Tax Compliance Behaviour and Tax System Fairness of Corporate Taxpayers in Kenya

Abstract

The existing tax fairness literature suggests that there are four dimensions of tax fairness: horizontal equity, vertical equity, exchange equity, and procedural fairness. Although research suggests that compliance usually increases with tax fairness, this study sought to uncover the individual impact of each dimension of tax fairness on the compliance behaviour of medium and large corporate taxpayers in Kenya. Employing a structural equation modelling technique, we find that reliable measures of tax fairness are established under the procedural fairness dimension. We also find that the different dimensions of tax compliance are influenced differently by the control variables. As such, policies to enhance compliance in Kenya would require a multi-faceted approach that critically takes on board what has traditionally been considered as tax fairness measures-since some measures in fact worsen compliance levels, contrary to expectations.

Keywords: Tax compliance behaviour, tax fairness, Income Tax, Corporate Taxpayers, Kenya

DOI: 10.7176/EJBM/11-6-05