collected from the field was analyzed using hundred respondents said that Management
SPSS that included use of descriptive & inferential assesses the system of filing from time to time with
statistics. Descriptive statistics will involve the use only two disagreeing. A smaller number (32) said
of percentages and frequency tables; results were that there are regular and periodic reviews of online
presented using frequencies tables and simple filing before the end of year report. On the same
explanations. note, 35 respondents strongly disagreed.When
asked whether Electronic filing is easier to use by
4. RESULTS, FINDING AND both individual taxpayers and limited companies,
27% strongly agreed, 25% agreed and 8% were
DISCUSSION
undecided. Twenty two percent of the total
respondents disagreed and a further 18% of the
The study sought to examine the effects of
total respondents strongly disagreed. Sixty four
electronic tax system on the revenue collection
percent of the respondents strongly agreed that
efficiency of Kenya revenue authority in Uasin
Taxpayers face difficulties filing during the
Gishu County. It was guided by three objectives
deadline periods, another 20% agreed while only
first to establish the effects of electronic tax
10% disagreed this factor. This is because of late
payment on revenue collection efficiency by Kenya
applications by the same people who wait till the
last minute of given time so that they can do their both KRA officials and government. From the
registration and payments (Wasao, 2014).Asked finding the study found that there has been timely
whether they can assess their tax obligations filing of returns although there is a reduction in
accurately using the electronic tax filing system as audit period due to introduction of electronic
compared to the old system 33 respondents system.
strongly agreed, 29 agreed, 11 strongly disagreed,
The results indicate that revenue collection n has
and 27 disagreed. This can be blamed by what
been affected upwards and KRA workers are
Akello (2014) as lack of internet, electricity and
comfortable using the process as compared with the
last minute rush top beat deadlines.More than a
old manual one. The electronic system has also
quarter of the total respondents (34) strongly
reduced corruption loopholes by making moist
agreed that Electronic tax filing system is fast and
payment through mobile phones and submitting
convenient compared to the old manual system
returns online. This is good for efficient revenue
with almost the same number of 28 respondents
collection and good for faster accessibility of KRA
agreeing. Nineteen of them disagreed strongly
services for the tax payer without physically
while nine disagreed the same. This is also evident
visiting KRA offices. On the contrary, most tax
to Wasao (2014) claims that several journeys to
payers complain of a difficult process, lack of
KRA headquarters and or district centers,
electricity, internet and knowledge to access
cumbersome filling of pages of papers and
computers and related media in filing and paying
expenses of similar activities have been replaced by
their taxes. Government has not conducted any
online and computer based activities of tax
civic education to the people to train them on how
payments and filing
to use the system leaving the job to individual tax
payers who complain of lack of time and skills to
Regarding the challenges that face the electronic do so.
systems at KRA A total of 32 respondents agree
that they feel uncomfortable using the electronic
5.1. Recommendations
tax system as compared to the old manual system.
Another 24 strongly agreed making it almost neck
The researcher strongly recommends that the
to neck. This can be attributed to Wasao (2014)
Kenya Revenue Authority should come up with an
presentation that computer illiteracy is the biggest
easy application that can make tax registration,
challenge which is further demonstrated in the next
filing and payment easy for the taxpayers.
question where a total of 74 agree that lack of
Deadlines and working hours should also be
computer knowledge on of the major challenges in
streamlined to suit the tax payer’s schedules in
using the electronic tax system. Around 24 strongly
whatever means that the department may think is
disagree this fact while 7 agree. In the same
good for both.
breadth, 25% of them strongly agree that KRA is
making accessibility of the electronic tax system
Elaborate civic education should be conducted at
easy 38% are undecided and 22 of them disagree.
the research area and beyond to ensure that the
general public is aware of the new tax system, how
5. CONCLUSION to use it and if not able to, tax payers should be
advised where they can get assistance at designated
According to the results it can be concluded that government centers like Huduma centre to avoid
most respondents accept KRA as the best electronic being robbed by fraudsters.
payment system maybe compared with other
similar initiatives in government functions like Lack of electricity can be solved in short term acts
university portals and banking activities that have like Huduma Centres assistance above but the
embrace electronic systems. Most KRA officials government should ensure all Kenyans access
interviewed are sufficiently knowledgeable about affordable electricity or power connection so as to
the electronic tax system Here the results indicate maximize government revenue collection. This can
that KRA has got the best workers for the job also boost businesses and make work efficient by
and/or it conducts training sessions for their tax payers and hence, more revenue for the
workers to update them on emerging trends in government. The websites hosting such services
electronic tax systems in regard to efficient revenue like itax should be strong and stable enough to
collection. avoid lack of accessibility and breakdown during
congestion
When compared with the old manual system, the
electronic system is good and convenient by far. It
reduces queues, workload, physical filing of large
files and cumbersome registration processes by
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Prepared by Approved by Forum on Tax
Administration Committee on Fiscal Affairs
Taxpayer Services Sub-group May 2007