Effect of Simplicity of the Tax System on Income Tax Collection among Small and Medium Enterprises in Kamukuji Sub-County Nairobi, Kenya

Purpose: Taxation is how government finances its expenditure by imposing charges on citizens and corporate entities. A country’s tax regime is always a key factor for any business considering moving into new markets. The purpose of this study was to establish the effect of Simplicity of the tax system on income tax collection among small and medium enterprises in Kamukunji Nairobi County, Kenya. The theories that guided this study were Ability-to-Pay Theory of Taxation, and, Unified Theory of Acceptance and Use of Technology. Methods: The study adopted an explanatory research design. The target population was 3106 small and medium enterprises in Kamukunji Nairobi County. A sample size of 354 respondents was drawn from this population using Yamane’s formula. In this study, out of 354 targeted respondents, 283 questionnaires were correctly filled and returned, resulting in a response rate of 79.94%. Results: The study found that Simplicity had a positive and significant effect on income tax collection (β = 0.236, p = 0.000). Conclusion: The study recommends that the government should focus on simplifying tax procedures and forms to reduce administrative complexity. This can increase voluntary compliance by making the tax process more accessible, particularly for SMEs that may lack sophisticated accounting knowledge. Future research should Investigate the effect of tax incentives, on companies’ financial performance.