Effect of Court Suits on Value Added Tax Compliance Among Small and Medium Enterprises in Machakos Town, Kenya

Purpose: Value Added Tax non-compliance is an area of concern for all government and tax authorities and it continues to be an important issue that must be addressed. The general objective of the study was court suits on Value Added Tax compliance among the Small and Medium Enterprises in Machakos Town, Kenya. The study was guided by Agency theory and ability to pay theory. Methodology: The target population was 5412 Value Added Tax Registered Small and Medium Enterprises operators located in Machakos Town. The sample size was 372 Value Added Tax Registered Small and Medium Enterprises operators. Out of the 372 issued questionnaires only 275 were correctly filled and submitted in a timely fashion signifying a 73.9% response rate. The study employed explanatory study design. Primary data was collected using semi-structured questionnaires. The pilot study was done in Kitui town and the data analysis was both descriptive and inferential statistics. Descriptive statistics covered frequencies, mean, standard deviations and variances. Inferential statistics included Pearson’s correlation and regression analysis. Results: The study found that court suits significantly affected VAT compliance in a positive way β=0.261 p<0.05. Recommendation: The study recommends that taxpayers should be aware of the legal consequences of non-compliance, as court suits can drive adherence to VAT regulations