Moderating Effect of Tax Literacy on the Relationship Between Digitalization of Services and Turnover Tax Compliance among Textile Companies Nairobi County, Kenya

Purpose: Tax compliance has been a matter of key concern for both researchers as well as tax administrators. Therefore, the study aimed to determine the moderating effect of tax literacy on the relationship between digitization of services and turnover tax compliance among textile companies in Nairobi County, Kenya, Methods: The study adopted explanatory research design. The target population of the study was 43 textile companies in Nairobi (KRA, 2023). The respondents consisted of senior managers and finance section heads of the respective companies, hence a total of 172 respondents were the target population. The data collected was analyzed using both descriptive and inferential statistics. Linear regression model was used to establish the strength of the relationship between independent variable, dependent variable, and moderating variable. Results: Digitalization of services had a significant positive effect on turnover tax compliance, with a standardized beta coefficient of 0.248 (β = 0.248, p = 0.006). The interaction between Digitalization of Services and Tax Literacy had a significant positive effect on turnover tax compliance, with a standardized beta coefficient of 0.600 (β = 0.600, p = 0.000). Conclusion: The study concluded that improved digitalization of services had a significant and positive impact on compliance. The study concluded that higher levels of tax literacy significantly improved turnover tax compliance. It is suggested that the government may continue investing in the digitalization of tax services to make tax compliance more accessible and user-friendly. Management is recommended to advocate for and support digital transformation initiatives that streamline tax compliance. Additionally, tax literacy programs should be prioritized to ensure that taxpayers are well-informed about their obligations and the benefits of compliance.